Geopolitics Unplugged

EP68: Think Building a Cutting-Edge Chip Factory is Easy? Think Again. Here's the Dirty Truth Behind Clean Rooms

Summary:
In this episode, we discuss the critical role of cleanrooms in semiconductor manufacturing, emphasizing the need for stringent control over particles, temperature, humidity, and chemicals to prevent contamination. We outline the standards including ISO 14644-1 and ISO 14644-2 standards for cleanroom classification and maintenance, explaining how laminar airflow, HEPA/ULPA filtration, and meticulous personnel practices ensure a contamination-free environment. We further delves into the construction and maintenance of ISO Class 5 or better cleanrooms, outlining essential components like modular panels, sealed windows, pressurization, and high air change rates. We highlight the importance of routine monitoring, cleaning protocols, personnel training, and scheduled maintenance in preserving the cleanroom environment and ensuring the successful production of high-quality semiconductors. It really is not that easy to start up from scratch and designing, building and maintaining a clean room is just one part of the complexity of modern advanced semiconductor fabrication.
Questions to consider as you read/listen:
What are the essential components of a cleanroom environment and their role in the semiconductor manufacturing process?
How do ISO 14644 standards impact the design, construction, and operation of semiconductor cleanrooms?
What are the key challenges and considerations in maintaining the cleanliness and functionality of a cleanroom over time?
Long format:
 Think Building a Cutting-Edge Chip Factory is Easy? Think Again. Here's the Dirty Truth Behind Clean Rooms
The news is full of countries stating that they are going to make semiconductors and fabricate them. Whether it is India or UAE or Germany or Italy or Vietnam. It is really not that simple.
So you want to make a cutting edge chip fabrication plant from scratch with no native experience? Good luck. Just one level of difficulty is in designing, constructing and maintaining a clean room.
INTRODUCTION
Cutting-edge semiconductor plants need clean rooms to prevent contamination during the production of microchips, which are incredibly sensitive to particles and impurities. Even a single dust particle or microscopic contaminant can cause defects in semiconductor chips, rendering them unusable or significantly reducing their performance and reliability. Here’s why clean rooms are essential:
Particle Control: Semiconductor chips are made using processes that involve etching and layering at microscopic scales. Particles much smaller than a human hair can interfere with these processes, leading to malfunctions. Clean rooms keep airborne particles to a minimum to avoid contamination.
Temperature and Humidity Regulation: Semiconductor manufacturing is extremely sensitive to changes in temperature and humidity, which can affect chemical reactions and the precision of lithography (the process of patterning circuits on chips). Clean rooms maintain strict environmental control to ensure consistent quality.
Chemical Control: Many materials and chemicals used in semiconductor production are reactive. Clean rooms limit contaminants, including gases and ions, which could react with these chemicals and ruin the chips.
Precision in Lithography: Advanced semiconductor chips are made at extremely small scales, with features as small as a few nanometers. For lithography to be precise, the environment needs to be tightly controlled, and vibrations must be minimized. Clean rooms help to provide these conditions.
Yield Improvement: The production of semiconductor chips is complex, and defects are costly. Clean rooms help maximize the yield of usable chips per wafer by reducing defects, which is crucial given the high costs associated with semiconductor manufacturing.
Clean rooms are classified by the number of particles they allow per cubic meter, with semiconductor fabs often requiring Class 1 or even stricter classifications, meaning they permit as few as one particle per cubic meter of air. These conditions are fundamental for producing the advanced technology found in modern electronics, where even minor defects are unacceptable.
THE STANDARDS
ISO 14644-1 and ISO 14644-2 are critical standards for defining and maintaining cleanroom environments, especially for industries like semiconductor manufacturing, where air purity is paramount to avoid contamination. 
ISO 14644-1: Classification of Air Cleanliness by Particle Concentration
ISO 14644-1 provides criteria for classifying the cleanliness of air in cleanrooms by measuring particle concentration. Semiconductor facilities commonly require an ISO Class 5 or lower environment, demanding stringent control of airborne particles, especially since microscopic contaminants can severely impact microchip functionality.
For ISO Class 5, a cleanroom must have a maximum of 3,520 particles per cubic meter at a size of 0.5 microns or larger. This level of cleanliness ensures that the semiconductor manufacturing process remains largely free of particulates that could damage the delicate circuitry and photolithography patterns on silicon wafers.
ISO 14644-2: Monitoring and Compliance Verification
ISO 14644-2 complements ISO 14644-1 by providing guidelines for monitoring, verifying, and maintaining the cleanliness of the cleanroom environment over time. This standard specifies the testing frequency and protocols necessary to confirm continued compliance with the established cleanliness class, based on particle concentrations. For semiconductor cleanrooms, this monitoring process is critical due to the sensitivity of microelectronics to particulate contamination.
Laminar Airflow in Semiconductor Cleanrooms
Laminar airflow is essential in semiconductor cleanrooms to maintain cleanliness by ensuring a consistent, unidirectional flow of air, typically moving vertically from the ceiling to the floor. High-efficiency particulate air (HEPA) filters or ultra-low penetration air (ULPA) filters are often used to filter incoming air, ensuring only clean, particle-free air reaches sensitive areas. This airflow system helps sweep away contaminants generated by personnel or equipment, preventing particles from settling on wafers and equipment.
Monitoring and Control
Monitoring the cleanroom involves continuous particle counting and environmental control to detect deviations from cleanliness standards. Advanced monitoring systems are used to detect particle concentration, humidity, and temperature. Semiconductor cleanrooms often have real-time particle counters, which are strategically placed to alert personnel to any increase in particle concentration immediately. This ongoing monitoring is vital for maintaining compliance with ISO standards and detecting any potential contamination risks promptly.
Cleanroom Suits and Personnel Training
Personnel working in semiconductor cleanrooms wear specialized cleanroom suits, which cover their entire body, including gloves, masks, and sometimes face shields. These garments are designed to contain human-generated particles such as skin flakes, hair, and other contaminants. The suits are made from materials that do not generate lint or static and are typically reusable after decontamination.
