From Japanese Chipmakers with Love Stuck in the China Chip Market, Despite Washington and Tokyo’s Controls

Japan's Semiconductor Industry Still Tied to Chinese Market, Despite Government Regulations from Washington and Tokyo

Tokyo Electron

Tokyo Electron, the Asian giant of semiconductor equipment, is experiencing a fascinating phenomenon in the midst of American and Japanese controls on chip sales to China. Surprisingly, the company’s reliance on cutting-edge machinery has been overshadowed by the soaring demand for less advanced equipment in China. It seems that Chinese buyers are saying, “Who needs the latest and greatest when the classics still do the job?”

Junko Takagi, head of investor relations at Tokyo Electron, revealed that a staggering 43% of the company’s sales derived from China last quarter, jumping from a modest 24% just a year ago. That’s like going from a side dish to the main course in record time! Meanwhile, Kokusai Electric Corp., another Japanese equipment manufacturer, is also taking heed of the growing demand in China. Our crystal ball predicts that China may account for nearly 50% of Kokusai Electric’s revenue, up from a satisfied 40% and surpassing the historical benchmark of 30%. It’s like China is the popular kid in school, and everyone wants to be their best buddy.

According to Fumiyuki Kanai, CEO of Kokusai Electric, the allure of China’s chip market lies in its vast number of small-scale fabrication plants, which are sprouting up like mushrooms after a rainstorm. Picture this: an enchanting forest of chipmaking facilities, each with its own unique charm, waiting to bring our electronic devices to life. Japan, although lagging behind Taiwan and South Korea in chip manufacturing, is still a major producer of the machinery that powers the chip-making magic. It’s like being the wizard behind the curtain, making dreams come true for giants like Taiwan Semiconductor Manufacturing Company and Samsung.

Earlier this year, Japan and the Netherlands joined forces with the U.S., agreeing to restrict the sale of cutting-edge chipmaking equipment to China. It’s like creating a secret pact to protect the realm of chip-making superheroes. But fear not, for China has a few tricks up its sleeve. While the U.S. tightens the screws on advanced semiconductors, China is cleverly investing in “legacy chips.” These are like the loyal sidekicks that have stood the test of time, catering to the needs of many devices. Think of them as the wise old sages with their knowledge and experience in larger chips that are larger than life at 28 nanometers. Meanwhile, the market for these legacy chips is set to bloom into a $28 billion treasure by 2030. It’s like discovering a hidden gem amidst the frenzy.

China’s tech mastery doesn’t stop there. Rumor has it that Chinese companies, led by Huawei and Semiconductor Manufacturing International Corporation (SMIC), are harnessing the power of old-school chipmaking equipment to secretly produce advanced semiconductors. It’s like witnessing a high-tech magic show, where the magician pulls a rabbit out of an ancient hat. Experts are marveling at this spectacle, with some speculating whether these Chinese firms possess the prowess to produce these advanced chips at scale and at a reasonable cost. Can they truly be the masters of illusion?

All this technological wizardry is causing quite a stir in the U.S. political arena. Huawei’s recent unveiling of the Mate 60 Pro, proudly featuring a Chinese-made advanced processor, has triggered calls for even stricter export controls. Some lawmakers are suggesting that the U.S. should block all technology exports to Huawei and SMIC. Their mantra seems to be “No chips for you!” It’s like a high-stakes poker game, where the players are bluffed by China’s unexpected hand. The United States, not wanting to lose its foothold in China’s chip industry, decided to allow TSMC, Samsung, and SK Hynix to continue supplying legacy equipment to Chinese chip plants indefinitely. The message seems to be, “Keep your friends close and your competition closer.” Oh, the intrigue!

As the saga unfolds, one thing is clear: the landscape of the chip industry is constantly shifting. It’s like a rollercoaster ride, with unexpected twists and turns at every corner. Who knows what the future holds? But for now, let’s sit back and enjoy the show. And remember, in the world of chips, the classics never go out of style. After all, who can resist the charm of a tried-and-true legacy chip? So, grab your popcorn and stay tuned for the next thrilling episode of “Chips: The Quest for Technological Dominance!”

What are your thoughts on China’s growing influence in the chip industry? Do you think legacy chips still have a role to play in today’s tech-savvy world? Share your insights in the comments below!