China has found sanction-free suppliers of chip-making equipment from South Korea. Prospects of the industry

China has found sanction-free suppliers of chip-making equipment from South Korea. Prospects of the industry

We have written more than once about the impact of US sanctions on Chinese companies in the field of electronics manufacturing and development. At first, it seemed that the sanctions were working, and very well – China began to have difficulties immediately after the introduction of various measures by the US. But after several years, the winner has not yet been determined. Moreover, the current situation results in a marked financial strengthening of companies from South Korea, which specialize in equipment for the production and control of microcircuits, while China continues to develop its production.

As you know, European suppliers can no longer produce and sell advanced equipment in China. At the same time, many Asian companies are not subject to these restrictions. This allows them to increase the volume of supplies to the Chinese market and increase their share in it in the conditions of the active rise of the IT sector. For more details, see below.



What is going on anyway?


In the context of the trade war, South Korean companies specializing in the production of semiconductor equipment are becoming significant participants in this confrontation. China is already actively redistributing orders in favor of South Korean vendors to meet the needs of lithographic equipment. This allows China to reduce its dependence on Western suppliers and at the same time strengthens the position of Asian equipment manufacturers.

One example of restrictions on the Chinese market is the Dutch company ASML, which previously supplied significant shipments of equipment to China. Now the Netherlands has imposed a ban on the sale of a certain type of equipment — DUV lithography. The rule comes after China’s Semiconductor Manufacturing International Corp (SMIC) allegedly used ASML’s DUV lithography and its N+2 processing technology to make 7nm chips for Huawei. Dubbed the Kirin 9000s, this chip debuted in Huawei’s Mate60 Pro smartphone in late August.

ASML management has since stated that the company intends to vigorously protect its intellectual property and increase security measures.

At the same time, Peter Wennyk, the head of ASML, admits that the sanctions have forced China to act out of the box, develop its own production and look for new ways of extracting information, including using industrial espionage and bribing employees. According to Winnyk, it is difficult for China to find suppliers of chip equipment. But despite this, statistics show that the average revenue growth of the six largest non-Chinese chip companies is 0.6%. While the revenue growth of the six largest Chinese companies for the same period was 39.4%.

Similar restrictions on the sale of equipment also apply to American and Japanese vendors, but do not affect South Korean companies, among which Nextin stands out. Today, it supplies the necessary equipment to China without any obstacles. Nextin has signed a major contract with China to supply equipment for optical quality control of silicon wafers worth about $5.4 million. As part of this deal, China will acquire the Aegis 3 station, which is expected to be 30% faster than its predecessor Aegis 2.

What else?


The tools manufactured by Nextin are designed to effectively detect defects on silicon wafers. Aegis equipment is capable of inspecting both 200 mm and 300 mm plates. The bright-field method, which uses reflected light, detects defects as small as 15 nm, while the dark-field method, based on scattered light, is able to detect defects as small as 30 nm.

While the capabilities of the Nextin Aegis tool may not seem that impressive in the context of today’s standards, it still has promise for inspecting wafers with 14- and even 7-nanometer chips.

Given that optical detection tools work faster than electronic or multi-beam counterparts, they are becoming widely demanded in this field.
On the back of the successful contract, Nextin said it plans to supply more units of its kits to Chinese foundries and memory chip makers. But even now the company already cooperates with large Chinese manufacturers.

Yes, Nextin is a supplier of production equipment for factories of the Korean company SK Hynix, one of the largest manufacturers of memory chips in the world, which is located in China. In addition, part of Nextin’s products is delivered to the factory of the Chinese company Yangtze Memory Technologies (YMTC) in Wuhan.

YMTC occupies a leading position in the global flash memory market. Starting in 2016, the company has become an industry leader, even attracting the attention of Apple as a potential supplier. However, in December 2022, US authorities blacklisted YMTC, leading to sanctions and staff cuts. However, in the autumn period of 2023, YMTC received significant financial investment from the Chinese government in the amount of billions of US dollars, and was able to not only maintain the current development, but also produce the world’s most compact flash memory.

In addition, Nextin cooperates with the Semiconductor Manufacturing International Corporation (SMIC) – the largest in the Celestial Empire and one of the largest contract manufacturers of chips in the world, which is also on the US sanctions list. New contracts with Chinese companies look promising for Nextin. Especially with operating profit and revenue falling 77% and 66% in the third quarter of this year due to the global economic downturn.

There is also evidence that Nextin is increasing the amount of investments in general, directing $200 million to one of the projects in the field of high technologies. The funds will be used to establish an advanced manufacturing and research base for optical inspection equipment in China. In essence, China is relying on Nextin and other South Korean companies to implement its ambitious plan to become the world’s leading chipmaker.

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