Proper training of personnel is another critical aspect of maintaining an ISO Class 5 environment. Staff must be trained on correct gowning procedures, handling of cleanroom equipment, and movement techniques within the cleanroom. Even minimal movement can disturb airflow and release contaminants, so personnel are trained to minimize unnecessary motion. They also learn protocols for entering and exiting the cleanroom to prevent cross-contamination from external areas.
Constructing and maintaining ISO Class 5 or better cleanrooms for semiconductor manufacturing requires careful design and rigorous protocols to control particulate contamination. Here’s a breakdown of the key components and practices:
Construction of ISO Class 5 or Better Cleanrooms
Room Design and Layout
Modular Panels and Seals: Walls, floors, and ceilings are made from non-shedding, easily cleanable materials, often prefabricated modular panels that are smooth, sealed, and designed to prevent particle accumulation.
Sealed Windows and Doors: Cleanrooms have airtight windows, limited entry points, and doors with airlocks to maintain pressure control and minimize the chance of outside contaminants entering.
Pressurization: Higher air pressure inside the cleanroom than in adjacent spaces prevents unfiltered air from entering. Positive pressure keeps airborne particles from infiltrating the cleanroom environment.
Filtration Systems and HVAC
HEPA/ULPA Filters: High-efficiency particulate air (HEPA) filters or ultra-low penetration air (ULPA) filters remove 99.99% of particles down to 0.3 microns. These filters are typically installed in the ceiling to facilitate laminar airflow.
Laminar Flow Design: A unidirectional, vertical airflow pushes particles down and out of the room. This reduces the likelihood of particles settling on sensitive equipment.
Return Air Vents: Vents are positioned near the floor to allow filtered air to exit, drawing contaminants out of the environment.
Flooring and Surfaces
Antistatic, Smooth Flooring: Flooring is typically made of seamless vinyl or epoxy, reducing particle generation and making surfaces easy to clean. Floors are often conductive to prevent static build-up, which can attract particles.
Rounded Corners and Coved Floors: Corners are rounded, and wall-floor junctions are coved to eliminate particle traps, facilitating thorough cleaning.
Airflow and Ventilation Rates
High Air Change Rates: ISO Class 5 cleanrooms require around 240-600 air changes per hour. This high turnover rate keeps particulate levels low.
Temperature and Humidity Control: Precise control of temperature and humidity prevents static electricity buildup and reduces particle generation, which is especially crucial in semiconductor manufacturing.
Maintenance of ISO Class 5 or Better Cleanrooms
Routine Monitoring and Testing
Particle Counting: Continuous or periodic particle counting is performed to ensure compliance with ISO Class 5 standards. Real-time monitors detect changes in particulate levels, alerting staff to any potential contamination.
Environmental Monitoring: Humidity, temperature, and pressure levels are continually monitored, as these factors influence particle behavior and static accumulation.
Cleaning Protocols
Regular Cleaning Cycles: All surfaces, including walls, floors, and equipment, are frequently cleaned using lint-free wipes, HEPA-filtered vacuums, and approved cleaning solutions.
Minimizing Surface Contact: Equipment and work surfaces are minimized and specifically arranged to reduce particle generation.
Cleaning of Equipment and Instruments: Equipment is cleaned to prevent particles from being reintroduced into the cleanroom. Some tools are kept in isolated spaces or mini-environments with even stricter cleanliness controls.
Personnel and Equipment Control
Gowning and De-Gowning Procedures: Personnel wear full cleanroom suits, gloves, masks, and eye protection, all of which are donned in designated gowning rooms. These garments prevent human-generated particles (skin flakes, hair) from contaminating the environment.
Training and Compliance: Personnel are trained on proper entry, exit, and movement protocols to avoid disrupting airflow. Training emphasizes minimal movement and strict adherence to cleanroom practices.
Use of Pass-Through Chambers: Materials and equipment enter through specialized pass-through chambers, minimizing door openings and reducing contamination risk.
Scheduled Maintenance and Filter Replacement
Filter Replacement and Testing: HEPA or ULPA filters require regular inspection and replacement to maintain optimal filtration efficiency.
Pressure Differential Verification: Air pressure differentials are regularly tested to ensure positive pressure is maintained, which prevents external air from entering.
Routine Certification and Compliance Audits
Periodic Recertification: Cleanrooms are recertified periodically to ensure they meet ISO 14644-1 standards. This includes particle counting and full-system inspections.
Audits and Process Reviews: Regular audits and process reviews help identify areas for improvement in maintenance and operations, ensuring the cleanroom remains compliant over time.
Through these construction and maintenance practices, ISO Class 5 cleanrooms are built and preserved to meet the stringent cleanliness standards needed for semiconductor manufacturing.
Conclusion
ISO 14644-1 and ISO 14644-2 establish the standards and protocols for cleanroom classification, monitoring, and compliance verification, ensuring that semiconductor facilities can achieve and maintain the required level of air cleanliness. Laminar airflow, continuous monitoring, cleanroom suits, and personnel training are all integral to meeting these stringent standards and preventing contamination, which is critical to the high-precision semiconductor manufacturing process.
Sources:
Cleanrooms for Semiconductor Fabrication Plants: A Comprehensive Guide to Design, Construction, and Operation by Charles Nehme
Clean Room Design Minimizing Contamination Through Proper Design By Bengt Ljungqvist, Berit Reinmuller
Cleanroom Technology: Fundamentals of Design, Testing and Operation by William Whyte Jr.
Semiconductor Microchips and Fabrication: A Practical Guide to Theory and Manufacturing 1st Edition by Yaguang Lian

EP67: The Lithium Gold Rush: Can the American Smackdown Formation Transform the U.S. from Lithium Dependence to Lithium Independence?

Summary:
In this episode, we explore the potential of the Smackdown Formation in Arkansas as a source of lithium, particularly for battery production. The discovery of significant lithium deposits within the formation has sparked interest in Direct Lithium Extraction (DLE) technology, a faster and more efficient process compared to traditional methods. While Standard/Equinor's project utilizing repurposed bromide wells shows potential cost savings, we highlight the volatility of the lithium market, including historical price drops and uncertain demand as a concern. This market instability presents substantial risk for investors, potentially impacting the financial viability of the project despite its promising technological advancements.
