Trade wars and technological blockades have seen the US and China go head-to-head. Now that China is looking towards becoming self-sufficient, it needs to be able to produce its own advanced semiconductors that can rival those of the west. What started the trade war, who is ASML, and what is China looking to achieve?

China vs. the US – Why are the two locking horns?

For the past few years China and the US have engaged in trade warfare with import taxes being imposed, technology sales restricted, and even the outright banning of certain goods. The result of this conflict has seen key technologies such as 5G set back several years, suppliers struggling to find tech alternatives, and some companies even selling their companies to others so they can continue to operate. But what started all of this off, and was it all justified?

Tensions between the two nations have steadily risen for the past few decades as a result of many incidences of Chinese companies conducting industrial espionage and intellectual property theft which has left western companies at a disadvantage. However, the actions of individual Chinese manufacturers and the inaction of the Chinese government to enact international laws was not enough for western nations to react strongly as the impact was merely commercial in nature.

The international scene started to change as technology became more critical in infrastructure, and the development of large-scale data centres and IoT devices sowed the seeds of worry for governments around the world. When multiple reports came out of serious security breaches such as servers manufactured in China having near-invisible (to the naked eye) ICs integrated that allowed for remote backdoor access, or the constant cyberattacks originating in China, the world began to change its stance.

In an effort to restrict China’s ability to produce cutting edge technology, the west has restricted the sale of key AI technology, components, software, and even manufacturing equipment. In fact, one particular case that saw media attention was the US attempt to prevent the sale of an ASML system to SMIC, a large semiconductor manufacturer for China.

Who is ASML?

ASML Holdings is a company that specialises in the production of photolithographic systems for producing semiconductors. Arguably, the most critical manufacturing step in the production of semiconductors is the masking step which allows for specific patterns to be etched into a wafer. The smallest feature size, now in the tens of nanometers, determines the wavelength of light used to cure the photoresist layers, and the smaller the wavelength of light used, the greater the challenges presented. The smallest mass-producible ICs have feature sizes of around 7nm, and achieving such a design is incredibly difficult; in fact so difficult that only three manufactures globally can do it. 

ASML is one of the few companies who can manufacture the imaging equipment needed to produce sub 10nm features, and when one of these machines are sold, everyone in the industry knows about it. When China attempted to purchase an ASML system in 2019, the US immediate stepped in and ordered that the ASML imager not be sent to China for reasons of security. The company that was to purchase the system, SMIC, is stated to only produce ICs for the commercial industry but leaked internal documents suggest that they also manufacture equipment for military uses, and China has the ability to produce state-of-the-art military-grade devices is what has sparked concerns.

What is China hoping to achieve with the ASML system?

While China may have been prevented from obtaining an ASML system directly, a chemical supplier for electronics in China has said that it has bought a used lithography system from South Korea. The intention behind the sale was to speed up the development of high-end silicon devices so that China can become self-sufficient in the development of semiconductor devices. Not only would military equipment be vastly improved, but it would also allow for more advanced AI systems as well as the ability to keep designs secrete and in house. A supply chain that cannot be externally interrupted allows for China to ensure that it has fresh supplies of high-end devices, and the large amount of natural resources combined with a strong manufacturing industry essentially allows for China to work independently from the rest of the world.

The ASML system was purchased by Suzhou Crystal Clear Chemical for a total of $11.02 million, and in a separate filing, the company announced that it would raise over $80 million to fund photoresist material projects to help reduce the dependence on foreign supplies. While this could be a result of pressure from the Chinese government, it could also be the result of trade wars and tariffs that increase the cost of producing key products. 


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