US mulls more export bans – this time, memory – in war on Chinese chipmakers

Memory vendors Samsung and SK Group could be the latest casualties in America's efforts to derail China’s domestic semiconductor industry.

Citing unnamed sources familiar with the matter, Reuters reports the US is weighing measures that would, among other things, limit shipments of US-made chipmaking equipment used to produce memory technologies with more than 128 layers to China.

Unlike previous export bans, the measures wouldn’t be limited to Chinese memory vendors like Yangtze Memory Technologies Co. (YMTC) and would instead extend to any company operating in the region. This puts Samsung and SK Group — both of which are producing 176-layer NAND flash in large volumes — squarely in the blast radius if the Biden Administration were to move forward with another round of Chinese trade restrictions

The South Korean foundry operators have substantial investments in China. SK Group is also in the process of acquiring Intel’s NAND memory and storage business in a deal valued at approximately $9 billion. The acquisition includes Intel’s NAND manufacturing plant in China’s Dalian province. Samsung also operates two memory fabs in Xi'an and Suzhou China.

However, Reuters reports that the measures are still in the early stages of development.

The rumors come less than a week after US Congress passed a $280 billion bill that seeks to bolster US investments in domestic semiconductor manufacturing and scientific research. And it's reported that China wants to spend about $150 billion through 2030 on silicon fabrication.

A risky proposition

Whether the White House would risk derailing a $20 billion investment by SK Group — SK hynix’s parent company — announced last week, to build semiconductor package and battery tech in the US, remains to be seen.

Samsung, which is reportedly weighing a $200 billion foundry expansion in Texas that would see the construction of nearly 11 fabs outside of Austin, is unlikely to look favorably on stricter trade restrictions either.

It’s also unclear whether the rumored export ban would have the intended effect. Previous attempts to prevent China from gaining access to US-made semiconductor manufacturing equipment and intellectual property have seen mixed results.

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In the final days of the Trump Presidency, the US Commerce Department banned several Chinese-based firms, including Semiconductor Manufacturing International Corp’s (SMIC) from importing American chipmaking gear.

The export ban sought to prevent the manufacturer from producing chips based on a 10nm or smaller process. Despite these measures, SMIC has reportedly obtained the means to produce 7nm chips.

Previously, it was thought the Chinese had only recently managed to ramp production of 14nm chips. By comparison, Intel is producing chips on a 10nm process, with 7nm chips slated for release next year, and TSMC and Samsung are in the process of rolling out their 3nm process node. (Remember, though, these process node sizes are manufacturer-defined marketing rather than actual feature size.)

Financial trouble

Despite recent victories, China’s efforts to catch up with rival nations in the semiconductor arena haven’t been without challenge or controversy.

This week, Reuters reported that China’s Central Commission for Discipline Inspection (CCDI) — the country’s corruption watchdog — was investigating Ding Wenwu, who leads the China Integrated Circuit Industry Investment Fund, over allegations of “serious violations of the law.”

The fund, better known as the “Big Fund” was established in 2014 in an effort to bring Chinese semiconductor and design capabilities in line with those of the US, South Korea, and Taiwan. It's raised tens of billions dollars to support home-soil chipmakers including SMIC and YMTC.

However the Big Fund has also been a source of controversy. According to Reuters, the CCDI opened an investigation into the fund’s previous head, Lu Jun, last month citing similar alleged violations.

And allegations of corruption and misconduct aren’t the only problems facing Chinese semiconductor factories.

Tsinghua Unigroup, a major Chinese chipmaker and foundry operator responsible for mobile chip design, NAND flash manufacturing, IoT, security chips, and IT infrastructure, received $9 billion bailout from a government-backed assessment management company this spring after racking up more than $30 billion in debt. ®