China to launch chipmaking platform as it targets Intel and AMD

China plans to set up a special organization that facilitates collaboration between domestic companies and overseas semiconductor powerhouses such as Intel to foster development hubs for software, material and manufacturing equipment.

The proposal comes as Beijing rushes to build a domestic supply chain for semiconductors immune to U.S. sanctions. Foreign governments, however, are likely to be wary of this effort, on fears that sensitive technology will be transferred to China.

The organization, named the “cross-border semiconductor work committee,” will be launched in the first half of the year. It will be overseen by the Ministry of Commerce, which has jurisdiction over domestic and international investment and trade, in cooperation with the Ministry of Industry and Information Technology. A lab at Tsinghua University, Chinese President Xi Jinping’s alma mater that has expertise in semiconductors, will coordinate the effort

According to sources, the role of the committee will be to strengthen cooperation between the Chinese and foreign semiconductor industries. Xi has set a goal of building an independent, Chinese chip supply chain. The organization appears to be designed as a way to acquire advanced semiconductor technologies from the U.S., Japan and Europe to help further this goal.

The committee will encourage collaboration between foreign and Chinese companies and research institutions. It will also invite foreign companies to set up development or manufacturing bases by working with local governments and providing funds. It also envisions offering financial backing to Chinese companies seeking to acquire overseas semiconductor-related companies.

According to documents obtained by Nikkei, among the targeted overseas companies are Intel and Advanced Micro Devices of the U.S., as well as Infineon Technologies of Germany. It also includes an industrial group in the Netherlands that counts ASML, a leading maker of cutting-edge semiconductor manufacturing equipment.

Sources close to the matter say some companies have already expressed an intention to participate. Intel and the Dutch industry group declined to comment when contacted by Nikkei.

China is said to account for about a quarter of global demand for semiconductors. According to some media, China generated 26% of Intel’s sales in 2020, while AMD has many customers in China.

“For many semiconductor companies, China is one of the largest growth markets in terms of sales, so they can’t ignore the wishes of the Chinese government,” said an executive at a Chinese unit of a foreign company.

Leading Chinese companies are also expected to participate. Candidates include Semiconductor Manufacturing International Co. (SMIC), a major contract manufacturer, Advanced Micro-Fabrication Equipment, which makes semiconductor manufacturing equipment, and Xiaomi, a major smartphone manufacturer that has also started developing semiconductors. Chip-related investment funds will also participate.

In addition to Tsinghua University, Peking University, the Chinese Academy of Sciences, a research institution directly under the government, and research institutes under the industry ministry are also expected to participate. China aims to promote human resources and technological development by strengthening cooperation between industry, government and academia – an effort that will include overseas companies.

Beijing has singled out semiconductors as a priority in the “China Manufacturing 2025” initiative announced in 2015. Via government-backed investments funds with a war chest of more than $20 billion dedicated to the chip industry, China has nurtured companies such as Yangtze Memory Technologies, a NAND flash memory company. However, according to U.S. research firm IC Insights, China’s self-sufficiency rate for semiconductors in 2020 languishes at 16%. Even China’s own estimates have the figure at just about 30%.

Under the direction of Xi, government-backed funds are planning to invest in new SMIC facilities and pour money into materials and manufacturing equipment to bolster the supply chain. However, given the lack of Chinese technology, the newly formed platform for international collaboration could play a key role in the effort.

But China may find itself stymied in this effort. Countries around the world are offering large subsidies and other incentives to attract factories and R&D hubs in an effort to foster the semiconductor industry. In addition, the transfer of this technology is a becoming an increasingly sensitive issue that involves national security.

Washington has restricted the supply of semiconductors developed by U.S. companies to Chinese telecom leader Huawei Technologies. In addition, SMIC is not allowed access to exported manufacturing equipment that uses the most advanced technology — measures that hobble China’s technological development. It is likely that overseas companies will be asked not to participate in the new platform in any ways that could lead to the transfer of technology.

“We will aim to expand our business in China to the extent that it does not conflict with regulations in the U.S. and other countries,” said a representative of one foreign company, but it is likely that situations will arise where companies will be caught between Chinese demands and the confidentiality of technology.

Author: SHUNSUKE TABETA, NIKKEI Asia