Blocked by the United States again! How difficult is it to import EUV lithography machines into China?

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Recently, SK Hynix hopes to introduce ASML's most advanced EUV equipment to upgrade its Wuxi chip plant's equipment products, control costs and accelerate production efficiency. However, the United States is opposed to this.

The United States has been continuously preventing China from purchasing EUV equipment. Although the main executors are now Korean companies, the United States will eliminate this risk because it will introduce advanced technology into mainland China.

Any major changes could have an impact on the global memory market, where demand is expected to grow 19% in 2021 alone, according to analyst firm IDC.

South Korean storage giant SK Hynix is ​​one of the world's largest suppliers of DRAM memory chips. They hope to transform their large chip foundry in Wuxi, which accounts for about half of the company's DRAM chip production and 15% of its global production.

SK Hynix is ​​worried that if the United States continues to block it, the company may fall behind Samsung Electronics, Micron and other companies in the memory chip competition. Samsung and Micron are also turning to ASML's EUV machines, but have said they will not use them in factories where those machines face export restrictions.

SK Hynix has been worried about this for some time, and SK Hynix CEO Lee Seok-hee raised similar issues to the United States during his visit to Washington in July. A source familiar with SK Hynix's operations in China said: "As new chips take up a larger share of SK Hynix's production in two to three years, the company will need EUV machines to control its costs and increase production capacity."

In response, SK Hynix stated: We are operating flexibly according to various market environments and are actively responding to market and customer needs.

A senior White House official declined to comment specifically on whether U.S. officials would allow SK Hynix to bring EUV equipment to mainland China. But the official told Reuters that the Biden administration remains focused on preventing China from using U.S. and allied technology to develop state-of-the-art semiconductor manufacturing to help China modernize its military .

During the administration of former US President Trump, it successfully lobbied the Dutch government to block the sale of ASML's technology to SMIC.

An ASML spokesman said the company complies with all export control laws and views them as an "effective tool" for governments to ensure national security. But the company said excessive use of the controls "could impact the production capacity needed to stay ahead of growing demand for semiconductors."

"Broad use of export controls could exacerbate microchip supply chain issues, which are already a major concern for governments and policymakers around the world due to spillover effects to other industries, such as the automotive sector," the spokesperson said in a statement.

Analysts believe that U.S. officials will not view SK Hynix's introduction of EUV lithography machines to mainland China as any different from what Chinese companies have done before.

(Image source: ASML)

"These regulations could apply to any chip manufacturing business in China, whether foreign or domestically controlled," said Dan Hutchison, CEO of VLSI Research. "Any company that advances EUV equipment in China is providing China with chip production capabilities. Once EUV lands in mainland China, you don't know where it will go after that. The Chinese are always good at seizing opportunities to do whatever they want."

ASML全球副总裁、中国区总裁沈波在最近的采访中表示，对中国出口集成电路光刻机持开放态度，在法律框架下全力支持。同时明确表明，目前ASML除了EUV光刻机无法对中国客户供货外，其他产品都可以正常供货。

Before 2002, only the United States, the Netherlands and Japan had entry tickets to the global lithography market, and imposed a technological blockade on China. In recent years, the global lithography market is still divided among ASML, Nikon and Canon, which occupy 99% of the global semiconductor front-end lithography market. In 2002, lithography was included in the "National 863 Major Science and Technology Research Program", and Shanghai Microelectronics Equipment Co., Ltd. was established.

Recently there have been rumors that: "Shanghai Microelectronics' 28nm lithography machine (rumored model is SSA800/10W) has not passed the national acceptance of the 02 special project and cannot be completed by the end of 2021. The 28nm lithography machine is stuck in the '02 special project'." This news has continued to ferment in the industry and caused heated discussions, but has not received an official response.

In the "02 Special Lithography Machine Project Phase II", the set time is: 193nmArF immersion DUV lithography machine acceptance in 2021, and the benchmark product is the DUV lithography machine launched by ASML in 2018: TWINSCAN NXT:2000i.

(DUV lithography machine, source: ASML official website)

However, mastering lithography technology is not easy. ASML's advanced EUV lithography machine has more than 100,000 parts, involving more than 5,000 upstream suppliers. These parts are extremely complex, with extremely high requirements for error and stability, and almost all of these parts are customized. 90% of the parts use the world's most advanced technology, and 85% of the parts are developed jointly with the supply chain. What's even more difficult is debugging and maintenance. Some interfaces in the equipment require engineers to polish with high-precision machinery, and the number of size adjustments is likely to be as high as more than a million times.

It is understood that since the delivery of the first EUV lithography machine in 2015, ASML has delivered a total of 100 units by the end of 2020, and delivered 31 EUV lithography machines in the first three quarters of 2021, which means that a total of 131 EUV lithography machines have been delivered so far. ASML expects to deliver 55 EUV lithography units in fiscal 2022.

(EUV lithography machine, source: ASML official website)

Although EUV lithography machines are quite expensive, costing nearly $120 million each, semiconductor manufacturers are still willing to invest in them. This is because 7nm and above processes do require EUV lithography machines, and the same 7nm process will have better transistor density and performance if EUV lithography technology is used. According to data provided by TSMC, compared to the first-generation 7nm process, 7nm EUV (N7+) can provide a 1.2-fold density increase, a 10% performance increase at the same power consumption level, or a 15% power saving at the same performance.

Currently, Samsung and TSMC have already started producing chips using the 7nm EUV process. AMD's Zen 3 architecture fourth-generation Ryzen processor uses TSMC's 7nm EUV process; Intel's 7nm process research and development is progressing smoothly, using a redesigned simplified process and EUV lithography technology, and plans to achieve tape-in ​​of the 7nm client CPU product "Meteor Lake" this year.