Zerbor/iStockGetty Images
According to a Reuters report, Biden’s management plans to expand restrictions on U. S. shipments to China of semiconductors used for synthetic intelligence and chip-making tools. The plan is expected to be implemented next month.
The letters, which semiconductor/semiconductor devices have publicly acknowledged, prohibited them from exporting chip-producing devices to Chinese factories that produce complex semiconductors with processes of less than 14 nanometers unless distributors download licenses from the Commerce Department.
Immediately after, the U. S. The U. S. tried to thwart mainland China’s technological innovation through sanctions and entity lists. Instead, they served as a catalyst for the Chinese to embark on their drive to become self-sufficient in semiconductor production through government systems such as “Made in China 2025. “”To counter the move, the United States has set up its own systems, such as the CHIPS Act.
Table 1 The earnings of those corporations from the first quarter of 2021 to the current quarter of 2022. ASML’s profits from appliance sales to China in the current quarter of 2022 fell year-over-year to $414 million, from $604 million in the current quarter of 2021. Revenue from aircraft sales in China fell to 10% of overall earnings for the quarter.
la red
ASML (NASDAQ:ASML) has battled significant headwinds from the chain, which I analyzed in a July 21, 2022 Seeking Alpha article titled “ASML: January Fire Responsible for Large Revenue Losses Through 2023. “
KLA (NASDAQ:KLAC) also struck, falling year-over-year to $264 million in the first quarter of 2021, from $275 million in the first quarter of 2021. Sales earnings in China fell to 13% of overall profit for the quarter.
As an aggregate of the six analyzed in Table 1, the subtotal gain from appliance sales in China fell sequentially from $5. 254 billion to $4. 366 billion, according to our report, “Mainland China Equipment and Semiconductor Markets: Analysis and Manufacturing Trends,
Figure 1 shows China’s appliance imports during the quarter. In the current quarter, imports fell by 13. 3% in China, while global profits from the appliances increased by 7. 0%. earnings for the quarter also fell 7. 5% quarter-on-quarter, ahead of the Shanghai closes.
la red
Table 1
In Figure 2, I show that the revenues of Chinese appliance suppliers are developing much faster than non-Chinese firms, and this slowdown in expansion is due to imports (Chart 1) as China prepares to upgrade non-domestic semiconductor appliances with local appliances.
la red
Table 2
Figure 2 above shows the first half of 2022/first half of 2021 earnings for the 7 most sensible Chinese domestic OEMs and the 7 most sensible non-Chinese OEMs. replace in the first quarter, which is attributed to the Shanghai blockades in the current quarter.
The average expansion rate was 12. 3% for non-Chinese manufacturers, a slight improvement over the first quarter. Much of this buildup in HoH’s expansion came from ASML, which solved its EUV shipping problems, with quarterly earnings of 61% in the second quarter versus -35% in the first quarter.
These sanctions have largely failed. China’s Semiconductor Manufacturing International (SMIC) foundry (OTCQX:SMICY), for example, cannot use ASML’s EUV lithography equipment, but it was still controlled to succeed on the 7nm node, which I first reported in a May 18, 2022 Seeking Alpha article titled “Applied Materials: Smic moves to a node capacity of 7 nm, some other headwinds. “
The most affected has been ASML, with sales losses of its EUV systems, its loss of software intellectual assets for China’s Dongfang Jingyuan Electron, and continued threats of sanctions on ASML’s DUV lithography, which I detailed in my previously mentioned article on ASML.
As I indicated earlier, I reported on May 18, 2022 that the SMIC had reached the 7 nm node. That’s two months before Techinsights reports published their findings.
By translating this information to SMIC, which was in high-volume production at 14 nm in November 2019, the company switched to its node N 1 on 1 Q 2021, and then to node N 2 on 2 Q 2022. I estimate node N 1 is at 8 nm and node N 2 is at 7 nm.
For five nm, with SMIC at a 3-year rate, which is TSMC’s 2-year rate, SMIC will succeed at a five nm production in 2025, as shown in Table 2. I used this type of research in my thesis that SMIC had also been successful on the 7nm Node.
la red
As also shown in Table 2, SMIC has the R
But with consequences in EUV lithography systems, the SMIC can still succeed in five nm without EUV systems. The company achieved 7 nm without EUV, which TSMC completed on its first-generation 7 nm chip. multiple techniques of structuring deposits, engraving, lithography.
You can read more about structuring in my January 27, 2020 Seeking Alpha article titled “ASML: My Pick from the Top Semiconductor Processing Equipment Companies. “
China’s stated purpose is to be self-sufficient in the production of semiconductors for its domestic market and to expand generation that is competitive in the global market. Usa. The U. S. had a chance to save China from being a technological powerhouse and, in the end, an existential risk 20 years ago, but it caved in under lobbying from the SEMI trade consortium in favor of its semiconductor apparatus members.
Twenty years later, the U. S. The U. S. tried to take corrective action by imposing sanctions on Chinese (and Russian) companies, starting with China’s Huawei, which was placed on an industry blacklist that prevented U. S. companies from doing business with the leading supplier of network devices and smartphones. The United States also imposed sanctions on Chinese chip and appliance corporations to sell complex devices to Chinese chip corporations.
Figure 3 of SEMI shows that China will increase its global capacity in percentage through three hundred mm, from 8% in 2015 to 20% in 2024, reaching 1. 5 million three hundred mm m/min in the last year of the reference period. While Not — Chinese corporations will account for a truly large percentage of this growth — Chinese corporations are accelerating their investments in capacity. These corporations will account for around 43% of China’s production capacity in 2020, a proportion that is expected to increase to 50% through 2022 and 60% through 2024.