Questions to consider as you read/listen:
What are the potential benefits and risks of the Smackdown Formation's lithium extraction project?
How does Direct Lithium Extraction (DLE) technology compare to traditional lithium extraction methods, and what are its implications for the lithium market?
What are the key factors that will influence the economic viability of lithium extraction in the Smackdown Formation, and how might these factors change in the future?
Long format:
 The Lithium Gold Rush: Can the American Smackdown Formation Transform the U.S. from Lithium Dependence to Lithium Independence?
SMACKDOWN FORMATION
Smackover Formation is an extensive, porous, and permeable limestone aquifer that hosts vast volumes of mineral rich brine. According to reports that broke on October 24, 2024 machine learning (AI) was used to examine data to discover that within that brine is believed to be a large volume of lithium. Samples from Arkansas were analyzed by the USGS Brine Research Instrumentation and Experimental lab in Reston, VA, and then compared with data from historic samples within the USGS Produced Waters Database of water from hydrocarbon production. The machine learning model was then used to combine lithium concentrations in brines with geological data to create maps that predict total lithium concentrations across the region, even in areas lacking lithium samples. Lithium is used in batteries. The U.S. relies on imports for more than 25% of its lithium. The USGS estimates there is enough lithium brought to the surface in the oil and brine waste streams in southern Arkansas to cover current estimated U.S.  lithium consumption.  The low-end estimate of 5 million tons of lithium present in Smackover brines is also equivalent to more than nine times the International Energy Agency’s projection of global lithium demand for electric vehicles in 2030.
THE TECHNOLOGY BEING USED AND MEANS OF PRODUCTION
Standard/Equinor and ExxonMobile are the two main outfits that will be exploring and producing lithium at this field. They both use the same exact technology. They are both using Direct Lithium Extraction (DLE) technology. It is a process that very loosely is like fracking which is my somewhat area of expertise.
Direct lithium extraction (DLE) often involves drilling wells into lithium-rich saltwater reservoirs, which can range in depth but are typically between 300 and 2,000 meters underground. This depth is crucial to reach the brine layers that contain sufficient lithium concentrations. The extraction wells are usually drilled vertically, although some advanced methods may include horizontal or directional drilling to increase contact with brine-rich areas and improve lithium recovery rates.
Once the brine is brought to the surface, it goes through a series of steps to selectively pull out lithium using specialized materials or filters, often relying on ion-exchange or adsorption technology.
No additional water is typically introduced into the well in direct lithium extraction (DLE). Fracking chemicals are generally not used in DLE. DLE doesn’t rely on fracturing the rock to release lithium, unlike hydraulic fracturing (fracking) used in oil and gas extraction. Instead, it simply involves pumping the naturally occurring lithium-rich brine up to the surface through wells, where lithium is then extracted through chemical processes.
While the specifics can vary depending on the company or technology, the general process includes the following steps:
Brine Pumping and Pre-Treatment: The lithium-rich brine is pumped from the underground reservoir to the surface. Sometimes, it undergoes initial filtration to remove larger particles and impurities, such as sand or debris.
Lithium Adsorption/Absorption: The brine is then passed through a series of filters, membranes, or specialized materials designed to attract and hold lithium ions. Common materials used in this step include lithium-specific adsorbents, which can selectively trap lithium while letting other minerals and salts pass through. These adsorbents are often lithium-selective resins or materials like manganese oxide or aluminum-based composites.
Elution (Lithium Release): Once the lithium is captured on the adsorbent, a chemical wash (usually a mild acid or a proprietary solution) is applied to release the lithium from the adsorbent material. This wash produces a concentrated lithium solution, sometimes called a "lithium eluate."
Purification: The lithium-rich solution is then further purified to remove any remaining impurities or unwanted ions, such as calcium, magnesium, or potassium, which may be present in the brine. This is typically done through additional filtration or precipitation steps.
Conversion to Lithium Compounds: The purified lithium solution can then be processed into a commercially usable lithium compound, often lithium carbonate or lithium hydroxide, which are commonly used in batteries. This final step typically involves precipitation reactions or crystallization to produce the desired lithium product.
Reinjection of Brine: After lithium extraction, the remaining brine, now with much lower lithium content, is reinjected back into the reservoir. This helps to reduce environmental impact by maintaining local groundwater levels and minimizing waste.
Each of these steps is designed to maximize lithium recovery while using less water and space than traditional methods. The specific materials and chemical processes in each step are often proprietary and can vary depending on the technology provider.
DLE does not require drying for months. DLE is a faster and more efficient alternative to traditional lithium extraction methods (Chile), which can take months to years. DLE can extract lithium from brine in hours or days.
I really didn’t get that deep into whether or not the pre-existing extraction wells could be repurposed without significant cost other than taking Standard’s say so. I would have gone there next or eventually I suppose. But in all truth I got gun shy with the 80% and also thoughts of possible softening of demand and what if both ExxonMobile and Standard pump out this much on top of Australia and Argentina and Chile. It’s not a mature enough or stable enough market for my liking. Your mileage may, of course, vary.
Whether it is a pre existing hole that can be repurposed doesn’t impact the means or technology between the two projects.
THE ECONOMICS OF THE STANDARD/EQUINOR PROJECT
I chose to examine the Standard/Equinor proposed exploration and production as they have made public their investment prospectus. Like all prospectus, they need to be read with some suspicion as it is definitely an advertisement to invest. In my past experience, such things need to be not only read critically but also with notions of increasing costs, adding time to time tables for delays and finally reducing yield projections.
Standard/Equinor have a potential advantage over ExxonMobile as their project calls for repurposing existing well infrastructure used in bromide extraction now for lithium extraction. This is potentially a large start p cost savings to the tune of between $2.5 to $7 million in well drilling and initial production costs. In theory, former bromide wells could potentially be repurposed for direct lithium extraction (DLE), depending on the specific geological and chemical characteristics of the brine in those wells. Bromide and lithium are often found in similar types of brine reservoirs at similar depths, so existing bromide wells might have infrastructure and access to brine sources that could contain lithium, making them candidates for DLE with some adjustments.
