Why is AMEC so powerful? Seeking opportunities for Chinese semiconductor companies amid risks

There's no way to keep this low-key.

Yin Zhiyao, Chairman and CEO of Advanced Micro-electronic Equipment (Shanghai) Co., Ltd. (hereinafter referred to as "AMEC"), has two identities on the Internet. One is the shocking "king bomb" that "breaks the pattern! Subverts core technology! The era of foreign companies' dominance is over!! The giants are sleepless all night!", and the other is a Chinese chip engineer who "works hard and begs the media to report pragmatically."

The former is a cosmic warrior imagined by the media last year in response to a statement by Dr. Yin Zhiyao during an interview that “5 nanometers will basically be finalized by the end of this year, and progress is particularly fast now.” The latter is Dr. Yin Zhiyao’s own description of himself.

Yin Zhiyao (Photo source: Rednet)

In an era when exclamation marks are worthless, what is the real face of Yin Zhiyao, who has made great contributions to China's semiconductor industry? The author will restore it from the official introduction and related interview materials.

Yin Zhiyao was born in 1944. He attended the prestigious Beijing No. 4 Middle School in high school, where he had excellent grades and was a top student. He graduated from the University of Science and Technology of China with a bachelor's degree, and then worked in the research and industrial production of catalysts and reactors at the Lanzhou Refinery and the Chinese Academy of Sciences for nearly ten years. In 1978, Yin Zhiyao chose to continue his studies and was admitted to the Department of Chemistry at Peking University. After obtaining a master's degree in chemistry, Yin Zhiyao went to the University of California, Los Angeles, and obtained a doctorate in physical chemistry in just three and a half years.

Along the way, he mastered physical chemistry to the doctoral level. As the saying goes, if you master mathematics, physics and chemistry, you are not afraid of going anywhere. After that, Yin Zhiyao began his journey of fighting monsters and upgrading in the semiconductor industry. The "place for cultivation" was Silicon Valley, and he worked there for 20 years.

In the past 20 years, Yin Zhiyao has worked his way up from an engineer to a senior executive, working for international giants in the semiconductor industry, including Intel (Technology Development Center, joined in 1984), Lam Research (led the development of etching technology, joined in 1986), and Applied Materials. He worked at Applied Materials for 13 years, serving as the company's vice president, general manager of the plasma etching equipment product group, vice president of procurement in Asia, and chief technology officer of Applied Materials Asia.

A quick calculation revealed that Yin Zhiyao was already in his sixties. Most people would start planning their retirement life after they turn 60, or even start fighting for turf in square dancing. However, he chose to return to China to contribute to the country's semiconductor industry.

Some media outlets have exaggerated the return to China as "heroic", and the return of an overseas student to serve his motherland has become a glorious event. In an interview with Fortune China in 2015, Yin Zhiyao said: "60 years old is about the same age, and many people in their 50s and 60s want to come back together, so with the government's encouragement, we decided to return to China in 2004 to start this business."

At that time, there were 15 other people who returned from Silicon Valley with Yin Zhiyao. Dr. Yin Zhiyao said that the achievements of SMIC were actually the joint efforts of everyone.

A Sina blogger nicknamed "Liu Changming" wrote a blog titled "The Yin Zhiyao I Know" in 2012, in which he mentioned: "At that time, Dr. Yin already had more than 70 international invention patents in the field of microelectronics. Since he was a leader in the field of semiconductor manufacturing equipment in the world and mastered many key technologies, the process of returning home was quite complicated and even risky."

The "risks" here, along with the growth of SMIC, have resulted in many stories that have ended in disaster.

The "old driver" of litigation

Founded in 2004, AMEC produced its first generation of dielectric etching machines in 2007, the first in the industry to use a dual-stage reactor that can be operated independently. Prior to this, no domestic company could supply core semiconductor manufacturing equipment, and the required equipment was almost entirely imported.

At the same time, in the same year, Yin Zhiyao's former employer Applied Materials came to pick a fight. In October of that year, it sued AMEC in the US court, complaining that AMEC was suspected of stealing secrets. In order to prove its innocence, AMEC hired a top US intellectual property litigation lawyer, who spent two and a half years thoroughly checking more than 6 million AMEC documents and more than 30 people's computers and documents, but did not find any drawings, technical data or trade secrets about Applied Materials. The lawsuit was eventually settled.

