Despite other reports, analysts at TrendForce argue that leading silicon wafer equipment suppliers are on track to secure export licenses from the US government to sell turnkey systems, parts and maintenance services to Chinese semiconductor manufacturer SMIC. We are talking about equipment for 14nm and older technical processes.

US equipment suppliers applying for such licenses include Applied Materials, Lam Research, KLA-Tencor, and Axcelis. TrendForce believes that with the support of these US equipment suppliers, SMIC will be able to continue to optimize existing production standards. Nevertheless, analysts believe that the company’s share in the global contract manufacturing market for chips will slightly decrease in 2021 – to 4,2% against 5% in 2020.

The marketing authorization for SMIC is expected to alleviate some of the capacity shortages seen in the global chip market. However, the US government continues to prohibit SMIC from purchasing advanced chip printing equipment (10nm and finer), and this restriction poses a potential risk to the long-term development of Chinese chip manufacturing.

SMIC is the fifth largest contract chip manufacturer in the world in terms of product output and now receives more than 70% of its revenues from Chinese and Asian customers. So far, most of the income (80%) is formed by production at 180-nm, 55-nm and 40-nm standards.

China continues to improve its ability to localize the production of equipment and materials for the semiconductor industry. However, sanctions imposed by the US Department of Commerce have impacted SMIC’s long-term capacity planning and development strategy, resulting in a 25% reduction in the Chinese company’s planned capital expenditure in 2021. Moreover, SMIC now intends to direct most of its investments to expand the capacity of already mastered technological processes and the construction of a new joint venture in Beijing. The company has to postpone plans to invest in advanced manufacturing processes, including mastering FinFET technologies. TrendForce believes that it was geopolitical factors and uncertainties in the equipment supply chain that forced SMIC to reduce its capital expenditures and expand its existing capacity.