SEMI
Table 3
Despite the intentions of the sanctions, we will have to look at President Joe Biden’s comment on the Russian sanctions imposed after his invasion of Ukraine:
“Sanctions deter,” Biden said at a news conference at a NATO summit in Brussels, Belgium.
These sanctions against China, like those that opposed Russia, have so far proved useless in preventing the technological profits of Chinese semiconductor and apparatus corporations. In fact, what it has done is to boost the development of complex chips from corporations such as SMIC and YMTC. Of equal importance, they have been a catalyst for the advancement and expansion of complicated devices capable of processing chips at 5 nm. These domestic apparatus corporations are not only promoting Chinese semiconductor corporations, but they are also promoting non-Chinese corporations, which will be a long-term detriment.
ASML, which has already been affected by U. S. sanctions. U. S. Department of Homeland Security on shipping EUV lithography systems to China. ASML faces the festival of Nikon Japan (OTCPK: NINOY) and Shanghai Micro Electronics Equipment (Group) Co. , Ltd. (SMEE) from China in the DUV lithography segment.
For smic, as the implemented fabrics and lam Research deposition and engraving systems for the 7 nm node were installed, this same apparatus can be used for five nm. which restrict the capacity of the nodes of the exported devices to 14 nm. This will have an effect on those appliance companies.
SMIC is building a new three-hundred mm plant in China. At present, the chips scheduled for production are 28 nm and above, which would not be affected by the sanctions. However, as noted above, Chinese appliance corporations such as AMEC and Naura are already on the 5nm node, and will most likely be used through SMIC and other semiconductor corporations of AMAT and LRCX.
The effect of Chinese sanctions on the profits of major non-Chinese corporations discussed above does not tell the full story. In Chart 4, I show the inventory values for the last one-year period, and the decline in asML’s inventory value is consistent with the large impact on Chinese earnings. But the percentage of ASML worth -47. 4% is also due to significant problems with the ASML supply chain, which has affected the profits of non-Chinese corporations. This is consistent with a global earnings expansion of -8. 4% HoH in Chart 2 above.
Y Charts
Figure 4
Chart 4 above also shows that KLAC, strongly impacted by China’s earnings, recorded a strong global HoH earnings expansion of 32. 2% on Chart 2. While the percentage value is -5. 0% for the year, its functionality is particularly higher than that of its AMAT, LRCX and ASML competition.
Figure five shows the PE ratio of the same 4 companies. AsML’s PE ratio of 29. 7 is particularly higher than more than 2 times that of its peers.
Y Charts
Figure 5
As I mentioned in several recent Seeking Alpha articles about each of those corporations, KLAC continues to outperform the entire WFE industry and its peers, retaining a five- and five percent percentage of the procedure control market. to control chip processing, as smaller nodes are required. A defect that can reduce efficiency, which can be controlled through KLAC’s inspection and metrology equipment, has a greater impact on production losses on 5 nm nodes than on 24 nm nodes.
AMAT continues to underperform the entire WFE industry and its peers. Its share of the WFE industry has continued to decline since the new control took over the company because it also underperforms. This is illustrated in Figure 6 according to The Information Network’s Applied Materials report. : Analysis of the competition of the markets served. The data in Chart 6 includes AMAT’s displacement of $331 million from 2018 to 2019 to increase its percentage as the company desperately searches for a symbol of success.
la red
Figure 6
At ASML, I’m still waiting for the CEO to explain the effect of the chimney at the Berlin plant of the company that manufactures EUV lithography parts. ASML has major problems in shipping EUV lithography systems and has resorted to shipping incomplete systems to consumers and then when parts are available, they install them in the customer’s factory so they can be paid for.
LRCX relies heavily on NAND chips from suppliers Micron (MU), Samsung Electronics (OTCPK: SSNLF) and SK Hynix (OTC: HXSCL), and those corporations are under pressure as sales of customer electronics fall.
I KLAC in purchase, ASML and AMAT in sale and LRCX in reserve.
This loose article presents my research on this sector of semiconductor devices. More detailed research can be found on my Marketplace Semiconductor Deep Dive newsletter site. You can learn more here and start a 2-week risk loss test now.
This article written by
Dr. Robert N. Castellano is president of The Information Network www. thedatanet. com. Most of the data, as well as the charts and graphs I use in my articles, comes from my market research reports. If you would like more information about an article, please visit my website.
I will soon launch a newsletter for investors. The data to register will be on my website.
I won a PhD. Degree in Chemistry from the University of Oxford (England) under the supervision of Dr. John Goodenough, inventor of the lithium-ion battery and winner of the Nobel Prize in Chemistry 2019. I had ten years of delight in the wafer production box. in AT
I have been editor-in-chief of the Journal of Active and Passive Electronic Devices since 2000. I am the one from the e-book “Technological Trends in VLSI Manufacturing” (Gordon and Breach), “Solar Panel Processing” (Old City Publishing), “Alternative Energy Technology” (Old City Publishing). Also in the solar field, I am CEO of SolarPA, which uses a patented nanomaterial to coat solar cells, increasing power by up to 10%. I recently published a fiction novel Bendita, to be had on Amazon and other sites.
Disclosure: I/we do not have any stock, options or derivative positions in any of the corporations discussed, and I do not intend to initiate such positions within the next 72 hours. I wrote this article myself and expresses my own opinions. . I don’t get any refunds for this (other than Seeking Alpha). I don’t have any business dating a company whose shares are discussed in this article.