The outbreak of the epidemic has caused a material shortage crisis, and the localization of photoresist is imminent

According to Jiwei.com, since the outbreak of the COVID-19 pandemic, the domestic semiconductor industry has been the first to encounter a "material shortage crisis", and as the overseas pandemic continues to spread, the global semiconductor supply chain is facing increasing challenges. Even TSMC, the leading foundry, has expressed concerns about this. TSMC pointed out in its annual report that "the COVID-19 pandemic may affect the normal operation of its company in various aspects, including interrupting the global semiconductor supply chain and the operations of TSMC's suppliers, including Asia, Europe and North America."

Amid the pandemic, as a material with large consumption but limited stock, the supply security of photoresist has received particular attention. Domestic semiconductor photoresist manufacturers have currently only achieved large-scale mass production of two types of photoresists: i-line (365nm) and KrF line (248nm), and have not yet made any breakthroughs in higher-end ArF and EUV photoresists.

Despite this, as the domestic semiconductor industry pays more and more attention to the security of the supply chain, major wafer fabs have strengthened their cooperation with domestic photoresist manufacturers, and domestic photoresist manufacturers are also working hard to promote research and development progress.

The localization of photoresist is imminent

Among all semiconductor chemicals, photoresist is one of the most expensive materials, but it has the shortest shelf life (more than 80% of photoresists are only valid for 90 days after entering the factory). In order to avoid unnecessary waste, wafer fabs do not have too much raw material inventory. Generally speaking, there are more than 30 types of photoresists needed in a fully loaded wafer fab, and some products even need to be restocked every month.

Jiwei.com previously reported that as California issued a "shelter-in-place order", local factories were temporarily closed at the request of the local government, including semiconductor equipment factories and a small number of semiconductor material factories including JSR and DuPont.

Jiwei.com learned that although the above-mentioned factories quickly resumed normal operations, it did not have much impact on the overall operations of the wafer fabs that purchased JSR and DuPont photoresists.

However, due to the extremely high technical barriers of photoresist, it is difficult for potential entrants to reverse analyze and imitate finished photoresist products. Therefore, the global photoresist industry presents an oligopolistic pattern and has long been monopolized by professional companies in Japan, Europe and the United States. Among them, Japanese companies occupy 80% of the global market.

The major photoresist companies include Japan's TOK, JSR, Fuji, Shin-Etsu Chemical and Sumitomo Chemical, the United States' Dow Chemical, Europe's AZEM and South Korea's Dongjin Semiconductor, etc., while China has always been blank in high-end photoresists and supporting key material products. Therefore, the industry is increasingly concerned about the security of the supply chain, and the localization of photoresists is imminent.

Foreign companies may have initiated countermeasures

It is understood that currently only Suzhou Ruihong (a subsidiary of Jingrui Co., Ltd.) and Beijing Kehua have the large-scale production capacity of semiconductor photoresists in China. The two have respectively undertaken and completed the national major scientific and technological project 02 special project "i-line photoresist product development and industrialization" and the "KrF-line photoresist industrialization" project.

In its 2019 annual report, Jingrui Co., Ltd. stated that Suzhou Ruihong has completed the technical development of a number of i-line photoresist products and achieved sales, obtained supply orders from domestic companies such as Yangjie Technology and Fushun Microelectronics, and conducted tests in well-known semiconductor factories such as Silan Microelectronics, Jilin Huawei, and Shenzhen Founder; high-end KrF photoresist is in the pilot stage.

However, in the past year, Jingrui Co., Ltd.'s photoresist business achieved operating revenue of 79.1578 million yuan, a decrease of 6.02% from the same period last year, and a gross profit margin of 50.95%, a year-on-year decrease of 2%.

Beijing Kehua has completed the production line construction and mass production shipments of UV positive photoresist, high-resolution G-line positive photoresist for integrated circuits, I-line positive photoresist, and KrF deep ultraviolet photoresist. Its customers include SMIC, CSMC, Silan Microelectronics, HuaWei Electronics, Sanan Optoelectronics, and HC SemiTek, etc.

