China’s big chip push: An equipment maker’s view

Article By : Rick Merritt

The government plans to spend ₹4.27 lakh crore by 2020 on 17 wafer fabs, but most projects face big challenges getting access to advanced technology.

« Previously: Executives make the case for China's big chip bet

Gerald Z. Yin is one of the leading lights in creating a capital equipment sector in China as chief executive and founder of AMEC. In an interview he shared his thoughts about China’s big chip push.

The government plans to spend ₹4.27 lakh crore ($64 billion) by 2020 on 17 wafer fabs, Yin said. But most projects face big challenges getting access to advanced technology and technical and management leaders to run them.

“Personally I think half the projects may not make it,” Yin said. “China is three generations behind—28nm [logic] is just barely getting into R&D,” he said.

[China front end suppliers (cr)]
__Figure 1:__ *Overseas gear vendors lead local ones in China; percentages indicate China market share. (Source: AMEC)*

In memory chips, China is further behind. Although Intel, SK Hynix and Samsung make leading-edge memory chips in wholly-owned fabs in China, locally-owned fabs typically make much older parts.

To catch up in flash, the Yangtze River project received ₹1.60 lakh crore ($24 billion) to make 3D NAND in a new fab that will be equipped in 2018, leveraging the existing Wuhan operations of XMC. Currently, a 39-level part has low yields on a functional die, and the company hopes to attract help from potential partners such as SK Hynix or Toshiba to work on a more state-of-the-art 64-level design.

Yin said U.S. equipment makers are likely to reap as much as ₹2.67 lakh crore ($40 billion) in sales from fabs supported by government investments, given the small size of most of the gear makers in China.

A total of about 40 capital equipment companies, three-quarters of them focused on wafer fab gear, are now operating in China. As a group they generally have less than 5% share of the China market, said Yin. “Five years from now the best case is they may get 7-10% of the market,” he said.

In a talk, he briefly profiled seven of the top companies including Sevenstar Electronics, a maker of furnace and wafer cleaning systems and North Micro Electronic, a maker of etch and vapour deposition systems, both in Beijing. Four of the companies are based in Shanghai including Shanghai Micro Electronics Equipment Co., a maker of scanners and exposure systems.

[China back end suppliers (cr)]
__Figure 2:__ *The situation in back-end gear is similar to front-end equipment.*

A profile of China’s top gear maker

AMEC is perhaps China’s most promising capital equipment maker with a portfolio of five kinds of wafer processing systems led by a strong line of etchers. It has sold 582 systems to date, 465 of them etchers, and its revenues are estimated to be approaching ₹666.62 crore ($100 million) this year, growing at 30% annually.

Yin developed leading-edge etch systems for Lam Research and Applied Materials before moving to Shanghai to form AMEC in 2004. His new company, which has a number of Applied Materials alums among its employees and advisors, has faced legal suits with both of his former employers.

Over the last five years, the company has received about ₹666.62 crore ($100 million) in R&D grants from China’s science and technology office which Yin says is comparable to the National Science Foundation in the U.S. AMEC also received a total of about ₹826.61 crore ($124 million) from the Sino IC Fund, China’s national semiconductor investment fund.

The U.S. took advanced etchers off its list of prohibited U.S. exports, in part because it found AMEC’s systems support advanced nodes, Yin said. He boasts Russia’s only 12-inch fab uses one of his etchers, and a Korean fab has produced 180,000 wafers/month for two years using his etchers.

AMEC could become a billion-dollar company by 2025, Yin said. To help get there, he has made an investment in deposition vendor Shenyang Piotech, a company he may seek to acquire.

But the 580-person AMEC is mainly focused on organic growth, Yin said. The company has filed a thousand patents to date and has been granted 433 of them.

Observers in the U.S. say AMEC is still a second-tier supplier, one under pressure to show results from government backing. One China fab exec said the company mainly has succeeded by delivering gear at 30% discounts compared to equipment from overseas vendors.

About a third of the components used in AMEC’s etchers are sourced in China, a fraction Yin expects to grow to 50% in five to 10 years. Of 90 different parts he buys from around the world, only seven are not available in China and four of them are in development there now, he said.

Nevertheless, Yin wants AMEC to be seen as an international company, noting six of his 18 vice presidents hold citizenship outside China.

There are tensions between the U.S. and China over semiconductors, “but it’s not necessary,” he said, pointing to the now long-gone conflict between the U.S. and Japan more than 20 years ago.

“I hope you will not be afraid of China’s momentum but proactively participate and get benefits from this growth,” he told the audience of mainly U.S. chip execs. “We are fully open to you coming to China to do business.”

« Previously: Executives make the case for China's big chip bet

This article first appeared on EE Times U.S.

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