U.S. Semiconductor Export Controls On China Are Failing | Dylan Patel

In Episode 329 of Hidden Forces, Demetri Kofinas speaks with Dylan Patel, a semiconductor and A.I. analyst and the founder of boutique Semiconductor research and consulting firm SemiAnalysis, about how U.S. semiconductor export controls are failing and what the U.S. can do about it.
Dylan and Demetri spend the first hour of their conversation going over Huawei’s groundbreaking new Kirin 9000s chipset produced by Chinese semiconductor foundry SMIC and what it tells us about the progress that China’s domestic chip industry has made in the year since the U.S. Commerce Department implemented a series of targeted updates to its semiconductor industry export controls. This also includes a discussion about the military and commercial implications of China’s progress for America’s strategic competition with the People’s Republic.
In the second hour, Kofinas and Patel focus their attention on how exactly China’s domestic chip industry has managed to make so much progress despite the stated goals of the U.S. Commerce Department, what can be done to strengthen the existing export controls that are already in place, and what additional measures can be taken to complement those efforts that strengthen America’s own semiconductor industry and that incentivize a rebuild of American industry and society for the 21st century.
You can subscribe to our premium content and gain access to our premium feed, episode transcripts, and Intelligence Reports at hiddenforces.io/subscribe.
If you want to join in on the conversation and become a member of the Hidden Forces Genius community, which includes Q&A calls with guests, access to special research and analysis, in-person events, and dinners, you can also do that on our subscriber page. If you still have questions, feel free to email [e-mail], and Demetri or someone from our team will get back to you.
If you enjoyed listening to today’s episode of Hidden Forces you can help support the show by doing the following:
Subscribe on Apple Podcasts | KZbin | Spotify | Stitcher | SoundCloud | CastBox | RSS Feed
Write us a review on Apple Podcasts at apple.co/3fLSIgR
Write us a review on Spotify at spoti.fi/3tv4zYr
Subscribe to our mailing list at hiddenforces.io/newsletter/
Subscribe & Support the Podcast at hiddenforces.io
Follow Hidden Forces on Twitter: / hiddenforcespod
Follow Demetri on Twitter: / kofinas
Producer & Host: Demetri Kofinas
ouple
Editor & Engineer: Stylianos Nicolaou
Follow Demetri on Twitter at @Kofinas
Episode Recorded on 09/28/2023

[@sarahkhan2310]

China’s technology advancement is a blessing to the world. Well done China❤🇨🇳

[@strigoiu13]

Ceausescu reales la al xiv- lea congres😂😂😂

[@jamesho8820]

Most enlightening. For China, success is such sweet revenge. Did not know that DUV is preferrable to EUV in 7nm manufacture. In short. America's "0 sum game" is a big WIN for China motivating them to become ever more innovative and self sufficient in semiconductor manufacture! This leaves QCOM, TSMC, ASML, KLAC, Samsung, NVDA and Japanese companies with the rreplaceable loss of their biggest customer and loss of expendable income for R&D. Thank-you Biden and Congress for accelerating CCP's technological advancement and understimating their ingenuity!

[@strigoiu13]

😂😂😂😂😂😂 Chinese red experts are the best :))

[@pikachus5m166]

Arrogance and hubris, just like Carla Fiorina, the former CEO of Hewlitt Packard, the company she brought to its knees, stated that China couldn't innovate because of communism.

[@blackknight4996]

​@@strigoiu13 Are you in pain? Nice 😊

[@callwide]

this guy is complete wrong. duv has no future in high end

[@sunshinesun121]

Tens of Thousands of TOP grade Chinese Scientist who had Settle in Us, Germany, etc .... was unhappy with the "Discrimination and Treatment" within their Work place. Many as such RETURNED to China. Thus ... Accelerating China R & D into Chips. More FRIGHTNING is the LEAD China has NOW CREATED into New Frontiers like Photonic Chips, Memorised Memories, Quantum Chips, Quantum Communication, 6G, Etc. CHINA ... WILL dominate the FUTURE in Innovation and Research. US and the West ... DROP the BALL with treatment and sanctions on China.