Bromide wells already have the necessary infrastructure, such as pumps, pipes, and well casings, which could be adapted for lithium extraction. However, the equipment might require upgrades to accommodate the specific needs of DLE technology, such as specialized filtration and extraction systems. Any repurposing of wells would need to meet environmental regulations for DLE, which differ from bromide extraction. Regulations may cover reinjection practices, groundwater management, and waste disposal.
Nevertheless with all things being equal, the initial costs of extraction will be less for Standard/Equinor than ExxonMobil.
THE SPECIFICS OF THE STANDARD/EQUINOR PROSPECTUS
The South West Arkansas Project Pre-Feasibility Study (PFS) by Standard Lithium and Equinor presents an investment overview and analysis for Standard Lithium Ltd.'s and Equinor’s project provides the relevant information.
The following key investment aspects and assumptions have been outlined:
Project Scope and Ownership:
Standard Lithium holds the rights to extract lithium from brine under an option agreement with TETRA Technologies Inc., with a 10-year exploratory period.
The project targets lithium-rich brine within the Smackover Formation, covering an area of approximately 36,839 acres.
The study expands upon a 2021 Preliminary Economic Assessment, offering updated methods and extraction plans to produce lithium hydroxide, primarily for battery applications.
Production Capacity and Methodology:
Target production is 30,000 tonnes per annum (tpa) of battery-grade lithium hydroxide, with potential to increase to 35,000 tpa.
The resource extraction involves a network of brine supply and injection wells, leveraging a refined flowsheet based on Direct Lithium Extraction (DLE) technology. Brine from wells will be processed and reinjected to maintain aquifer pressure.
Economic Viability and Cost Estimates:
Capital Expenditure (CAPEX): Estimated at $1.3 billion, including contingency, primarily for the well field, pipelines, DLE units, and processing facilities.
Operating Expenditure (OPEX): Estimated at $5,229 per tonne of lithium hydroxide, with electricity and reagent costs as major components.
Revenue and Profitability: The study assumes a lithium hydroxide price of $30,000/tonne, yielding strong financial projections:
Net Present Value (NPV): $3.09 billion after-tax, based on an 8% discount rate.
Internal Rate of Return (IRR): 32.8% after-tax.
Assumptions and Risks:
Market Price Stability: A flat rate of $30,000 per tonne for lithium hydroxide over the project life.
Regulatory Compliance: The assumption of future royalty rates aligned with Arkansas regulations.
Technical Feasibility: Continuous operation and optimization of the DLE process, with ongoing development to minimize reagent costs and manage waste.
Resource Sustainability: Long-term viability of lithium concentration and production rates based on well data and geological modeling.
Sensitivity to CAPEX/OPEX Fluctuations: Economic sensitivity analysis indicates the project remains viable even under adverse CAPEX, OPEX, and pricing scenarios.
The PFS confirms the South West Arkansas Project’s investment potential, supporting its transition to further feasibility assessments and regulatory steps for future production if conditions precedent are met.
WHY I WAS AND AM A PASS…
The breakeven price for lithium hydroxide extraction in the South West Arkansas Project can be derived from the operating cost estimates. The all-in operating cost is approximately $5,229 per tonne of lithium hydroxide for the base case production scenario of 30,000 tonnes per year. This cost represents the minimum price at which the project would break even, excluding additional financial considerations like CAPEX recovery, taxes, and any unforeseen royalties not included in this analysis. Thus, the breakeven price is approximately $5,229 per tonne of lithium hydroxide for operational sustainability. As of September 4, 2024, the spot price for lithium hydroxide was $10,550 per metric ton. So it seems to make sense in the current market.
The estimated cost to produce lithium hydroxide per tonne for the South West Arkansas Project, based on the provided figures, is broken down as follows:
All-in Operating Cost: $5,229 per tonne of lithium hydroxide, which includes:
Workforce Costs: $371 per tonne
Electrical Power: $1,291 per tonne
Reagents and Consumables: $1,158 per tonne
Natural Gas: $15 per tonne
Maintenance, Waste Disposal, Miscellaneous Costs: $1,073 per tonne
Indirect Operational Costs: $168 per tonne
Royalties: $741 per tonne
Sustaining Capital: $415 per tonne
This cost structure covers all essential operational expenditures needed to produce one tonne of battery-quality lithium hydroxide.
Looking outside of the US to see the competition. Australia can and does produce lithium hydroxide at approximately $6,600 per ton of LCE (assuming integration with lithium mining), compared with $10,400 per ton of LCE for China. Indeed, South Korea and Canada, the closest countries to Australia from a cost perspective, still have costs approximately 24 to 51 percent higher than Australia’s.
But one has to examine history of the market as a whole and its strength…
In 2023, lithium hydroxide and lithium carbonate prices fell by more than 80% after reaching record highs in 2022. Yikes. That right there scared me off. If all of the sudden China rolls back its overproduction of NEVs and the American market softens on them, then might that be a problem? Will simply producing as much as they outline above crater the price too?
Too risky for my blood. I wish Exxon and the others well. They can take a loss leader every day of the week. I prefer not to.
CONCLUSION
In conclusion, the economic viability of the Smackdown Formation's lithium extraction project, while promising on paper, presents substantial risks that temper its attractiveness as an investment. The formation holds vast lithium resources that, if fully utilized, could supply a significant portion of U.S. lithium demand, with advanced DLE technology offering an efficient and environmentally conscious extraction method. Standard/Equinor's project shows potential advantages in cost savings by repurposing bromide wells, which could reduce initial infrastructure expenditures and further enhance feasibility.
However, the project remains vulnerable to significant market volatility. Historical trends in lithium pricing, including the sharp price drops in recent years, raise concerns about future profitability. If global lithium supply increases due to production from Arkansas alongside other leading regions such as Australia, Argentina, and Chile, a price decline could undermine revenue forecasts. Additionally, while current projections estimate competitive production costs, unforeseen CAPEX or OPEX increases, regulatory changes, or shifts in market demand could also impact profitability.
