Huali, AMEC execs share their views
HALF MOON BAY, Calif. — Two senior China executives defended the country’s big bet on its semiconductor industry here a week after a White House report called for international action against practices it called unfair. Executives from fab and capital equipment companies said the China government is not being unfair in the way it supports its still-infant industry.
The China national and provincial governments along with private investors aim to spend as much as $160 billion dollars over the next few years growing China’s semiconductor industry. U.S. chip makers are concerned the government help puts an unfair finger on the scale in what is seen as the largest growth market for semiconductors for the next several years.
Executives from foundry Shanghai Huali Microelectronics Corp. and etch-system vendor Advanced Micro-Fabrication Equipment Inc. (AMEC) made the case both for China’s efforts and their companies at the Industry Strategy Symposium, an annual event sponsored by the SEMI trade group.
As the assembler of the vast majority of the world’s smartphones, digital cameras and other products, China runs a huge trade deficit in semiconductors. It buys about 45% of the world’s chips but makes only 13% of them.
China runs an estimated $150 billion annual trade deficit in chips. (Images: Huali)
A market-based policy set in June 2014 aims to close an estimated $150 billion annual trade deficit, but it will take years, the China execs said. Its goals include getting China fabs in mass production of 16/14nm chips by 2020 with a robust local equipment and materials industry to support them.
“If we don’t have these key [component] technologies we may have trouble in the future,” said Jack Qi Shu, vice president of sales and marketing for Huali in an interview with EE Times after a presentation here.
Next page: Huali’s $5.9 billion Fab 2 bet
China's provinces are kicking in money as part of a national chip effort.
Inside Huali’s $5.9 billion bet on Fab 2
Huali aims to shift to 28 and 14nm nodes with Fab 2...
For its part, Huali recently announced it secured $5.9 billion to build a 40,000 wafer/month fab in Shanghai to build 28-14nm chips. Nearly 40% of the funds came from the China national government with nearly 7% from the Shanghai government.
About 54% of the money was from Huali which has an existing 55-40nm fab. The government funds are loans Huali must pay back, said Qi Shu of Huali.
“If I were running the fab, I would not aim for advanced technologies [such as 28-14nm] but increase capacity for our current [55-40nm] technology because I can increase revenues quicker, but the government wants to support the industry,” he said.
The high cost and seven-year deprecation times of advanced tools mean Huali will not see profits for many years. “It’s not a very good business, although you can make money in the future -- only the government would invest in something like this,” he said.
More investments may be coming. Qi Shu showed plans for three fabs on the new site in Shanghai’s Pudong district where the Huali Fab 2 is planned.
Huali had revenues of more than $450 million last year making it the world’s tenth largest fab and demand is high, he said. One analyst said the company’s current 35,000 wafer/month fab has very low yields, suggesting it may be operating at a significant loss.
The $5.9 billion Fab 2 is not scheduled to start production until mid-2018 and not expected to reach capacity until 2022, Qi Shu said. Huali is in negotiations with multiple non-U.S. companies to license and develop 28nm high-K metal gate technology with licensing costs alone expected to range in hundreds of millions of dollars.
Meanwhile, Huali is working with one customer, Taiwan’s Mediatek, to develop 28nm polysilicon technology. Huali makes combo Wi-Fi/Bluetooth chips for Mediatek. The foundry also is working with Omnivision, a company acquired by China investors in 2014, to develop process technology to make its image sensors.
“We don’t have much IP in house, but we have some standard IPs at 55 and 40nm and at 28nm we are developing IP,” he said.
Next page: An equipment maker’s view
...but it expects to take 2-3 years to ramp 28nm HKMG and five years to fill the fab. (Images: Huali)
An equipment maker’s view
Gerald Z. Yin is one of the leading lights in creating a capital equipment sector in China as chief executive and founder of AMEC. In an interview he shared his thoughts about China’s big chip push
The government plans to spend $64 billion by 2020 on 17 wafer fabs, Yin said. But most projects face big challenges getting access to advanced technology and technical and management leaders to run them.
“Personally I think half the projects may not make it,” Yin said. “China is three generations behind -- 28nm [logic] is just barely getting into R&D,” he said.
In memory chips, China is further behind. Although Intel, SK Hynix and Samsung make leading-edge memory chips in wholly-owned fabs in China, locally-owned fabs typically make much older parts.
To catch up in flash, the Yangtze River project received $24 billion to make 3D NAND in a new fab that will be equipped in 2018, leveraging the existing Wuhan operations of XMC. Currently, a 39-level part has low yields on a functional die, and the company hopes to attract help from potential partners such as SK Hynix or Toshiba to work on a more state-of-the-art 64-level design.
Yin said U.S. equipment makers are likely to reap as much as $40 billion in sales from fabs supported by government investments, given the small size of most of the gear makers in China.
A total of about 40 capital equipment companies, three-quarters of them focused on wafer fab gear, are now operating in China. As a group they generally have less than 5% share of the China market, said Yin. “Five years from now the best case is they may get 7-10% of the market,” he said.
In a talk, he briefly profiled seven of the top companies including Sevenstar Electronics, a maker of furnace and wafer cleaning systems and North Micro Electronic, a maker of etch and vapor deposition systems, both in Beijing. Four of the companies are based in Shanghai including Shanghai Micro Electronics Equipment Co., a maker of scanners and exposure systems.
Next step: A profile of China’s top gear maker
A profile of China’s top gear maker
AMEC is perhaps China’s most promising capital equipment maker with a portfolio of five kinds of wafer processing systems led by a strong line of etchers. It has sold 582 systems to date, 465 of them etchers, and its revenues are estimated to be approaching $100 million this year, growing at 30% annually
Yin developed leading-edge etch systems for Lam Research and Applied Materials before moving to Shanghai to form AMEC in 2004. His new company, which has a number of Applied Materials alums among its employees and advisors, has faced legal suits with both of his former employers.
Over the last five years, the company has received about $100 million in R&D grants from China’s science and technology office which Yin says is comparable to the National Science Foundation in the U.S. AMEC also received a total of about $124 million from the Sino IC Fund, China’s national semiconductor investment fund.
The U.S. took advanced etchers off its list of prohibited U.S. exports, in part because it found AMEC’s systems support advanced nodes, Yin said. He boasts Russia’s only 12-inch fab uses one of his etchers, and a Korean fab has produced 180,000 wafers/month for two years using his etchers.
AMEC could become a billion-dollar company by 2025, Yin said. To help get there, he has made an investment in deposition vendor Shenyang Piotech, a company he may seek to acquire.
But the 580-person AMEC is mainly focused on organic growth, Yin said. The company has filed a thousand patents to date and been granted 433 of them.
Observers in the U.S. say AMEC is still a second-tier supplier, one under pressure to show results from government backing. One China fab exec said the company mainly has succeeded by delivering gear at 30% discounts compared to equipment from overseas vendors.
About a third of the components used in AMEC’s etchers are sourced in China, a fraction Yin expects to grow to 50% in five to ten years. Of 90 different parts he buys from around the world only seven are not available in China and four of them are in development there now, he said.
Nevertheless, Yin wants AMEC to be seen as an international company, noting six of his 18 vice presidents hold citizenship outside China.
There are tensions between the U.S. and China over semiconductors, “but it’s not necessary,” he said, pointing to the now long-gone conflict between the U.S. and Japan more than 20 years ago.
“I hope you will not be afraid of China’s momentum but proactively participate and get benefits from this growth,” he told the audience of mainly U.S. chip execs. “We are fully open to you coming to China to do business.”
— Rick Merritt, Silicon Valley Bureau Chief, EE Times