Although Zhongwei is not afraid of any lawsuit, if you steal other people's business or market, you will be targeted. The previous lawsuit has not been settled yet, and the next one is coming.

In 2009, another giant, Lam Research, sued AMEC for patent infringement in Taiwan. Judging from the result, this case is like a louse on a bald head - obvious, but just so difficult to deal with. AMEC won the first trial after only 8 months. But Lam Research continued to appeal, and the court rejected it again, repeating it four times. In the end, the plot reversed, AMEC produced evidence to accuse the other party of theft, and filed a lawsuit in the Shanghai court, and finally won the lawsuit.

Although the outcome is optimistic, judging from the date of the press release announcing the fourth victory, it was already December 29, 2011, and the lawsuit lasted for nearly three years.

From its establishment in 2004 to the end of 2011, AMEC did not seem to be disturbed by the lawsuit, and its R&D achievements were not lost. In addition to the first-generation dielectric etcher mentioned above, there are also some deep silicon etching equipment and MOCVD equipment. The following figure is taken from the "AMEC's ​​Application for Listing on the Science and Technology Innovation Board - Response to the Third Round of Review Inquiry Letter" which shows the machine development status of the company's historical R&D projects.

In addition, in October 2011, the company opened its first R&D center outside of China. The new 1,800 square meter facility is located in Zhunan, Taiwan. In addition to R&D, the facility is also used for final testing and assembly of AMEC's ​​advanced etching products. In March 2012, AMEC announced that Primo AD-RIE was installed and used by SMIC, mainly for 32/28nm and below process nodes.

It can be seen that SMIC was fighting lawsuits while carrying out research and development. It thought that after the fight with Applied Materials and Lam Research, life would be peaceful from then on. However, the stronger the sense of mission you carry, the more people will find fault with you.

In 2017, LED equipment manufacturer Veeco sued a supplier of MOCVD graphite trays in the U.S. District Court in New York, claiming that the graphite trays they provided to AMEC infringed Veeco's patents. As an old hand in litigation, AMEC did not let the matter go this time, but took direct countermeasures, filing a lawsuit with the Chinese Patent Office and other national patent authorities to invalidate Veeco's patents.

The result seemed very strange. First, the US announced a ban on the shipment of graphite trays, which prevented AMEC from obtaining supplies until AMEC's ​​application for Veeco's patent invalidation was approved. AMEC then sued Veeco in a Fujian court for infringement of the tray locking design, and finally the Fujian High Court also imposed a shipment ban on Veeco's MOCVD equipment imported into China.

The other party finally compromised and agreed to share the graphite pallet patent with SMIC.

Now, SMIC, whose revenue reached 1.64 billion yuan in 2018, has also started its journey to the Science and Technology Innovation Board some time ago.

When crisis becomes a habit

Judging from external reports, AMEC's ​​performance today is remarkable because it has always focused on providing services to customers in the IC and LED fields. With its specialized industry depth, it has not only attracted domestic pan-semiconductor leading customers such as SMIC, Yangtze Memory Technologies, and San'an Optoelectronics, but its etching equipment has also entered world-leading companies including TSMC , SK Hynix, UMC, and GlobalFoundries.

But we have to admit that the gap with international giants is still huge.

For example, data from The Information Network shows that the top three companies accounted for 94% of the total etching equipment market share in 2017, and the trend has been further concentrated in the past three years. AMEC only took a small share in the "other" column. Even in the prospectus, AMEC said that it "has outstanding market competitiveness in the domestic etching equipment market, and the recent orders for etching equipment purchased by two well-known domestic memory chip manufacturers accounted for 15% and 17% respectively."

The prospectus acknowledges nine major risks at the outset, which are: the risk of technology being overtaken or replaced due to insufficient R&D investment; the risk of loss of key technical personnel and shortage of top technical talent; the risk of downstream customers' production expansion falling short of expectations; the management and internal control risks brought about by the company's expansion; financial risks; intellectual property dispute risks; issuance failure risks; market competition risks; and international trade friction risks.

Just from the name of this risk, you can feel the pressure.