While major players like ExxonMobil may have the resources to absorb potential market fluctuations, the risks associated with lithium's price instability and uncertain demand growth render this project too speculative for some investors. For those seeking a stable return, the Smackdown Formation’s project may be best approached with caution, given the current state of the lithium market and its sensitivity to global supply-demand dynamics.
My Sources:
https://www.newsweek.com/enormous-reserve-hidden-treasure-found-under-arkansas-1972840
https://www.usgs.gov/news/national-news-release/unlocking-arkansas-hidden-treasure-usgs-uses-machine-learning-show-large#:~:text=The%20USGS%20predictive%20model%20provides,a%20type%20of%20artificial%20intelligence
https://corporate.exxonmobil.com/what-we-do/delivering-industrial-solutions/lithium#Whyitmatters
https://d1io3yog0oux5.cloudfront.net/_eb6382573a303ca3bd820e96a6747e7d/standardlithium/files/pages/standardlithium/db/369/description/South_West_Arkansas_Project_-_Pre-Feasibility_Study_2023.09.18.pdf
https://lithiumharvest.com/knowledge/lithium-extraction/what-is-direct-lithium-extraction/#:~:text=Direct%20Lithium%20Extraction%20(DLE)%20is,environmental%20footprint%20of%20lithium%20extraction
https://news.pontemanalytics.com/p/lay-the-smack-down
https://www.mckinsey.com/industries/metals-and-mining/our-insights/australias-potential-in-the-lithium-market#
https://www.reuters.com/markets/commodities/china-lithium-boom-slows-sagging-prices-batter-high-cost-miners-2024-03-13/

EP66: China can’t make its own 5nm or 3nm chips under these export restrictions, can it?

Summary:
In this episode, we explore China's struggles to independently produce advanced semiconductor chips, specifically 5nm and 3nm chips and the future to get there and lower. Despite claims of reaching 7nm, China primarily relies on outsourcing for this, and its domestic production is limited to 28nm at scale. The analysis highlights that China faces various obstacles, including a lack of access to crucial equipment like EUV lithography machines, underdeveloped silicon wafer production, limited EDA software availability, and insufficiently advanced cleanroom facilities. While China may theoretically achieve 5nm or 3nm production using workarounds like SAQP, this approach brings significant drawbacks, including high costs, low yields, and energy consumption, making it unlikely to be a viable solution. We discuss all of these things and more in this episode.
Questions to consider as you read/listen:
What are the main technological obstacles preventing China from independently producing 5nm and 3nm chips?
What are the alternative methods China is employing to produce chips at smaller nodes, and what are their limitations?
How does China's current chip production capacity compare to that of other countries, and how are they addressing their weaknesses?
Long format:
China can’t make its own 5nm or 3nm chips under these export restrictions, can it?
The answer is maybe. But it’ll take a lot here is why.
TL;DR:
China is far from making 5nm or 3nm chips at scale domestically due to export restrictions on advanced equipment like EUV lithography. While it can produce limited 7nm chips using inefficient workarounds (like SAQP) and perhaps lower to 5nm or 3nm, yields are low, and costs are extremely high. Core challenges include insufficient silicon wafer production, lack of key EDA design software, and underdeveloped cleanroom facilities. Essentially, without access to advanced tools and technology, China’s chip production is stalled at older nodes (mostly 28nm) and is unlikely to advance soon.
Introduction
The global race for advanced semiconductor technology has placed China at a critical juncture as it contends with strict export restrictions from Western countries. With these limitations, the question arises: can China successfully produce 5nm or even 3nm chips? While some experts and media reports suggest that China is “stuck” at the 7nm node, this narrative oversimplifies the complexities of China’s chip production capabilities. In reality, domestic fabrication is still in its infancy, and challenges across several stages of chip production hinder progress. In this analysis, we delve into China’s technological capabilities, exploring what it has achieved domestically and the significant hurdles it still faces in reaching advanced nodes independently.
CURRENT TALKING POINTS NEED REFINING
Right now, most of the world press and some self-designated subject matter experts say that China is “at 7nm chip [really node size] and is stuck there.”
But that first claim that they are at 7nm is deceptive. China uses other fabricators to get to 7nm. It is not domestic fabrication.
Here’s the real scoop in the charts that follow.
As far as being stuck there, that requires a condition precedent that they are there. The data shows that for AI chips, they aren’t truly at 7nm node size on their own…. well not really as we will see.
In truth and at scale, they are stuck at 28 nm. Shanghai Micro Electronics Equipment (SMEE) claims to have developed a 28 nm lithography machine, the SSA/800-10W. SMEE's current SSA600 series can use 90 nm, 110 nm, and 280 nm processes.
There is an asterisks though. SMIC (a domestic Chinese company) has been able to produce 7 nm chips since 2021, using a technique called "multi-patterning" (more on this latter). But the rejection rate is very very very high and it certainly isn’t at scale. SMIC's 7nm chip production is limited and the yield rate is below 50%, which is well below the industry norm of 90%. SMIC's overall monthly wafer production capacity increased from 714,000 wafers in 2022 to 805,500 wafers in 2023. It is unknown how much of that is 7nm but the best guess in the industry is that due to high rejection rates, it is very low. Otherwise, China would be trumpeting the numbers as they tend to do. SMIC's 7nm chips are very costly, around 10 times the market price of a chip manufactured at TSMC's 7-nm node.
So mostly broken, way undersupplied and way over budget. Not a lot of future there.
For Chinese domestic production of AI chips per the chart above, for GPUs they are at best 28nm, for FPGAs they are at best 40nm, for ASICs they are at best 22nm. To get to 7nm at scale for AI chips they have to outsource and that is predominantly to TSMC. That TMSC door is closed. Taiwan is getting pretty darn aggressive in its written regulations to hurt China.
CAN CHINA GET TO 5nm OR 3nm WITH WHAT IT HAS ON HAND?
Recall getting below 7nm requires ASML EUV or NAEUV lithography systems generally. China has zero EUVs or NAEUVs. They do not even have the high-end older technology DUVs. They have zero of the TWINSCAN NXT:1970i and 1980i DUV immersion lithography systems.
