Technology invades the modern world

Chapter 450 The Beginning of the Hurricane

The 7nm breakthrough in China, though far away, was the beginning of a hurricane for many.

The outside world thought this was the end, a concentrated burst of results from the years of deep cultivation of the semiconductor industry by the China National Semiconductor Industry Investment Fund since 2018.

The media is paying close attention, political leaders from various countries are concerned, and everyone, regardless of their background, wants to say something.

In Europe, where there is virtually no chip industry, high-ranking EU officials in Brussels have had to speak out, saying that while China's progress is certainly gratifying and we are concerned about the advancement of global innovation, we must ensure that this progress is based on fair competition, transparency, and sustainable development.

This is considered friendly.

The less friendly side says that we need to strengthen strategic autonomy and ensure the resilience of the supply chain.

The subtext of the latter is that no matter how cheap your price is, I will not consider buying your chip products, because buying them would mean losing autonomy.

Does Europe actually have any strategic autonomy whatsoever?

The bombing of Nord Stream was such an important event, yet no one investigated it, no one dared to investigate it, and some scattered revelations were drowned out by the sea of ​​information.

That's about all the impact this incident has.

The public doesn't care.

What is 7nm? What is the entire industry chain? What impact would it have if China mastered it? More than 90% of foreign people don't care.

Some YouTubers created educational videos to explain how remarkable this event is.

In particular, European tech bloggers, who are interested in technology, are concerned because Europe also has a chip law. They hope to ensure that by 2030, 10% of the world's chips will be produced in Europe through an investment of 430 billion euros.

In her 2021 State of the Union address, Ursula von der Leyen set a vision for Europe’s chip strategy.

European tech bloggers on YouTube compare the EU's plans with China's progress, emphasizing the difficulty of this task, as it involves starting the entire semiconductor industry chain from scratch and requires overcoming numerous obstacles.

At the same time, they began to imagine that Europe could achieve the same success as China by 2030.

This is not only because I think I can do it in China, but also because the goals and difficulties in Europe are much lower.

America can ban ASML, but it can't prevent ASML from selling its lithography machines to Europe.

Europe doesn't need to do much independent research and development; all they need to do is rely on the existing supply chains of the liberal camp and put together a scheme.

Is this difficult?
This is what YouTube bloggers in Europe thought.

People in Europe and America didn't care at all, and the video's views were significantly lower than their usual video views.

In traditional media, this matter was completely frozen and reported in a low-key manner.

Did the New York Times report on it? Yes, but the average reader would have to scroll through five pages on the website to find the article. Even with a simple push notification, it doesn't generate even a tenth of the buzz of a news release that comes from a random tweet on the New York Times.

The impact is more felt in East Asia.

European officials are just talking big, but it's a different story in East Asia, where it concerns their vital interests.

Whether it's Korea, Japan, or the 4V region, they all have a large semiconductor industry.

This is the most concentrated and fiercely competitive semiconductor industry in the world. Any slight disturbance here could cause a tsunami, let alone a hurricane that hits the very core of the industry.

The cold air is so penetrating that it affects everyone, regardless of whether they work in the semiconductor industry.

An engineer who worked in Samsung Electronics' foundry division for ten years wrote on an anonymous internal forum: "We have always believed internally that China is at least five years behind at the 7nm node."

In retrospect, we completely underestimated China's speed of catching up.

This is not just about catching up in technology; it's about achieving complete independence in the supply chain.

This is fatal for our non-storage business.

If Chinese design companies start shifting to local OEM manufacturing, we will lose not 10%, but 30% of our orders each year.

If this pace continues, when will they reach 5nm, 3nm, or even 2nm, and catch up with TSMC's progress?
By then, will Korea's semiconductor industry still be necessary? Will we, like in the shipbuilding industry, be overtaken by China's "golden cross"?

For ordinary investors, semiconductors are the "ballast" of the national economy.

