According to Gerald Yin, the founder of Advanced Micro-Fabrication Equipment (AMEC), one of China's top etching equipment manufacturers, he believes that the US import restrictions will have negligible impact on his company's operations. Yin states that about 80% of the imported equipment, which is now restricted, could be replaced with domestic alternatives by the end of the year. Additionally, AMEC estimates that it will be able to resume full operational capacity by the second half of 2024, thanks to China's push for semiconductor self-sufficiency.
AMEC aims to achieve a 60% market dominance in the capacitively coupled plasma (CCP) etching equipment market in the coming quarters, a significant increase from their current 25% overall market share as of October 2022. Furthermore, the company is also targeting a three-quarters control of the inductively coupled plasma (ICP) tool market at a similar pace.
While AMEC is witnessing growth, US-based Lam Research is experiencing shrinkage. This is notable because AMEC is gaining a significant market share from Lam Research, which recently presented a design for 3D DRAM. It raises the question of whether the Chinese market is more advanced than perceived, or if Lam Research is being restricted in what it can sell, causing it to struggle in the Chinese market.
It is also interesting to consider how AMEC manages to fill the gap, given the perceived technological gap of five generations between US and Chinese technology. It is worth noting that in December 2010, Lam Research filed a lawsuit against AMEC for IP theft, resulting in a favorable court decision for AMEC in March 2017. AMEC appealed, and on July 11th, it won the second instance trial in the Shanghai High Court. As a result, Lam Research was ordered to pay damages and legal costs to AMEC and reimburse AMEC for misappropriating its trade secrets.
Despite AMEC's market share growth, the semiconductor equipment market it operates in is shrinking. China's domestic market for semiconductor equipment manufacturing contracted 33% year-on-year in the first half of the year, higher than the global semiconductor market's average contraction of 23%. AMEC generated approximately 4.7 billion yuan (around $645 million) in revenue from this market. Meanwhile, Lam Research expects to lose $2.5 billion from all its Chinese business areas due to export restrictions. Interestingly, Lam Research has not made any product-related announcements since December 2021 when it celebrated the sale of its 100th-chamber milestone for the Prismo UniMax system used in mass-producing gallium nitride-based (GaN) mini-LEDs.
However, other players in the semiconductor supply chain are emerging in China, including chip-making manufacturers capable of serving the domestic market. These players, along with giants like SMIC, contribute to Lam Research's estimated losses. Consequently, those who are not part of China's domestic market will be affected.
China is determined to maintain its course toward self-sufficiency, although it may cause losses to economies that used to export to the country. The $5 billion loss expected by Lam Research is just one example of similar cases. Even companies like Nvidia are missing out on the success of their AI accelerators due to China's internal market conquest, resulting in a smaller pie for everyone else.
Despite US sanctions, China doesn't seem deterred, as evidenced by its development of a 19.2 million-core supercomputer. Additionally, while China may be perceived as being five generations behind in leading-edge technology, it is leading in high-quality academic research, even against the country imposing sanctions. AMEC claims on its homepage that it fabricates tools capable of 5nm etching nodes and beyond.
China is addressing the sanctions by creating domestic capabilities to satisfy its own market demand while also investing in research for future advancements. The long-term effects of the sanctions are still uncertain.