Now back on October 24, 2024, ASML’s CEO Christophe Fouquet stated that China MAY be able to produce 5nm chips or 3nm chips using an older technology DUV equipment. How can this be without EUVs or NAEUVs?
China can potentially make 5nm chips by utilizing workarounds like "self-aligned quadruple patterning (SAQP)" technology on existing Deep Ultraviolet (DUV) lithography machines. Self-aligned quadruple patterning (SAQP) is a lithography technique that increases the density and performance of chips by creating IC patterns from larger pitched patterns on photomasks. SAQP is a spacer-based patterning approach that uses one lithography step and two spacer depositions to reduce lithography resolution by four times. What the heck does that mean? Self-aligned quadruple patterning (SAQP) is a manufacturing technique used to fit more components onto a computer chip, boosting its power and efficiency. Imagine it as a method to create very fine, precise lines needed for chip circuits, starting with a bigger, simpler pattern. In SAQP, only one “printing” step is needed, but the process cleverly adds layers around the initial pattern, almost like building up ridges around a stencil. By adding these layers in just the right way, SAQP divides the original pattern into four, resulting in a much finer design without requiring extra printing steps. This method allows chipmakers to achieve much higher detail than traditional methods, making it possible to produce powerful, compact chips for modern technology. SAQP is also known as a brute-force method because it involves pitch-splitting, which is the division of a pattern into two or three parts. The SAQP process uses repeated plasma deposition and etching steps to pattern fins.
But if the 7nm process using this SAQP process is wasteful with low yields, has high production costs, uses a lot of energy and is not cost competitive compared to using EUV technology, then 5nm or 3nm DUV production using SAQP is going to be perhaps an order of magnitude worse.
But doing the DUV-SAQP route is not easy because it requires technical labor resources (read humans) that China does not currently have.
BUT THERE’S MORE
Recall the lithography is only one part of the ecosystem. Some of the other parts that are worth noting include:
First, there is silicon wafer production. Well-known companies in the production of silicon materials include Shin-Etsu Chemical and SUMCO in Japan, LG Chemical in South Korea, and Global Wafer in Taiwan, China. Although a certain number of companies in mainland China are doing research and development and production of silicon materials, their proportion is still too small. It can be said that the problem of silicon wafer production capacity in the chip manufacturing process is a big mountain on the road of domestic chip development.
Second there is EDA tool software. Electronic Design Automation (EDA) is a specific category of hardware, software, services and processes that use computer-aided design to develop complex electronic systems like printed circuit boards, integrated circuits and microprocessors. The main areas where it can support design work include IC design, electronic circuit design, and PCB design. Currently, the leading EDA software providers globally are Synopsys, Cadence, and Mentor Graphics (now under Siemens), all based in the United States. These three major companies dominate the EDA market, controlling over 90% of the global share. China, however, remains a crucial growth market for these industry giants. Although there are EDA software companies in China, the most prominent one is BGI, which has inherited the early domestic Panda EDA system and has built substantial technological expertise. Despite this, the domestic EDA industry as a whole still faces challenges in achieving a complete process workflow, indicating a significant journey ahead. Without EDA software design, there is no way to design high-end chips.
Third is having the correct environment (clean room). The cleanroom level needed for sub 7nm chips depends on the process, but it's usually ISO 4 (Class 10) or ISO 5 (Class 100). And that is a fascinating discussion for another day.
Conclusion
In summary, China’s path to producing 5nm or 3nm chips domestically is fraught with challenges. While workarounds like self-aligned quadruple patterning (SAQP) theoretically allow for the creation of smaller node sizes, the high costs, low yields, high energy costs, and lack of technical expertise present substantial obstacles. Furthermore, critical components such as silicon wafer production, EDA software, and advanced cleanroom facilities are still underdeveloped in China’s semiconductor ecosystem. Without access to cutting-edge EUV lithography and a robust infrastructure, China’s ambition for advanced chip production remains limited, at least for now.
Sources:
https://itif.org/publications/2024/08/19/how-innovative-is-china-in-semiconductors/#:~:text=Semiconductor%20Manufacturing%20Equipment,-Lithography%20represents%20a&text=Shanghai%20Micro%20Electronics%20Equipment%20(SMEE,the%20SSA/800%2D10W.&text=(By%20comparison%2C%20TSMC%20was%20manufacturing,(See%20figure%208.)
https://swarajyamag.com/tech/how-chinas-state-funded-semiconductor-chipmaker-smic-is-overcoming-us-sanctions-and-developing-a-5-nanometer-chip#:~:text=SMIC%20has%20been%20capable%20of,million%20transistors%20per%20square%20millimeter
https://www.csis.org/analysis/contextualizing-national-security-concerns-over-chinas-domestically-produced-high-end-chip#:~:text=China's%20SMIC%20has%20been%20able,chip%20into%20wide%20commercial%20availability
https://evertiq.com/design/55327
https://www.edn.com/the-truth-about-smics-7-nm-chip-fabrication-ordeal/#:~:text=According%20to%20some%20industry%20observers,design%2C%20which%20implies%20lower%20complexity
https://www.trendforce.com/news/2024/10/24/news-asml-ceo-china-might-be-able-to-produce-5nm-and-3nm-chips-amid-u-s-export-restrictions/#:~:text=Notably%2C%20Fouquet%20claims%20that%20China,to%20the%20report%20from%20Wccftech
https://asiatimes.com/2024/04/china-to-make-5nm-chips-with-saqp-process/
https://www.appliedmaterials.com/eu/en/semiconductor/patterning.html#:~:text=Self%2Daligned%20quadruple%20patterning%20effectively,high%E2%80%91density%20cuts%20and%20vias
https://www.lasertec.co.jp/en/products/glossary/3625.html#:~:text=Self%20Aligned%20Quadruple%20Patterning%20(SAQP,prior%20limitations%20of%20optical%20lithography
https://www.spie.org/news/6378-self-aligned-quadruple-patterning-to-meet-requirements-for-fins-with-high-density#:~:text=Repeated%20plasma%20deposition%20and%20etching,Suong%20Ou%20and%20David%20Hellin

EP65: The South Korean Loophole: Is China’s Access to Advanced Technology Wide Open?