[@patbyrneme007]

Fascinating programme. One significant mistake though. US export restrictions are responsible for China's speedup in chip development. When Made in China 2025 was launched in 2015 large investment funds were made available for chip development (something like $100 billion) but this ititiative failed and the funds were largely not taken up. The reason was that tech companies in China were well aware of the huge technical skills and risky investment that would be required to compete with Intel, Samsung and TSMC. Moreover, they were relatively happy to import chips from abroad and pay thecsame cost as their competitors. Instead they competed on other aspects. A good example being mobile phones. All the brands were using the same chips and competing on cameras, design etc. However, once the US started to restrict imports of US content into China, the Chinese tech industry was left with no choice but to work on Chinese content only chips. As a result a host of new chip research companies have emerged with even bigger government subsidies, and Chinese research institutions have made this field their top priority.

[@kolviczd6885]

The Chinese government should thank the Biden Administration for the export control. It is doing good for the Chinese in the long run though it might be difficult at first, otherwise despite the huge subsidies that is being given Chinese companies are not willing to take them and continue to import from outside China. Xi must be secretly thanking USA for the chip ban.. lol😉

[@yaoliang1580]

China will soon able to to have a complete supply chain to produce their own high end chips so as to avoid being blackmailed by the endless sanctions of the US

[@patbyrneme007]

One aspect missing from this programme is the potential for China to now go from being the largest chip importer - $400 billion per year - to becoming the world's largest chip manufacturer. At first this will be for the lower end chips which make up 80% of chips made, but in time will also include the higher end chips. Thus the unintended effect of America's export bans will be to destroy the US chip industry, a sector it has led since the 1950s.

[@fookcheonkhaw7147]

Huawei once again proves that angering China is not a wise thing to do.

[@fatdoi003]

soon china may become the world's biggest chip exporter...

[@ChinaSongsCollection]

I find it incredible that this guy doesn't think banning tech sales to China will force China to innovate. I would have thought this would be commonsense.

[@lagrangewei]

China already produce more chip than US does... this is rarely mention, the chip shortage during covid wasn't that Taiwan or Korea wasn't exporting to the West, it was the shutdown in China that cause the problem. US strategy of limiting "highend" chip production is problematic because only 5% of the chip product actually want highend production, because for every 30% improvement, companies have to pay up to 50% premium, so they really only want chip that are "good enough", even AMD is scaling down part of their processor by building part of their chiplet at a lower tech level. and in a way, AMD has show Chinese companies a path of "mix" quality chiplet to reduce their demand for highend chip manufacturing. and US strategy doesn't even feel targeted at China, for example the Korean companies that is found to supply some of the commodity chip of mate 60s, got their request to buy new equipment for their chinese plant approved. so US is really targeting Chinese companies that they don't own shares of. this is inline with the ban on US investment to certain companies, but even that has to be rollback because of investor pushback... so it really about US investment... there is no doubt that Huawei was heavily targetted and not Xiaomi becaue Huawei is 100% private whereas Xiaomi has US inventors... that's the true face of US policies... so it is unfortunate that the US has make it policies to enrich investors than protect national interest...

[@kooisengchng5283]

Later China will block export of solar panels to US.

[@olderchin1558]

I think China will have to go its own way technologically. SMEE already produces indigenous DUV Litho, ASML will want to sell as many DUV Litho as they can now, they can see the Chinese market disappearing if the EUV is not allowed. And China is already working on non-silicon based chips as well as developing their own sub-1nm Litho using a Synchrotron light source. As ASML start to shrink in sales, they will find it more difficult to finance new products. Even TSMC is reducing production, several of their EUV Litho are just sitting idle.

[@fredfrond6148]

Market size is how the USA took down Japan, because they could bully the Japanese into doing things against Japan’s interest. China has a bigger market size than the USA. Also a bigger GDP, when compared by purchasing power parity. Taking China down economically is gonna be harder.

[@tehcsiamg3185]

The more The US sanctions China, the more China work China harder to overcome the sanctions... . now, the have their own station on space..

[@strigoiu13]

yes they will fail and PRC will prosper😂😂😂

[@blackknight4996]

​@@strigoiu13 Looks like you are in pain... I feel good 😊

[@pjeng1]

@@blackknight4996 Please, please, you need to stop masturbating all the time to feel good about yourself.