According to the announcement disclosed by Nanjing University of Science and Technology Optoelectronics, Beijing Kehua achieved revenue of 70.46 million yuan in 2019, a decrease of 10.75% from 78.95 million yuan in the same period last year, and net profit of 5.45 million yuan, compared with 10.15 million yuan in the same period last year.

Jingrui Shares and Beijing Kehua did not explain the decline in performance. However, Nanjing University of Science and Technology said that when my country forms its own localized photoresist products, the corresponding foreign monopoly enterprises will inevitably launch a counter-measure mechanism to hinder the development of my country's independent industrial chain to the greatest extent possible, and there may be a price war with local enterprises in the domestic market, thereby hindering and delaying the entry of local products into the domestic mainstream market and the subsequent industrialization.

Although I do not know whether foreign companies have launched countermeasures, the same thing has been verified countless times in various semiconductor industry segments.

With the entry of lithography machines, domestic photoresist manufacturers are accelerating their breakthrough

It is worth noting that although KrF photoresist represents the most advanced photoresist research and development and production level in China, KrF photoresist can only be used for integrated circuit manufacturing at process technology nodes above 130nm, and cannot meet the manufacturing process of technology nodes below 90nm.

Therefore, A-share listed companies Nanjing Optoelectronics and Shanghai Xinyang have begun to develop more advanced Arf photoresists.

NCU Optoelectronics started to independently develop ArF (193nm) photoresist in June 2017, and in January 2018, it was approved for the national 02 project "ArF Photoresist Development and Industrialization Project".

"The project has been in development for more than three years, but it is still a long way from success." Nanjing University of Science and Technology Optoelectronics said in its reply to the Shenzhen Stock Exchange's letter of concern on April 10 that the "ArF photoresist development and industrialization project" has not yet achieved mass production and is in the process of photoresist product verification, which usually takes 12-18 months or even longer.

It is understood that before mass production of photoresist products, four main tasks need to be completed, including photoresist product formula development, application process development, production process development, and customer verification.

The author learned from informed sources that Nanjing University of Science and Technology Optoelectronics has not yet started verification work and its formula development has not been completed. Formula development is the most important and critical basic work in the research and development of photoresist products. Only a few photoresist companies in the world can modulate product-level ArF photoresist formulas, and development is extremely difficult.

People familiar with the matter further pointed out that when developing the formula, customers will put forward basic requirements for the key exposure data of the photoresist. The photoresist manufacturer determines the preliminary formula by selecting and proportioning the main raw materials. The process requires thousands of continuous trials and tests, and finally forms multiple product formulas. The formula is continuously adjusted and optimized during customer testing, verification, and use. If the standards are not met during the customer testing stage, the photoresist manufacturer can only re-debug.

However, after the lithography machine enters the site, the debugging and verification of photoresists can be accelerated. It is reported that in April 2020, the ASML193 nanometer immersion lithography machine purchased by Nanjing University of Science and Technology has entered its Ningbo workshop, but it still needs to be installed and debugged, and it is estimated that the installation and debugging will take 4-5 months. Through this imported lithography machine, Nanjing University of Science and Technology can verify the quality of the photoresist products produced by the company.

Shanghai Xinyang has launched a project to develop ArF, KrF, and I-line high-end photoresists for integrated circuit manufacturing.

According to Shanghai Xinyang's reply to the Shenzhen Stock Exchange's letter of concern on April 22, some of its KrF thick-film photoresist product formulas have completed laboratory research and development; production process development is about to begin, and the pilot production line is under installation, commissioning and construction; the lithography machine used to detect exposure data and quality analysis (model: Nikon-20541, second-hand machine) has completed installation and commissioning and entered the trial operation stage; the development of major raw materials is being carried out simultaneously; and customer production line verification will be carried out after the pilot products are produced.