Summary:
In this episode, we examine the growing tension between the US and South Korea regarding export controls on semiconductor technology to China. Despite international efforts to restrict China's access to advanced technology, South Korea's dependence on the Chinese market and lack of comprehensive export controls present a significant loophole. This loophole, fueled by South Korea's key role in the global semiconductor industry, weakens the effectiveness of export restrictions, potentially enabling China to obtain restricted technology through indirect channels. We emphasize the urgency of closing this loophole to ensure the efficacy of global efforts to safeguard advanced technology.
Questions to consider as you read/listen:
What are the implications of South Korea's lack of export controls on advanced semiconductor technology for the global effort to curb China's technological advancement?
How do the competing priorities of South Korea's economic ties with China and its security alliance with the US impact its stance on semiconductor export controls?
What are the potential consequences for South Korean companies and the global semiconductor industry if South Korea adopts stricter export controls on China?
Long format:
 The South Korean Loophole: Is China’s Access to Advanced Technology Wide Open?
Introduction
As global powers increase restrictions on semiconductor and technology exports to safeguard critical advancements from unauthorized access, Japan, the Netherlands, the USA and Taiwan have implemented rigorous export controls aligned with U.S. policies aimed at limiting China’s access to cutting-edge semiconductor technology. However, a significant gap in these measures lies in the lack of similar restrictions in South Korea. Given South Korea’s central role in the semiconductor industry and its proximity to China, this absence of export controls represents a critical vulnerability in the broader strategy to curb China’s acquisition of sensitive technology. Without coordinated measures from South Korea, there exists a substantial risk of these technological safeguards being circumvented, potentially undermining the collective efforts of other nations.
INFORMATION
South Korea is considering export controls on semiconductor technology, in response to the US's request to limit the export of certain equipment and technologies to China:
Equipment and technology
The US is asking South Korea to limit the export of equipment and technologies used to make advanced logic chips and DRAM memory chips. This includes logic chips more advanced than 14-nanometer, and DRAM memory chips beyond 18 nanometer.
The South Korean government is concerned that export control measures on China could negatively impact the competitiveness of the South Korean semiconductor industry.
China is South Korea's biggest trading partner, and South Korea relies on China for trade.
But as of right now, there are no laws or regulations preventing export. It is up to the individual companies. The South Korean government says it is in favor of multi county talks aimed towards export curbs but does not seem to be independently committed to act.
This is a very large loophole for China. If the other countries, namely USA, the Netherlands, Japan and Taiwan are looking for their export controls to be effective rather than just hurt their companies bottom line, South Korean involvement isn’t just preferred. It is necessary.
In October 2023, the South Korean government announced that its semiconductor manufacturers, Samsung and SK Hynix, have secured waivers from U.S. export curbs. The waivers do not have a definite end date.
South Korea is a major player in the global semiconductor industry, with companies like Samsung and SK Hynix operating in China. However, China is South Korea's biggest trading partner, accounting for roughly half of South Korean semiconductor sales. South Korea is also a key ally of the US, and their security alliance is a cornerstone of their relations.
CONCLUSION
The absence of stringent export controls in South Korea creates a large and concerning loophole in the international effort to limit China’s access to advanced semiconductor technology. While Japan, the U.S., the Netherlands and Taiwan have tightened restrictions to protect sensitive technology, South Korea’s openness to China weakens this protective stance, potentially allowing restricted technology to enter the Chinese market through indirect channels. For the global strategy against unauthorized technology transfer to succeed, cohesive export controls from key players like South Korea will be essential. Closing this gap is critical to ensuring the effectiveness of semiconductor and technology curbs in an increasingly competitive and security-conscious global landscape.
Sources:
https://koreapro.org/2024/04/us-reportedly-presses-south-korea-to-tighten-chip-export-controls-on-china/#:~:text=for%20sensitive%20products.-,The%20U.S.%20has%20asked%20South%20Korea%20to%20tighten%20export%20controls,export%20controls%20for%20sensitive%20products
https://www.bloomberg.com/news/articles/2024-03-22/south-korea-targets-multi-country-talks-for-chip-export-controls#:~:text=South%20Korea%20is%20tapping%20into,as%20its%20biggest%20trading%20partner
https://www.japantimes.co.jp/business/2024/09/02/tech/south-korea-us-china-chip/#:~:text=%22The%20bigger%20the%20shock%2C%20the,important%20to%20us%2C%20too.%E2%80%9D
https://qz.com/south-korea-china-chip-exports-us-1851380981#:~:text=Bloomberg%2C%20citing%20unnamed%20sources%20familiar,memory%20chips%20beyond%2018%20nanometer
https://koreapro.org/2024/04/us-reportedly-presses-south-korea-to-tighten-chip-export-controls-on-china/#:~:text=South%20Korean%20officials%20are%20reportedly,export%20controls%20for%20sensitive%20products
https://www.bloomberg.com/news/articles/2024-03-22/south-korea-targets-multi-country-talks-for-chip-export-controls#:~:text=South%20Korea%20is%20tapping%20into,as%20its%20biggest%20trading%20partner

EP64: Balancing Progress and Protection: Japan’s Role in Global Semiconductor Security

Summary:
 Japan has implemented strict export controls on semiconductor technology, specifically targeting advanced manufacturing equipment, in alignment with U.S. efforts to limit China's access to cutting-edge chip technology. These controls involve licensing requirements, expanded restrictions on specific technologies, and streamlined processes for trusted countries. Japan's approach prioritizes national security and responsible technology export while fostering international cooperation to safeguard crucial technological advancements in the semiconductor industry.
Questions to consider as you read/listen:
How does Japan's semiconductor export control policy impact global technology security?
What are the main goals and strategies of Japan's semiconductor export controls?
How does Japan's approach to semiconductor export control align with other countries' policies?
Long format:
 Balancing Progress and Protection: Japan’s Role in Global Semiconductor Security
Introduction
In response to global concerns over technology security and competitive advantage, Japan has implemented a series of export controls for semiconductor technology. These regulations, particularly aimed at advanced semiconductor manufacturing equipment, reflect Japan’s strategic stance on technology exports, especially in alignment with U.S. efforts to limit China’s access to cutting-edge semiconductor processes. Japan’s approach includes a combination of licensing requirements, expanded restrictions, streamlined processes for trusted countries, and enhanced reporting protocols, all designed to safeguard critical technology from reaching unauthorized markets.
