How is SMIC after US embargo?

Table of Contents

SMIC after US embargo

TSMC investors and Taiwanese, all care about SMIC’s business current progress after US embargo.

Regarding SMIC, please refer to the relevant posts in my blog: “Mong-Song Liang, the hero of SMIC’s breakthrough in US blockade“, “Two long-term threats to TSMC: US and SMIC“, “Comparison of SMIC, Rapidus, TSMC, Intel, and Samsung’s new process roadmaps for future chips“, “Yield rate comparison of SMIC, Rapidus, TSMC, Samsung, Intel’s advanced process“

Chip process technology

Successfully developed 7nm

After perfecting the 28nm and 14nm processes, Mong-Song Liang helped SMIC successfully develop the 7nm process in 2023, despite the US embargo and many obstacles. SMIC did not have ASML’s EUV, which most people believed was impossible.

“Nikkei” previously reported that Yoji Shimizu, president of semiconductor research company TechanaLye, said that SMIC’s strength is only three years behind TSMC. In particular, SMIC uses 7nm technology, but its overall performance is at the same level as TSMC’s 5nm performance, which means that the design capabilities of Chinese-made semiconductors have been further improved.

5nm have been successfully pilot-produced

Recently, the market has heard that Huawei and SMIC have teamed up to develop a 5nm process using multiple patterning and achieved a breakthrough. SMIC has successfully launched a 5nm process without the difficulties of ASML’s EUV.

However, SMIC stated that although it has successfully produced 5nm process wafers due to the lack of EUV restrictions, its current mass production is still plagued by high costs and low yields.

Due to the US ban, ASML is unable to sell the most advanced EUV to Chinese factories. SMIC can only rely on deep ultraviolet (DUV) equipment. The wavelength of DUV is 193~248 nanometers, which is far less than EUV’s 13.5 nanometers. In order to manufacture advanced process chips, SMIC has to repeat the exposure process, which not only increases the cost of wafer production but is also very time-consuming.

It is estimated that the production cost of SMIC’s 5nm chips is 50% more expensive than TSMC’s 5nm using EUV. Wccftech reported that SMIC will complete the development of its 5nm process technology in 2025, but because it can only rely on deep ultraviolet (DUV) equipment, the current yield is estimated to be only 1/3 of TSMC’s yield on the same technology.

3nm already has a plan

The US magazine Tom’s Hardware has pointed out that SMIC and Huawei have applied for patents for 3nm process using DUV and multiple patterning. It is reasonable to infer that SMIC has already developed 3nm process technology, and the timeline for commercialization is only a matter of time.

Note: Huawei has announced that it will launch chips using 5nm process by the end of 2024 and in 2025. Huawei’s chip foundry is SMIC.

Note: SMIC is one of TSMC’s only two long-term rivals. For details, please see my post of “Two long-term threats to TSMC: US and SMIC“

Note: When ASML CEO Christophe Fouquet announced the third quarter financial report for 2024, he said that Chinese mainland companies have the potential to produce 5nm and 3nm chips on their own, but because they do not have EUV, they can only use DUV, which may limit production and yield.

SMIC’s chip process yield

When talking about SMIC, we must talk about the following two things:

Because the United States is afraid of China’s rise, it has joined forces with other countries to impose a technological blockade on China, including a tight embargo on advanced semiconductor manufacturing equipment and materials, causing SMIC’s advancement after the 14nm process to be greatly delayed.

Mong-Song Liang is a key figure in SMIC’s advanced process and yield in recent years. For details, please click on my post “Mong-Song Liang, the hero of SMIC’s breakthrough in US blockade“

Yield improved significantly by Liang

In 2017, after Mong-Song Liang joined SMIC, SMIC’s 28nm process yield rate began to improve.

Because he developed 22nm too late and missed the opportunity for mass production, he decided to skip the next generation 22nm process and switch to the mass production of 14nm process strategy.

Mong-Song Liang significantly increased the 14nm process yield from 3% to over 95% within 298 days, making SMIC the sixth company in the world capable of producing 14nm chips after TSMC, UMC, Samsung, GlobalFoundries and Intel; and the fifth company in the world capable of manufacturing 12nm process.