[@andrewwong2605]

Tks. Dylan Patel's explanation is amazing. Clear and concise. A very knowledgeable individual. Tks again.

[@whosyourdaddy5719]

Dylan is right. I was an engineer worked at TSMC's 5nm fab (F18A). there were two process flows in 4nm/5nm, one is 1P1E, which means 1 photo 1 exposure, basically using EUV on the beginning of metal connects (Pitch 42nm, mostly at Metal 3,4,5,6). the second one is 2P2E which is 2 photo 2 Exposure, basically using DUV. The result is that the DUV yield is much better than EUV, at least at the BEOL interconnects.

[@roddiechan]

When they can't compete, they go the dirty way😂😂 such a shameful act!

[@philipwong895]

Right, you know. It is scary that the US Tonya Harding strategy of competition is not working.

[@ftft98]

The Tonya Harding approach is the only approach Uncle Sam knows. The whole world can see what US does when it cannot compete fairly, and it doesn't inspire much respect for Uncle Sam.

[@jamesho8820]

So much for a "free and open market", "rules based order", "level playing field." Just more hypocritical rhetoric when we appear to be losing the game.

[@cooper1819]

Good talents working for good money is very normal in today's market. You see so many Western Expats in Asian cities, and also Indian IT professionals in USA for example. But really is these export controls that spur the Chinese semiconductor industries. Many other Asian countries in South East Asia been trying to build up semiconductor industries, but this is China's Sputnik moment.

[@tyn6211]

YMTC isn't dead. China's such a large market, YMTC has forced the Koreans and Japanese mfgs to lower prices globally, to the benefit of consumers everywhere.

[@engineersze2546]

Very good and accurate report on the state of the US Export Controls with historical background. Also very good explanations on the microchip manufacturing process. Keep it up Dylan

[@ChinaSongsCollection]

So you don't think it's weird that this guy doesn't think banning tech sales to China will force China to innovate. I would have thought this should have been commonsense.

[@jusmeetsingh1907]

Banning Chinese sales to Africa will force Africa to innovate. Banning helps nations regions to develop capacity. China is not developing capacity because they important DUV machine was not banned. 😂

[@johnwhoo6194]

When there is a will, there is a way. How can they forget that?! Plus, China has all the market, money, talent, political power, government will. Considering Intel tried so many years to try to get to the same level of technical sophistication with all the resources readily available without success, Huawei made it in 3 years under the hushest sanction by the most powerful government and it's allies! Just amazing!

[@mechannel7046]

Please interview Dan Collins, another China expert who actually knows something about China, having lived and worked in China for 20 years.

[@justmythought929]

I’m glad to have found your channel. Much appreciate your valuable content.

[@harryzhang3111]

Pulling your competitor's leg won't put you ahead. Doubling your efforts would.

[@Anders01]

Amazing expert knowledge. I have listened to several presentations about semiconductors and this is the best I have found so far.

[@ChinaSongsCollection]

The most amazing thing I found with this interview is how EXTREMELY fast this guy talks!!

[@lokechanmun8587]

Patel's puzzle analogy assumes that the US and Allies had all the pieces. China is slowly trying to convince the US that China do hold some important pieces too.

[@richardneoh2ahsai401]

China turned crisis into opportunity. Ironic. The joke was on the joker!

[@JD-yz4kr]

The whole discussion can be distilled to the statement that nobody in the US knows what is going on in China's semiconductor industry. Everything is apparently just pure speculation & guesswork. This is not worth 52 minutes of talk.

[@chriscain7333]

False, the us industrial experts, analysts, and officials know exactly whats going on, because everyone knows some gus whom know some guy of whom provides information, every country on this planet dose this. The real question is never "whether theres something worth knowing", its more of like "is there anything we can do to change the situiation into our favour", and often than not, the answer is NO. There is that.

[@lagrangewei]

@@chriscain7333if they know what going on, why did they not forsee the mate 60 and her SOC? US expert is clueless, even now they can't explain how Huawei build the chip.

[@chriscain7333]

@@lagrangewei as i said, its never about "whether there is something worth knowing", it has everything to do with "is there anything we can do to change the situiation into our favour". If you can NOT do anything about the situiation you know, why would you openly discussing about it? Do you want everyone else to think that you are weak and cant do sh!t?

