The strategic battleground in the technological arms race is no longer confined to the Biden administration’s efforts to thwart Beijing’s access to cutting-edge semiconductors with potential military applications. It transcends into the burgeoning chippackaging domain, where China currently holds sway. In the seemingly mundane realm of semiconductor packaging – the art of encapsulating chips in materials that safeguard and seamlessly integrate them into electronic devices – a profound shift is underway. It has become as vital as the chip fabrication process itself.
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This shift in focus is not merely a trivial diversion; it represents a pivotal juncture in global technological dominance. Beyond the immediate concerns of military applications, the competition extends to the lucrative chippackaging market.
Advanced Packaging As The Key To Semiconductor Supremacy
For China, this unassuming aspect is viewed as a strategic avenue to bolster its domestic semiconductor capabilities. Simultaneously, the United States recognizes the significance of mastering advanced packaging as a linchpin in its pursuit of technological self-sufficiency, especially at a time when a substantial portion of tech production is outsourced to Asia.
Mathieu Duchatel, a China expert based in Taiwan and affiliated with the Institute Montaigne think tank, observes, “For China, one way around technology transfer restrictions is advanced packaging because so far it’s a safe space that everyone invests in.”
China currently commands an impressive 38% share of the world’s assembly, testing, and packaging market, as reported by the US-based Semiconductor Industry Association. This dominance allows Beijing to construct faster and more cost-effective computing systems by intricately interweaving diverse chips.
In stark contrast, the United States lags behind in the packaging domain, contributing a mere 3% to the global packaging capacity, according to Intel. Recognizing the urgency of catching up, the Biden administration has unveiled ambitious plans for a $3 billion National Advanced Packaging Manufacturing Program. The program aims to establish multiple high-volume packaging facilities by the end of the decade, positioning the US as a formidable competitor in the advanced packaging arena.
SMIC Breaks Through US Blockade
As Jefferies predicts a tenfold increase in the number of chips utilizing advanced packaging in the next 18 months – a number that could skyrocket to 100 times if it becomes standard in smartphones – the stakes have never been higher. Commerce Secretary Gina Raimondo emphasizes the imperative for the US to enhance its advanced packaging capacities, asserting that “chips can only get so small, which means all the special sauce is in the packaging.”
Yet, amidst this intense competition, it’s crucial to note that China remains steadfast in its pursuit of advanced chip technology. The battle for technological supremacy unfolds not only in chip manufacturing but equally in the intricate art of packaging, where innovation and dominance herald a climax in the race for global technological pre-eminence. The nation’s premier chip manufacturer, SMIC, has defied a meticulously orchestrated US blockade, making a resounding entrance into the limelight. Its triumph: the delivery of an advanced 7-nanometer processor for Huawei’s latest smartphone, a feat that has reverberated with domestic acclaim.
Pronounced “smick,” SMIC’s breakthrough is attributed to years of strategic preparation, amassing chipmaking machines, including identical models of deep ultraviolet lithography equipment from the Dutch company ASML.
Reporters revealed that SMIC utilized ASML’s deep ultraviolet lithography machines to craft Huawei’s cutting-edge chip. The pivotal question looming over SMIC’s future trajectory is whether it can scale up the production of sophisticated chips in substantial volume, or if the US will strategically curtail its capabilities. The Biden administration is currently navigating the delicate terrain of how to respond to SMIC’s collaboration with Huawei, a company Hong Kong IPO Proceeds Set for Lowest Since 2001.
Alibaba’s Shocking Move
In a stark downturn, the trading volume has plummeted by a staggering 85%, a stark deviation from the 10-year average. Alibaba, in an unexpected twist, attributed its abrupt decision to abandon the spin-off and listing plans for its colossal $11 billion cloud business to the prevailing chip restrictions.
The reverberations of this reversal extend beyond the e-commerce titan’s vast reorganization strategy, casting a shadow over investor sentiment and exacerbating the ongoing tech-induced stock market sell-off.
As the clouds of uncertainty loom, there is a palpable fear that this market lull might endure, exacerbated by China’s economic challenges. In response, some banks are contemplating contingency measures, contemplating expansion into more lucrative markets in other parts of Asia, such as Singapore and Japan, where deal opportunities abound. An advisor, reflecting on a career spanning more than three decades, candidly labeled the current drought as the most severe they have ever encountered.
Amidst this financial turbulence, a potential climax emerges on the horizon. The yuan, fueled by bets on the greenback’s peak and a nascent turnaround in the Chinese economy, stands poised to rally towards the critical 7-per-dollar threshold in the coming weeks. A strengthening Chinese currency could afford the central bank the flexibility to contemplate further easing measures, introducing a potential twist in the narrative of economic uncertainties.