The fluctuations in related stocks have caused volatility in national assets.

Korean media outlets are constantly discussing the future of Korea's economy, worrying about where new growth points will come from if the semiconductor industry's advantages are lost. They are urging the Blue House to provide quick solutions instead of just focusing on being friendly to China.

It's hard to find an adjective to describe their inner feelings. Anger, sadness, contempt, unease, etc., but perhaps "unhappy" is the most appropriate word to sum it up.

In the laboratory of the Institute of Fine Chemicals on the outskirts of Tokyo, the air is filled with the faint smell of high-purity solvents and resins.

Yamaguchi, a senior engineer at Shin-Etsu Chemical, stood in front of a precision testing instrument worth hundreds of millions of yen, his hands in the pockets of his cleanroom suit, his face expressionless, but his anxiety was palpable.

He is in charge of one of the company's core products: ultra-high purity photoresist used in EUV.

This photoresist is the lifeblood of manufacturing chips at 7nm and below, and Neon Corporation holds absolute sway in the global market.

Yamaguchi's anxiety did not begin today; it began with the so-called cooperation last year.

He looked back on 2024.

At the time, the company's senior management announced in a triumphant manner that they had transferred the complete set of 28nm mature process technology, equipment drawings, and detailed process flow to China at an astonishing price.

"Mr. Yamaguchi, we're selling outdated tools, but we're earning research and development funds for the next ten years!" The sales director at the time said with great enthusiasm at the celebration banquet.

But Yamaguchi and his colleagues in the R&D department knew the truth.

28nm is the engineering foundation for all subsequent processes.

In the restroom of the celebration banquet, Yamaguchi bumped into the sales director who walked in shortly after him. He reminded him, "The Chinese don't want to buy chips; they want to buy our roots. What we sell them is our entire experience in managing a wafer fab."

The sales director, who had been all smiles at the dinner party, silently lit a cigarette. Through the puffs of smoke, the middle-aged man's face showed no positive emotion whatsoever.

"Do we have a choice? We don't. This MacArthur of our time is sitting high above the clouds next to the Royal Palace, forcing us to sell technology to our biggest competitor."

What you know, how could the company's top management not know, and how could Chiyoda's ministers not know?

But we had no choice. MacArthur was watching us, and if we disobeyed his will even slightly, we would be punished in every way.

The 4V next to it is the best example.

At the time, Yamaguchi simply thought that the leaders were the best actors, able to put on the right mask in different situations, and didn't quite understand the meaning behind their words.

Who is MacArthur? And what's wrong with 4V?
A year later, he fully understood. That guy named John Adams Morgan was, on the one hand, colluding with China to reap profits from the Taiwanese stock market and capital markets, and on the other hand, causing the Japanese semiconductor industry to dig its own grave. In Yamaguchi's view, perhaps the only good news was that the Chinese were also about to plunge headlong into the NIL lithography machine pit.

On the afternoon of the day the news of China's breakthrough came, the R&D director summoned all the core engineers.

The atmosphere in the conference room was more oppressive than during any lithography machine malfunction.

The R&D director cut straight to the point: "Orders from the Chinese market for our 7nm photoresist and precision polishing fluid have been cut by 25% next quarter."

There was dead silence in the room.

A 25% reduction means a loss of billions of yen, but it also means that domestic Chinese material suppliers are entering the core production line at an unexpected speed.

“But that’s impossible,” someone couldn’t help but retort. “The impurity control of domestically produced photoresist in China simply cannot pass the 7nm yield test!”

The director sighed, adjusted his glasses, and projected a report onto the screen.

"The problem is not here."

This report comes from our intelligence department.

The Chinese government is providing substantial subsidies for yield losses at wafer fabs that use domestically produced materials.

They forwent short-term profits, using the power of the state to forcefully upgrade the quality of domestically produced materials.

His gaze swept over everyone, and his tone became extremely heavy: "The 28nm technology we sold to them gave them control over the speed of process verification and error correction."