[@Amidat]

@@lagrangewei US industry did... its the politicians that don't

[@francisliew2801]

brilllant

[@shencheanglow3726]

Either the world work together to prosper together, or fight it out. In the later case the one that get the respect of knowledgable people will get more help and win the race. In other word, weapon will not win this race.

[@Rio-by1eh]

We’re past that tech were already in subatomic level in chip making

[@MASMIWA]

One not so secret weapon that Huawei has is that it is privately held by its employees so as not to beholding to the bottom line as US semiconductor companies are with their investors. It is estimated that over half of Huawei's employees are focused on R&D, hence Huawei's success at a broad spectrum of tech sectors, all of which began with the success of their telecom sector. It is looking more and more like Huawei will eventually control most, if not all, the supply chain for making semiconductors and production of their systems and products. According to Huawei's 2022 annual report: "Total R&D investment over the last decade now exceeds CNY977.3 billion In 2022, our total R&D spending was CNY161.5 billion, representing 25.1% of total revenue At the end of 2022, 114,000+ employees, or 55.4% of our workforce, worked in R&D"

[@LL-rm8xt]

Question: what would you say if you spent a lot of money buying a racing car but the government or car company says you can only drive it 50 mph when you know it can go 90 mph....... lol

[@qake2021]

👍👍👍🇨🇳🇨🇳🇨🇳👏👏👏✌️

[@Trumpindad]

Is this Kash’s brother?

[@qilu2004]

chips are made by humans, and chinese are among the brightest on earth. this sanction is very shortsighted.

[@ayambo3281]

I wonder what Americans think of Tonya Harding

[@smling11]

US has not enough disciplined edcuated people to make chips competitively. For a few plants maybe that is the maximum that US can man, beyond that, she shall need to import a lot of people. The covid19 mask wearing requirement was a very good score card of what countries can do high technology disciplined production.

[@JOhnSmith-qt3zs]

Can you imagine that you have to kidnap his daughter, yet the company still not dead. Instead, it's striving? You gotta be badass.

[@LECOMAYAGUA]

North American Strategic Minerals Inc. (“NASM” or the “Company”) Announces the Discovery of a Significant New Geologic Type of Rare Earth Element Deposit In Multiple Areas of North America September 26, 2023 10:56 ET | Source: North American Strategic Minerals, Inc.

[@MASMIWA]

Finding rare earths is fairly common. Processing is the choke point and China holds the IP and mature processes for rare earths. Let's see if the US can solve the puzzle.

[@qake2021]

😃😃😃 🇨🇳 have a lot of human capital ‼️👏👏👏

[@LL-rm8xt]

What most people deliberately omit is that Huawei worked closely with TSMC to develop the process to what is now. Huawei was TSMC's biggest customer before the ban. US companies like Apple are now reaping the benefits of Huawei's investment in TSMC

[@Amidat]

They also deliberately omit that 90% of Taiwan people are Han Chinese. They share the same language and culture.

[@brilliantcheesecake1894]

We gave away our electronics industry to China for the sake of pursuing a service economy. That didn't work out too well and now we're paying the price.

[@marsmotion]

greed kills

[@mingouczjcz3800]

I don't think the give-away to China has ever happened. Mainly South Korea and Taiwan took advantage of American technology transfers and beat Japanese electronics industry.

[@pikachus5m166]

You gave way to Wall St never ending search for maximum profits, leading to outsourcing and offshoring, hollowing out American industry.

[@jackreacher8858]

@@marsmotion GREED IS NOT NOT NOT GOOD hehe !

