The chip war between the United States and China is escalating with new measures that are likely to cause major disruption to the global semiconductor industry. The US Department of Commerce has been working on rules designed to ban China Gate All Around technology – the newest and most advanced method of manufacturing transistors.
“The latest restrictions imposed by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) on August 12, 2022 will potentially have the greatest impact on China-U.S. trade of any other steps taken to date,” says a report by US consultancy International Business Strategies (IBS).
How much worse could the situation get? If the export restrictions were applied in their broadest sense, they would “clearly be a disaster for many businesses” in China, America and elsewhere, and could “have a catastrophic impact around the world”, according to the IBS report, titled “The US Department of Commerce Limitation on EDA Tools for Gate All Around to China.
The phrase “gate-all-around” is the name some jargon-crazed industry has given to a technology for manufacturing semiconductors that have more computing power and consume less power than earlier designs.
“Limitation of electronic computer-aided design (ECAD) software affects some EDAs [Electronic Design Automation] tools for gate-all-around (GAA),” IBS CEO Handel Jones wrote in the report. This “includes 2nm technology from TSMC and Intel as well as 3nm and 2nm technologies from Samsung Electronics”.
These tools include products not only from industry leaders EDA Synopsys, Cadence Design and Siemens (Mentor Graphics), but also from Ansys and other vendors.
EDA stands for Electronic Design Automation. Also called electronic computer-aided design (ECAD), it consists of software, hardware, and services used to design integrated circuits and printed circuit boards. Advanced semiconductor products cannot be designed without it.
A video explanation can be found below:
Gate-all-around is used to build transistors, which are basic components (along with resistors and capacitors) of integrated circuits.
Even though the U.S. Department of Commerce applies a narrow definition applying only to designs using gate-all-around, Jones writes, “Chinese fabless companies and vendors of equipment such as smartphones, data centers and autonomous transport will be seriously affected in 2026 for 2030 by this limitation.
But the same tools are used for design rules from 5nm to 28nm, which means “if all EDA tools used for GAA are excluded, then all EDA tools will be effectively blocked and cannot be authorized in China “.
Not only that, but shipping ICs designed using these EDA tools to China could also be banned. This would include products designed by Qualcomm, NVIDIA, MediaTek, Intel, Samsung and other companies and manufactured by Intel, Samsung, TSMC and other foundries.
This broad definition would not only deprive Chinese makers of cellphones and other electronic devices of the advanced components they need, but also result in a severe loss of sales for foreign semiconductor design and manufacturing firms.
Last year, for example, Intel’s revenue in China was 50% higher than its revenue in the United States ($21.1 billion vs. $14.1 billion; 27% of total revenue vs. 18%) . Qualcomm derives about two-thirds of its revenue from China and NIVDIA more than 25%.
Jones’ judgment on the matter: “The situation is very serious for China. The past pattern of the US government has been to broaden the definition of its initial decision over time to increase impact, and this will likely be the case with the current decision.
His conclusion is that “China will likely respond to the narrow BRI definitions once their implications are clear. The broad interpretation of its rules can be catastrophic for relations between the United States and China. These broad definitions are likely to cause major disruptions to the global electronics industry.
Based in California, consulting firm IBS provides strategic consulting services to senior electronics industry executives in the United States, Europe, East Asia and around the world. Its client list includes IBM, Intel, Qualcomm, Cisco, Apple, Microsoft, STMicroelectronics, Nokia, Samsung Electronics, Fujitsu, Canon, Sony, Huawei, SMIC and others.
Jones is also the author of several books, including ChinAmerica: the difficult partnership that will change the world and When AI rules the world: China, the United States and the race to control an intelligent planet.
China splurges on EDA
Jones notes that “China is developing its own EDA tools, but they are not ready for large-scale commercial use.”
On the other hand, Brian Bailey, Technology/EDA Editor for the Semiconductor Engineering News website and forum, wrote this:
“The rest of the world is just watching the substandard attempts… [the Chinese] have done so far and write them off as not capable of developing competitive EDA software. But in all likelihood, given the current political climate, China is working hard on it.
According to Bailey’s assessment, China has the following advantages:
(1) Western EDA companies should be careful with customer information, but China may require its EDA research teams to share data and use AI to develop common solutions.
(2) As a new business, China does not have to adapt to legacy software in a rapidly changing environment.
(3) China can outspend Western companies in the EDA if it chooses to do so and is under no pressure to generate strong quarterly profits.
The greater the threat of US sanctions, the greater the EDA’s Chinese spending is likely to become. And with imports representing around 90% of the Chinese market, the need is critical and the opportunity is immense.
As noted by Jeff Pao of Asia Times in “EDA software ban last blow to China’s chip makers”, “In 2008, China began implementing its National Science and Technology Major Project (2006-2020), who put EDA software development as top priority among all tasks.
Which begs the question: will the United States push China to create itself what its restrictions aim to prohibit? Most likely.
Will there be a catastrophe or will the United States and China be fine? Hope for the best, but prepare for the worst.
Scott Foster is an analyst at LightStream Research, Tokyo. Follow him on Twitter: @ScottFo83517667