Chips in China: manufacturer SMIC achieves 7-nanometer breakthrough

A message electrifies the chip industry – and politicians in the USA: China’s largest manufacturer, SMIC from Shanghai, is said to have made a technological breakthrough. The state-owned company is now producing chips with a so-called structure size of seven nanometers.

This would make SMIC only the third contract manufacturer worldwide to produce such highly developed chips for other companies. In addition, SMIC would have technologically overtaken the American competition in contract manufacturing, as chip analyst Dylan Patel said on his blog stressed. That would be another partial success for Beijing in the competition between the USA and China for global technological dominance.

But much of the message about SMIC leaves people puzzling. It begins with the fact that this breakthrough only became known indirectly. According to the Canadian analysis company Techinsights, it has a chip from the Canadian-Chinese supplier Minerva technically examined. Techinsights is certain that this chip was produced by SMIC for Minerva. In an initial analysis in July, Techinsights wrote: “This is the most advanced technology product we have seen from SMIC.”

After this analysis, many observers asked critical questions. For example: is it really a 7-nanometer chip, or isn’t it missing important technical skills?

SMIC chip is very similar to TSMC product

This Monday Techinsights has a in-depth investigation – and confirmed his finding: SMIC did indeed produce a 7-nanometer chip. And one that is very similar to a product from the Taiwanese competitor and technology leader TSMC.

Techinsights also pointed out on Monday that SMIC only needed two years for the technological leap from 14 to 7 nanometers in structure size. That’s three years less than the South Korean chip giant Samsung needed. Because of US sanctions, SMIC does not even have access to the best Western production technologies.

The whole thing gets even more puzzling: SMIC has not commented on its apparent success. No confirmation, not a word.

Chinese media are also remarkably silent on the subject. Most likely, they’re still celebrating, as Western media reverently report on China’s chip coup. One reason for this could be censorship: A Chinese tech journalist told the NZZ that her publication was not allowed to write about SMIC, and certainly not about the 7-nanometer breakthrough.

The issue is politically sensitive. China’s chip industry and thus also its most important representative SMIC are right at the top of the list of priorities in Beijing. Party and state leader Xi Jinping has long declared China’s dependency on the rest of the world to be a problem that needs to be fixed. China only satisfies around 17 percent of its chip needs through domestic production – and only around 7 percent if you don’t count foreign companies in China like Samsung.

To change that, governments in China are injecting the equivalent of tens of billions of Swiss francs into the industry from the local to the national level. Despite considerable progress, severe setbacks regularly occur. Supposed model companies go bankrupt, recently prominent chip bosses suddenly had to go again.

China’s government and media are largely silent

In this environment, a success report for the Chinese chip industry would do you good, you might think. But instead: silence. Why?

Do SMIC and the Chinese government not want to wake up sleeping dogs? In other words: give the US no reason to tighten sanctions against SMIC and other chip companies? The majority leader in the American Senate, the Democrat Chuck Schumer, already referred to more chip production in the USA in the debate warning of the SMIC breakthrough.

Or has China generally become more cautious about celebrating supposed breakthroughs in chip technology? Finally, the country made a fool of itself in the 1990s, for example, when a scientist presented a supposedly groundbreaking chip – and in fact only provided a foreign product with its own label.

Or is it simply that SMIC and the Chinese government do not consider the technological breakthrough to be that groundbreaking? On the one hand, SMIC already said in 2020 that it was working on the leap to 7-nanometer chips; the completion of this announcement seemed only a matter of time. On the other hand, a closer look shows that SMIC is far from going into mass production with 7-nanometer chips.

The US blocks SMIC’s access to the best ASML machines

First of all, how was SMIC able to make this breakthrough so quickly without the best technology? As a result of American pressure, the Dutch world market leader ASML does not sell its best production machines to China. In chip production, pizza-sized silicon discs are exposed using so-called lithography machines.

SMIC only gets older lithography machines with so-called deep ultraviolet (DUV) illumination. SMIC apparently processed silicon wafers several times with these DUV machines. In this way it achieved a result that can be achieved much more quickly and efficiently with the latest EUV (extreme ultra-violet) machines.

However, the more you process the silicon wafers, the higher the error rate. Because chip technology is incredibly complex and fragmented. For example, the latest chips are only the size of a fingernail, but have more than 10 billion transistors. A nanometer, the relevant unit for designating generations of chip technology, is unimaginably small: it corresponds to one millionth of a millimeter.

SMIC is apparently trying to reduce such difficulties by making a simpler 7-nanometer chip. The Minerva chip now in focus is much smaller than comparable products. A chip analyst who wishes to remain anonymous makes a comparison in an interview: the SMIC chip core is eight times smaller than that of a TSMC product for the American chip designer AMD.

The smaller the chip cores, the easier it is to fix errors in production. Because the chip cores are cut out of the exposed silicon disks; the faulty ones can simply be thrown away. But the more you cut out, the less efficient the production is. Observers speculate that SMIC can only use 15 percent of the chip cores – so 85 percent would be scrap. This is not an economical way to produce.

Experts are also discussing to what extent the chip from SMIC really belongs in the “7 nanometer” category. The problem with such designations is that they no longer clearly describe a technical criterion, as is still the case with much older, larger structure sizes. Whether a chip says 10 nanometers or 7 is therefore primarily a question of marketing.

However, the Techinsights company made a clear statement in its analysis from Monday. It describes in detail the points at which the SMIC chip keeps up with 7-nanometer products from TSMC, Samsung and Intel from the USA (although, unlike the competition, Intel uses its best chips itself and does not manufacture them for others). And on which points SMIC cannot keep up. The whole thing is very technical, at least one thing is clear for Techinsights: SMIC has arrived in the top league.

Some observers wonder if SMIC copied technology from TSMC – and if so, how. Traditionally, SMIC poaches many top executives with astronomical salaries from TSMC in Taiwan. In any case, Techinsights writes in its analysis that there are “many similarities in process technology, design and innovation” between the 7-nanometer chips from SMIC and TSMC.

The mystery of SMIC’s amazing chip is likely to keep the chip industry busy for a long time.