[@lucienpan1679]

​@@jackreacher8858👍 Odd eh? He he... Not•Not•Not odd is odd. (As in contrasting to even.) Thus greed is NOT good. Never was, is, or will be. Why? Because it is uneven thus asymmetrical. (At least from a pure perspective of STE-Mathematics.) ____________ Maths proof: • Suppose that n²+2n−1 is an even number. This means it is two times some integer (or set object). But equating it to 2n, makes it a specific integer, since n is fixed (once we calculate n²+2n−1). On the other hand, every even integer is given by 2k, where k is an integer. • Now suppose that n²+2n−1=2k, then transposing, n²−1=2(k−n). Hence, (n−1)(n+1)=2(k−n). At this point, it is enough to see that if n was even, both n−1 and n+1 are odd. • The right hand side is even (divisible by 2 ), whereas the left hand side, being a product of odd numbers, is odd. This is a contradiction. ≡ Hence, n must be odd. __________ even (adj.) Old English efen "level," also "equal, like; calm, harmonious; equally; quite, fully; namely," from Proto-Germanic *ebna- (source also of Old Saxon eban, Old Frisian even "level, plain, smooth," Dutch even, Old High German eban, German eben, Old Norse jafn, Danish jævn, Gothic ibns). The adverb is Old English efne "exactly, just, likewise." Modern adverbial sense (introducing an extreme case of something more generally implied) seems to have arisen 16c. from use of the word to emphasize identity ("Who, me?" "Even you"). Etymologists are uncertain whether the original sense was "level" or "alike." Used extensively in Old English compounds, with a sense of "fellow, co-" (as in efeneald "of the same age;" Middle English even-sucker "foster-brother"). Of numbers, from 1550s. Sense of "on an equal footing" is from 1630s. Rhyming reduplication phrase even steven is attested from 1866; even break (n.) first recorded 1907. Even-tempered from 1712. To get even with "retaliate upon" is attested by 1833. even (v.) Old English efnan "to make even, to make level; liken, compare" (see even (adj.)). Intransitive sense of "become even" is attested from early 13c. Related: Evened; evening. even (n.) "end of the day," Old English æfen, Mercian efen, Northumbrian efern (see eve (n.))

[@kooisengchng5283]

Necessity is the mother of invention, and China responded appropriately. If US had collaborated with China for the past 20 years, US would still be far ahead and China will still be very dependent on the US, Japan, Korea and Taiwan. It should have seen the signs but it had a hegemonic face to lose, so it double downed on its own mistakes. Now it is too late.

[@Rio-by1eh]

Had many engineers steal and move back to China after working here for 10-15 yrs

[@rezamotori5709]

The Taliban ?

[@callwide]

this guy is complete wrong. duv has no future in high end

[@lagrangewei]

on paper EUV can reach a higher resolution, however in practise, the current EUV machine light source has limited power, this lead to it yield being lower than DUV. that's the problem. else Samsung and TSMC with all the EUV machines should be able to produce chip at the EUV on paper resolution limit, it taking a long time to realise because they have to baby the result out of the weak light source. Samsung latest resolution only improve complexity by 10% increase of the desired 30%, if you can't create large chip because of yield problem, you can't really take advantage of it. another problem is the size of a gate using finfet is 12nm... it doesn't mean you can make them smaller just because you have higher resolution. this is why samsung is shifting layering the contact on top of each other... "nanowire" or "nanoribbon", however these are much harder to produce as you have to layer them on top of each other. which kind of defeat the advantage of the EUV doing higher resolution in a single pass... the issue isn't just producing the chip, it also how long it take to produce a chip. if you end up taking 10 time as long just to offer a 50% improvement to a single chip. why don't I just buy 10 chip made from DUV and array them together to do the job? this is why only 5% of the chip produce today use cutting edge EUV. it why US is freaking out about EUV ban being pointless

[@jumpinthedog5533]

This seems like he is taking all of China's claims at face value which is pretty naive considering we haven't even gotten our hands on a Kirin 9000s yet

[@JA-pn4ji]

What planet are you on? Within 24 hours of its release, a Canadian firm had stripped it down and a few days later released an analysis.

[@havencat9337]

let him be in his american superiority bubble @@snoopysnoops007

[@strigoiu13]

​@@snoopysnoops007still, guys, where can we buy this wonder phone? 😂😂 We have no Huawei restrictions here, but the phone is not in the offer :))) Are they not able to mass produce this phone? The financial loss mass producing this phone will be too big, even for the PRC?😂😂😂

[@rap3208]

@@strigoiu13 Yeah, keep being smug. In just two weeks from release, Huawei sold Mate 60 Pro 15-17 million units, and adding the other Mate 60 series of products, the volume can reach up to 20 million.

[@arminius6506]

​@@strigoiu13only loss going to happen is the people losing iq points reading their comments