Chiyoda was wrong; they overestimated our ability to control the situation.

They thought that by controlling the EUV equipment, China would be powerless to cause trouble, but they were sorely mistaken.

Even in private, Japanese people dare not criticize the White House.

"Gentlemen, our advantage is no longer irreplaceable, but difficult to replace quickly."

Now, China has proven to the world that this rapid timeframe was only one year.

From that day on, Yamaguchi's research and development mission underwent a complete transformation.

In the past, their work was to strive for excellence, increasing the purity of existing photoresists to more decimal places and optimizing their exposure uniformity.

Now, his superiors have instructed him to shift his focus entirely to technological breakthroughs.

On the first page of his lab notebook, he wrote down his new goal in red pen:

Next-generation EUV materials will be delivered a year ahead of schedule.

Objective: To achieve a completely new chemical structure and preparation process that cannot be imitated within five years.

Yamaguchi realized that he was now racing against time and against the deployment of a national machinery.

The purity of photoresist is crucial to Japan's position in the global semiconductor supply chain.

He felt he was no longer a craftsman, but a sentinel running desperately through a storm with a torch in his hand.

That evening, Yamaguchi sat on the tatami mat at home while his wife prepared dinner in the kitchen, and a special report about the incident was playing on television.

A former official from the Ministry of Economy, Trade and Industry appeared grim on the program:

"This is a complete failure of Japan's industrial strategy! We are content to sell mature technologies and satisfy short-term profits, but we have lost the ability to be prepared for potential crises."

China's achievement of 7nm technology proves how arrogant and fragile our confidence in technological barriers is.

We thought we were the blood supplier of the industrial chain, but we ended up becoming the catalyst.

Japan's technological accumulation is becoming an accelerator for China's self-reliance!

His wife came over, handed him a cup of hot tea, and asked worriedly, "Yamaguchi-kun, will this really affect us? Didn't your company say that their materials could never reach your purity level?"

Yamaguchi said helplessly, "That was the logic of the past. The logic is different now."

The Chinese have proven that engineering problems can be solved with time, money, and national will.

They are digging their own well.

We used to control the water source; now we must dig deeper and faster than them.

This sense of crisis is most direct and intense in 4V.

The economic structure here is deeply intertwined with the semiconductor industry, with a single contract manufacturing giant supporting the region's economic skyline.

China's breakthrough in 7nm technology is nothing short of a minor earthquake for industry professionals in Taiwan.

A senior engineer working at TSMC, at an after-get off work gathering with colleagues, summed up his feelings in one sentence: "The wolf is really here. What we used to consider a moat has been proven to be able to be crossed. How long can we maintain our lead with 3nm and 2nm? Five years? Three years? This is not a contest of technology; it is a full-scale confrontation between a nation's will and a region's industry."

Our strength lies in our vast ecosystem and customer base, but if customers start being required or encouraged to choose local supply chains, that would be a fatal blow.

Another colleague said directly, "Isn't that obvious? How could China not support its own companies? How could it possibly give us orders?"
To put it simply, within six months to a year, we can expect to see a complete disappearance of orders for 7nm and above process technologies throughout the entire Chinese region.

This sense of crisis transcends the industry and permeates all aspects of society.

The media discussion was unprecedented, with financial channels and political talk shows repeatedly analyzing the impact of the event.

Even if ordinary people don't understand the details of chip manufacturing, they know what this means: the economic foundation has been shaken.

ChipShield has gone from a shield to a piece of paper, and the White House is still trying to move the 4V semiconductor industry to America.

How long can their economic advantage last?

No one can give an answer.

Both sides in the video conference were Chinese.

"Now, we have achieved full domestic production of 7nm."

My superiors, and the entire board of directors, have all demanded that I prioritize de-risking the supply chain as my top priority.

　Happy Mid-Autumn Festival everyone!

　　
　
(End of this chapter)