The same old story! To suppress China's rise, the U.S. military and Intel have reached a cooperation agreement to develop advanced chips

Author | Bei Shuang

In order to suppress China's rise, the United States has taken new actions in the chip field.

According to Reuters on October 2, Intel Group announced on Friday local time that it has reached a cooperation with the US military to assist the military in producing more advanced semiconductors. According to the cooperation arrangement, Intel will use its self-developed semiconductor packaging technology in its factories in Arizona and Oregon to help the military develop chip prototypes.

It is reported that the US government is working to improve the domestic semiconductor manufacturing industry in order to suppress China's rise in the semiconductor field. Previously, the head of the US military, Ellen Lord, had publicly stated:

It is understood that about 75% of the world's chip manufacturing plants are in Asia, among which chip giants such as TSMC, Samsung Electronics, and Hynix are mainly concentrated in Taiwan, China and South Korea. These factories are within the range of the Chinese and North Korean armies.

It is this point that has caused concern in the US government.

Intel CEO Bob Swan told Reuters:

As a chip giant headquartered in the United States, Intel can help address possible concerns that the United States may have regarding key technologies in the future.

A key technology in chip development is packaging, which can integrate "chiplets" from different suppliers into one package. It can integrate more functions while reducing energy consumption and product size.

Currently, the highest chip manufacturing process has reached 5nm, and TSMC was the first to achieve its research and development and mass production, followed by Samsung Electronics.

In recent years, TSMC has been the number one chip foundry, accounting for more than half of the industry's market share. The only chip giant that can compete with it in the industry, Intel, has only achieved a 10nm process.

Intel won the second phase of the military contract this time, largely because it is headquartered in the United States. Dan Hutcheson, CEO of VLSI Research, publicly stated that Intel has been researching packaging technology and has a certain leading edge. More importantly, it can do this work in the United States, while TSMC and Samsung Electronics cannot do it.

Recently, Intel has just completed a $7 billion factory expansion project in Arizona. Next, it will be used together with the factory in Oregon for the US military's advanced semiconductor technology research and development. The specific amount of this contract has not been disclosed publicly by Intel Group.

In addition to strengthening its chip technology R&D advantages, the US government is also vigorously promoting the return of chip and other manufacturing companies. Almost all aspects of American society are heavily dependent on Chinese manufacturing. In March this year, Trump clearly stated that the United States needs "manufacturing independence" and bring manufacturing back to the United States.

Later in April, White House Chief Economic Advisor Kudlow publicly stated that all expenditures of American companies moving back to the United States from China could be fully expensed in the current period, trying to encourage companies to return through indirect tax cuts.

Whether it is accelerating the return of enterprises or reaching cooperation with Intel, the US government intends to reorganize the chip industry chain and strengthen its core advantages.

If the above measures fall within the scope of normal business competition, then the unreasonable sanctions imposed by the United States on Chinese companies such as Huawei by taking advantage of its chip advantage in order to suppress China's rise are clearly a violation of international free trade regulations.

In May this year, the US Department of Commerce issued a ban on Huawei on the grounds of "maintaining national security", prohibiting companies including TSMC, Qualcomm, Samsung, SK Hynix, Micron and others from supplying chips to Huawei. The ban officially came into effect on September 15.

Not only that, in August this year, US Secretary of State Pompeo also stated in a statement that the US Department of Commerce has further tightened restrictions on Huawei's access to US technology, listing Huawei's 38 subsidiaries in 21 countries around the world on the "Entity List", prohibiting them from selling and using semiconductors based on US technology.

This series of measures may directly lead to the swan song of Huawei's Kirin 9000 high-end chip. Huang Haifeng, an independent analyst in the communications industry, previously publicly stated:

This series of unwarranted suppression measures will undoubtedly hurt US companies while hurting themselves.

It is reported that Huawei purchased semiconductor parts worth US$20.8 billion in 2019, ranking third in the world after Apple (US$36.1 billion) and Samsung (US$33.4 billion).

The same is true for AMD and Intel. Nearly one-third of Intel's annual revenue comes from the Chinese market. Therefore, American technology companies have been actively lobbying the US government to lift restrictions on Huawei.

Perhaps under pressure from technology companies, the US government gave in. Shortly after the ban came into effect on September 15, Intel and AMD obtained permission to supply Huawei.

Intel CEO Bob Swan said global market access is "very important" to help Intel raise the cash needed to build chip factories, which is mainly used to invest in wafer fabs and research and development in the United States.

Regardless of the purpose, Chinese companies accept all free competition that complies with international trade regulations, and will not stop developing their own chips. As Ren Zhengfei once said: "Key core technologies cannot be obtained, bought or begged for."

References:

https://www.reuters.com/article/us-intel-manufacturing/intel-wins-second-phase-of-contract-to-help-pentagon-develop-chips-idUSKBN26N1N7