Unable to obtain EUV, use DUV for advanced process

SMIC does not have ASML’s EUV, which most people think is impossible. In 2023, SMIC helped SMIC successfully develop a 7nm process using DUV. EUV equipment only requires 9 steps to carry out the 7nm process, but using DUV equipment requires 34 steps. In May 2024, market professionals estimated that the industry’s estimate of SMIC’s 7nm chip yield is about less than 50%.

Market sources say Huawei and SMIC have teamed up to develop a 5nm process using multi-patterning and have achieved a breakthrough. Without ASML’s EUV, SMIC should be able to launch a 5nm process by 2025 at the earliest.

Advanced process yield rate reached 40%, aim 60%

In February 2025, the Financial Times quoted two people familiar with the matter as saying that under the premise of being forced to use DVU, SMIC adopted the N+2 process and was able to produce advanced AI chips for China without extreme ultraviolet (EUV) technology. The yield rate of Ascend 910C has increased from 20% a year ago to 40% that can make money.

SMIC’s goal is to increase the yield to 60% of the same-level H100 wafers produced by TSMC for Nvidia. Based on this, Creative Strategies consulting firm said that 40% of SMIC’s yield will be commercializable───it means that this level of yield rate is not only break even but good enough to make money.

Already ranked world’s top 3 foundries

According to a survey released by TrendForce on June 12, the output value of the world’s top 10 wafer foundries in the first quarter of 2024 was US$29.2 billion, a quarterly decrease of 4.3%. The top three are as follows:

TSMC’s revenue decreased by about 4.1% quarter-on-quarter to US$18.85 billion, with a market share of 61.7%.
Samsung’s revenue fell 7.2% quarter-on-quarter to US$3.36 billion, and its market share fell to 11%.
SMIC’s revenue increased 4.3% quarter-on-quarter to US$1.75 billion, outperforming its peers, with a market share of 5.7%, surpassing GlobalFoundries and UMC to jump to third place.

It is worth mentioning that SMIC’s ranking has risen to third place, narrowing the gap with Samsung. Samsung’s market share has been between 15-17% in the past few years. This also confirms my viewpoint in my post three years ago, “Two long-term threats to TSMC: US and SMIC“

SMIC is now stronger than before the US embargo. Not only has it produced 7nm chips without EUV, but its yield rate has exceeded 40%, which is beyond everyone’s expectations and has reached the threshold of making money.

More importantly, at the beginning of 2024, SMIC has become the world’s third largest wafer foundry, and its market share has narrowed to about 5 to 6 percentage points closer to Samsung.

SMIC’s 28nm cut price by 40%

In January 2025, SMIC lowered the price of 28nm chips without warning, from US$2,500 per wafer to US$1,500, a 40% drop. The price difference of up to one thousand US dollars was quite rare and shocked the market.

I emphasized in my post “”6 common wrong semiconductor investment myths” that the vast majority of the world’s chips do not require advanced processes. Especially since SMIC will be the world’s third largest wafer foundry by 2024, this price cut will have an important impact on the mature processes of the world, including UMC, World Advanced, GlobalFoundries, and even Samsung and TSMC. If Samsung and TSMC do not force customers to bundle advance and mature processes, prospects will be affected.

TrendForce said that data showed that in 2024, Taiwan’s market share in mature processes will be 44%, leading the world, but China will be close behind with 31%. By 2027, China will make significant progress and increase its market share to 39%. Taiwan’s rate will drop to around 40%, with almost no gap between the two sides. In the future, China will dominate and control the world’s mature process market.

This is why the United States and the European Union have been clamoring to start sanctioning China’s semiconductor equipment needed for mature processes since 2024 because they cannot compete with China’s mature processes. Again!

What if SMIC has EUV

Based on SMIC’s performance in the past three or four years after the US semiconductor equipment ban, if SMIC can buy EUV lithography machines, normal people will understand that TSMC’s good days are over. Talent, equipment, capital, market, degree of selling one’s liver, government support; SMIC does not have any of these, except EUV lithography machine.

Conclusion

To paraphrase Friedrich Nietzsche, “What doesn’t kill me makes me stronger.” Both SMIC and Huawei have proven that there are ways to survive the unreasonable US embargo. These two companies have shown the world and the US that they are now even stronger than before the US embargo.

Those who did not dare to say no to the United States and succumbed to the United States, including Japanese semiconductor industry, Alstom, Toshiba, HTC and Taiwan’s panel industry; without exception, all fell, and none survived.

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