When the US government imposed broad sanctions on China’s semiconductor and supercomputer sectors in October, the global semiconductor industry quickly lost about $240 billion in valuations. When the new quarterly reporting cycle begins, we’ll see how much revenue American businesses will lose due to the new rules. The numbers are staggering, but they don’t kill these companies. Moreover, according to Applied Materials, a leading manufacturer of fab tools, Chinese companies can adjust their process technology to get around the new rules.
Bryce Hill, Chief Financial Officer of Applied, said: Seeking Alpha).
Is there an exit for China’s semiconductor sector?
of Latest US Export Regulations Restricting imports of American tools and technologies capable of manufacturing logic chips with non-planar transistors at the 14nm/16nm node or below, 3D NAND with 128 layers or more, and DRAM memory chips at 18nm half-pitch or below. It is a widely used and fairly advanced process technology that requires tools from US companies such as Applied Materials, KLA and Lam Research.
To ship Wafer Fab Equipment (WFE) subject to the new rules, US fab tool makers and companies that manufacture equipment containing US technology must obtain an export license from the US DoC. License applications are set to be reviewed on the premise of denial, so when companies like Applied reveal their “impact numbers,” the DOC says he will not allow shipments to Chinese companies like SMIC and his YMTC. I’m assuming you don’t approve.
Applied Materials stresses that some customers may adjust their process technology to circumvent the new regulations. For example, although Applied doesn’t explicitly say so, we can speculate that SMIC could come up with his 17nm manufacturing process, allowing YMTC to reduce the number of active 3D NAND layers in the chip. .
“We have customers trying to make it clear that they can apply for a license or obtain a permit if the technology proves to be within the guidelines,” Applied’s CFO said in a recent conference call. rice field. “On the other hand, some customers may decide to change plans or change technology, so we do not exceed the thresholds affected by the rules at this time.”
However, the development and customer validation/certification of such nodes takes time, so don’t expect this measure to work in the short term.
For example, moving from 14nm to 17nm requires SMIC customers to make significant changes to their existing designs to meet specific performance and power targets at the thicker node. Additionally, lower transistor densities lead to larger die sizes, which impact cost, yield, and even package dimensions. Therefore, SMIC’s current clients with 14nm-class designs are expected to continue using the node and company services for as long as the foundry can deliver. Meanwhile, his hypothetical 17nm node (assuming it makes economic sense) could be used for an entirely different design. Of course, all assumptions about SMIC’s fictitious 17nm node are just speculation.
The situation is also very complicated for 3D NAND manufacturer YMTC. The company’s 128-layer 3D NAND devices cater to very specific 3D TLC or 3D QLC capacities, so simply turning off some layers will affect the economic viability of these devices. is reached. 3D NAND manufacturers have some latitude regarding the number and capacity of their active layers, but their devices are certified “as is” by the developers of SSD controllers and actual drives. Adopting devices with different configurations is a long process, so YMTC will continue to provide production ready components.
Overall, many things are possible in theory (neither SMIC nor YMTC want to write off billions of dollars worth of equipment, after all), but they are costly and can be implemented overnight. I can not do it.
10% of revenue
This week, Applied Materials, a leading manufacturer of wafer fab equipment, Said U.S. sanctions on China’s semiconductor industry, banning it from providing advanced tools to Chinese customers, could cut revenues of $2.5 billion in fiscal 2023 and reduce the company’s revenues of $25.79 billion in fiscal 2022. 10%. The company will continue to seek appropriate export licenses from the US Department of Commerce.
Bryce Hill, Chief Financial Officer of Applied Materials, said: “We continue to work on regulatory requirements, including seeking licenses and approvals where necessary. Reduced revenue impact by $500 million to $1 billion, resulting in net impact of $1.5 billion to $2 billion. I would like to
impact is already a hit
Applied Materials’ results for the fourth quarter of fiscal 2022, which ended October 31, are already impacted by the new regulations.
“In the fourth quarter, the new rules reduced semi-systems and AGS revenues by approximately $280 million, which was within our October 12 forecast,” Hill said. “In the first quarter, we expect the new rules to reduce Semi Systems and AGS combined revenues by approximately $490 million and gross margins by approximately 1 percentage point, neither on an easing basis. .”
KLA assesses impact
KLA, another major US WFE producer, said in late October that its earnings would be affected by new US export regulations.
“Unique to KLA, a significant amount of our business in China is focused on investing in legacy nodes, which is not the focus of recent export restrictions, but because we are unable to deliver the system , system and service revenues will be negatively impacted in the future.” statement By KLA reading. “We are evaluating the broader impact and are working with the U.S. government to provide necessary information regarding our products and services to fully determine the impact on future business operations.”