China 3-4 generations away from ‘cutting-edge’ chip capabilities: Report

File photo of a semiconductor chip (Image Source: Shutterstock)

Mario Morales, group vice president for enabling technologies and semiconductors at the International Data Corporation (IMC) feels China is “generations” away from realising capabilities needed to manufacture “cutting edge” semiconductor chips.

“I still believe that [China is] probably three or four generations behind what is considered leading edge,” Morales told CNBC’s “Squawk Box Asia” on January 19.

He said that when it comes to cutting edge chips — 16-nanometer, 14-nanometer or below — these are manufactured by South Korea and Taiwan and to some degree the United States — with Intel.

Morales’ views come even as China is spending billions to boost its domestic semiconductor sector, the report noted. He explained that regardless of “heavy investments” China still needs to gain access to software and equipment required for such chip production.

He noted that the Chinese ecosystem is going to “thrive and grow and begin to take market share” in the sphere of legacy, long-tail technologies considered important to the overall supply chain. Morales however added that this will “take China some time, it could take them more than a decade before they can actually get more competitive, at least at the very leading edge.”

Legacy companies manufacture a variety of less advanced chips for sensors, microcontrollers, power management and other consumer related products.

Morales pointed out that SMIC, China’s largest chipmaker, has the capabilities to support 28-nanometer chips and have started sampling 14-nanometer, but lacks customers to scale up and the current Chinese ecosystem does not use that technology. He noted that they would have to partner with US, European or Taiwanese customers to “ramp that technology effectively, so that they can bring down the cost structure needed”.

Semiconductors & chip technology

Semiconductors are used in cars, computers, home appliances and smart phones among other things.

High quality chips are made using complex and expensive lithography machines that shine very narrow laser beams into silicon wafers that have been treated with ‘photoresist’ chemicals to create intricate patterns.

These patterns form transistors — more the number of transistors on a chip, more powerful and efficient the microprocessor. The nanometre number indicates size of transistors, where a small numbers means more transistors are packed per square millimetre on a chip.

Samsung and Taiwan Semiconductor Manufacturing Company (TSMC) lead in this space, mass producing 7-nanometer chips as well.

Beijing has for years spent additional on R&D to achieve self-reliance in the semiconductors and artificial intelligence (AI) fields and Chinese businesses Alibaba, Baidu, Meituan and Tencent have started invested in chip development. The country further stepped up efforts after the US targeted Chinese tech companies like SMIC and Huawei during the cross-sanctions battle.