How U.S. Uses Supply Chain Sway to Throttle China’s Chip Development
The new U.S. restrictions on exports of chips and related items to China leverage American dominance in critical areas of the global semiconductor supply chain and aim to strangle China’s advanced-chip development.
The semiconductor industry has long been marked by a highly integrated global supply chain. Over the years, its steep research and development costs and intensive capital expenditures have driven different countries to specialize in different steps of the chip-making process.
Today no one country can do it all, let alone do it all well. “Everyone is very interdependent on each other,” says Anne Hoecker, a partner in the semiconductor group at the management consulting firm Bain & Co.
Still, the U.S. reigns in some of the most critical—and earliest—parts of the chain, especially those that require research-intensive development. It is home to the leading chip design software providers and a bulk of the essential manufacturing equipment makers as well as the most cutting-edge chip-design firms.
This month the Commerce Department announced expansive new export-control rules that use these chokeholds to restrict China’s semiconductor sector from accessing critical inputs for making relatively advanced chips. The Wall Street Journal visualized the layers of the global chip supply chain to illustrate where the U.S. holds a significant share of the influence to assert its control.
U.S. dominates early chip supply chain
U.S. firms lead in producing the most advanced chip designs and chip-making tools.
Chips are designed using software that packs circuits into a tiny space.
Chip design software makers, global market share
U.S. leaders: Cadence Design Systems, Synopsys
China leader: No clear standout
Logic chip designers, global market share
U.S. leaders: Nvidia, AMD, Intel, Qualcomm
China leaders: HiSilicon, Will Semiconductor
STEP 2: WAFER FABRICATION
Silicon wafers are prepared and etched with circuit patterns in a complex process.
Equipment makers, global market share
U.S. leaders: Applied Materials, Lam Research, KLA
China leaders: NAURA Technology, AMEC
Logic chip fabrication plant locations, global capacity share
U.S. leaders: Intel, GlobalFoundries
Memory chip fabrication plant locations, global capacity share
U.S. leader: Micron Technology
China leaders: YMTC, ChangXin Memory Technologies
STEP 3: ASSEMBLY, PACKAGING, TESTING
Wafers are cut and encased in their final form, and tested to ensure they work.
Factory locations, global capacity share
Sources: Boston Consulting Group, Semiconductor Industry Association
Jemal R. Brinson; Karen Hao / THE WALL STREET JOURNAL
Chips are designed using software that packs circuits into a tiny space.
Chip design software makers, global market share
U.S. leaders: Cadence Design Systems, Synopsys
China leader: No clear standout
Logic chip designers, global market share
U.S. leaders: Nvidia, AMD, Intel, Qualcomm
China leaders: HiSilicon, Will Semiconductor
STEP 2: WAFER FABRICATION
Silicon wafers are prepared and etched with circuit patterns in a complex process.
Equipment makers, global market share
U.S. leaders: Applied Materials, Lam Research, KLA
China leaders: NAURA Technology, AMEC
Logic chip fabrication plant locations,
global capacity share
U.S. leaders: Intel, GlobalFoundries
Memory chip fabrication plant locations,
global capacity share
U.S. leader: Micron Technology
China leaders: YMTC, ChangXin Memory Technologies
STEP 3: ASSEMBLY, PACKAGING, TESTING
Wafers are cut and encased in their final form, and tested to ensure they work.
Factory locations, global capacity share
Sources: Boston Consulting Group, Semiconductor Industry Association
Jemal R. Brinson; Karen Hao / THE WALL STREET JOURNAL
Chips are designed using software that packs circuits into a tiny space.
Chip design software makers,
global market share
U.S. leaders: Cadence Design Systems,
Synopsys
China leader: No clear standout
Logic chip designers, global market share
U.S. leaders: Nvidia, AMD, Intel, Qualcomm
China leaders: HiSilicon, Will Semiconductor
STEP 2: WAFER FABRICATION
Silicon wafers are prepared and etched with circuit patterns in a complex process.
Equipment makers, global market share
U.S. leaders: Applied Materials,
Lam Research, KLA
China leaders: NAURA Technology, AMEC
Logic chip fabrication plant locations,
global capacity share
U.S. leaders: Intel, GlobalFoundries
Memory chip fabrication plant locations,
global capacity share
U.S. leader: Micron Technology
China leaders: YMTC, ChangXin
Memory Technologies
STEP 3: ASSEMBLY, PACKAGING, TESTING
Wafers are cut and encased in their final form, and tested to ensure they work.
Factory locations, global capacity share
U.S. leader: Amkor Technology
China leaders: JCET, TongFu Microelectronics,
Tianshui Huatian Technology
The rules require a U.S. license for Chinese chip makers using chip design software to make advanced chips, and prevent some Chinese chip users from using powerful chips whether they are designed in the U.S. or made elsewhere with U.S. technology. The latter approach is invoked by the so-called foreign direct product rule, a mechanism previously used by the Trump administration to cripple the Chinese telecom company Huawei Technologies Co.
Advanced chip makers in China are additionally restricted from buying manufacturing equipment or spare parts from such U.S. makers as
Applied Materials Inc.,
Lam Research Corp.
and
KLA Corp.
Neither can they buy extreme ultraviolet lithography machines, essential to achieving the most-advanced chips, made by
ASML Holding
NV. The Dutch company hasn’t shipped the machines to China in the face of U.S. pressure.
The new curbs restrict access to:
- Chip-design software. U.S.-made software used in the development of the most cutting-edge chips.
- Advanced chips. U.S.- or foreign-made chips produced with U.S. technology destined for Chinese supercomputers, as well as the most- advanced AI training chips.
- Chip-making equipment. U.S.-made manufacturing equipment and their components for the most cutting-edge chips.
- Talent. “U.S. persons,” which include U.S. citizens, green-card holders, residents and American companies, for supporting the most cutting-edge chips.
The Commerce Department further barred “U.S. persons”—U.S. citizens, permanent residents, people who live in the U.S. and American companies—from supporting China’s advanced chip development or production without a license. With American talent scattered across the supply chain, this gives the U.S. government further leverage to close off other remaining avenues for China to obtain chip-making resources.
A Wall Street Journal review of 16 Chinese chip companies’ filings found that nearly four dozen of their senior executives are American citizens who now might be forced to give up their citizenship or exit their companies.
Write to Karen Hao at [email protected]
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