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Investment bank Goldman Sachs believes Chinese lithography companies are at least 20 years behind their US counterparts. Lithography is one of several portions of semiconductor fabrication, and it is the only bottleneck that prevents China from manufacturing high-end chips. The most advanced lithography machines are manufactured by the Dutch firm ASML, and since they rely on American-origin components, the US government is able to restrict their sales to China.
Chinese technology giant Huawei is sanctioned by the US government from procuring chips from Taiwan's TSMC due to the Chinese firm's links to the military. As a result, Huawei has to rely on SMIC for its chip needs, and additional sanctions that restrict SMIC from procuring extreme ultraviolet (EUV) chip manufacturing lithography machines mean that the Chinese firms are limited to working with 7-nanometer chips.
However, these chips are most likely manufactured using ASML's older DUV machines, as China lacks the ability to manufacture advanced lithography scanners since they require components produced worldwide and primarily in the US and Europe. A fresh report from investment bank Goldman Sachs shares that it is likely that the domestic Chinese lithography equipment industry is two decades behind ASML.
Lithography is one of several steps in the chip manufacturing process. It involves transferring the chip designs from a photomask onto a silicon wafer. High-end machines, such as ASML's EUV and High-NA EUV scanners, are able to transfer smaller circuit patterns on the silicon wafer, which improves chip performance. Once the patterns are transferred, they are then etched for the final layout, with other materials deposited and the wafer cleaned throughout the manufacturing process.
As a result, the criticality of lithography in enabling the reproduction of fine circuits on the wafer means that lithography equipment is the bottleneck in the chip manufacturing process. In a recent report, investment bank Goldman Sachs believes that the domestic Chinese industry is at least 20 years away from achieving parity with ASML's current-generation chip manufacturing technology.
Currently, leading chip manufacturers such as Taiwan's TSMC are mass-producing 3-nanometer chips and gearing up to manufacture 2-nanometer products. Goldman's note highlights that "It took ASML 20 years and US$40bn in R&D spending and CapEx to migrate from 65nm to below 3nm lithography." With Chinese domestic lithography equipment manufacturers currently at 65nm, the bank's data shows that it appears to be unlikely that these companies will catch up with the West anytime soon.