INFORMATION
Japan has implemented several export controls for semiconductor technology, including:
Licensing requirements
Japanese suppliers need a license from the Ministry of Economy, Trade and Industry (METI) to export certain semiconductor manufacturing equipment. As of July 23, 2023, Japan requires a license from the Ministry of Economy, Trade and Industry (METI) to export 23 types of advanced semiconductor manufacturing equipment. These include equipment for: Forming circuit patterns, Testing chips, and EUV (extreme ultraviolet) lithography. Put simply, manufacturing equipment required for advanced semiconductors with range of 10 to 14 nanometers and below are subject to export control restrictions.
Expanded restrictions
Japan has expanded export restrictions on technologies such as scanning electron microscopes, gate-all-around transistors, and cryogenic CMOS circuits.
Simpler application process
A simpler application process is available for exports to 42 countries and territories that are part of the Wassenaar Arrangement, including the United States, South Korea, and Taiwan.
General Comprehensive License
A blanket permit called the “General Comprehensive License” is required for exports to a list of countries, including the Netherlands, the United States, Taiwan, India, and Lithuania.
Increased reporting requirements
Suppliers must increase their reporting requirements to METI.
Public consultation
The government holds public consultations to discuss and exchange information with export companies.
Japan's export controls are in line with the US's efforts to limit China's access to key semiconductor processes.
CONCLUSION
Conclusion
Japan’s semiconductor export controls underscore a growing trend among leading economies to protect advanced technologies and strengthen national security interests. Through licensing requirements, extended restrictions, and ongoing public consultations, Japan is reinforcing its commitment to responsible technology exports while fostering cooperation with allied countries. By aligning its regulations with those of the U.S., Japan’s export policy not only aims to control sensitive technology access but also contributes to a broader international framework of technology security in the semiconductor industry.
Sources:
https://www.csis.org/blogs/perspectives-innovation/key-differences-remain-between-us-and-japanese-advanced-semiconductor#:~:text=Exports%20from%20Japan%20are%20subject,for%20certain%20destination/item%20combinations
https://asia.nikkei.com/Business/Tech/Semiconductors/Japan-s-new-chip-equipment-export-rules-take-effect-Sunday
https://langleyesquire.com/analysis-of-japans-export-control-policy/#:~:text=Strengthen%20Catch%20All%20Regulation%20(2)&text=Rather%20than%20just%20having%20export,clearance%20for%20the%20economic%20sector
https://www.engage.hoganlovells.com/knowledgeservices/news/japans-new-chip-equipment-export-rules-take-effect#:~:text=Effective%2023%20July%202023%2C%20Japan's,%2C%20South%20Korea%2C%20and%20Taiwan
https://www.datacenterdynamics.com/en/news/japan-to-expand-export-restrictions-on-semiconductor-and-quantum-computing-technology/#:~:text=Japan%20to%20expand%20export%20restrictions%20on%20semiconductor%20and%20quantum%20computing%20technology,-Updated%20rules%20set&text=The%20Japanese%20government%20has%20announced,using%20to%20improve%20semiconductor%20design.&text=The%20report%20added%20that%20the,%2C%20market%20reports%2C%20and%20more
https://www.trendforce.com/news/2024/04/29/news-strengthening-controls-on-semiconductor-equipment-exports-to-china-japan-reportedly-tightens-export-control-measures-further/#:~:text=Currently%2C%20manufacturing%20equipment%20required%20for,subject%20to%20export%20control%20restrictions

EP63: Protecting Security or Sinking Stocks? The High Stakes of Dutch Export Laws

Summary:
The Netherlands has imposed strict export controls on advanced semiconductor manufacturing equipment, particularly those produced by ASML, to protect national security. These controls require companies to obtain licenses before exporting such equipment outside the European Union. The restrictions have impacted ASML's stock valuation and sparked discussions about potential adjustments to the export laws. The Netherlands aims to balance its commitment to national security with the economic well-being of its high-tech industries.
Questions to consider as you read/listen:
How does the Netherlands' export control policy balance economic growth with national security concerns?
What are the specific types of advanced semiconductor manufacturing equipment subject to Dutch export controls?
What are the potential consequences of the Netherlands' export control policy on the global semiconductor industry?
Long format:
 Protecting Security or Sinking Stocks? The High Stakes of Dutch Export Laws
Introduction:
The Netherlands has established stringent export controls on strategic goods and services, particularly in the high-tech sector, as part of its national security and international policy. Among the most closely monitored items are advanced semiconductor manufacturing technologies, critical for producing cutting-edge microchips used worldwide. These controls reflect the Netherlands’ commitment to balancing economic growth with global security responsibilities, an approach increasingly relevant in today’s geopolitical landscape.
DETAILS 
The Netherlands has export controls on strategic goods and services, including advanced semiconductor manufacturing equipment, to protect national security:
Advanced semiconductor manufacturing equipment
As of September 1, 2023, Dutch companies need a license from the Central Import and Export Office to export certain advanced semiconductor manufacturing equipment outside of the European Union. This includes equipment for atomic layer deposition, lithography, and epitaxial growth, as well as Extreme Ultraviolet (EUV) pellicles and production equipment for EUV pellicles. EUVs are the only equipment in the world that can produce chips under 7nm. ASML is the only company in the world that makes EUVs. Older technology deep ultra violet lithography systems  (DUVs) are made at ASML as well as other countries and companies. But two of the higher end DUVs require export licenses to ship out of the Netherlands. The TWINSCAN NXT:1970i and 1980i DUV immersion lithography systems from ASML require export licenses from the Dutch government. 
Strategic goods and services
The Netherlands has export controls on military goods, dual-use goods, and certain types of software and technical advice. The Netherlands does not issue licenses for the export of these goods if they could contribute to human rights violations, international aggression, or instability.
Principles
The Netherlands' export control policy is based on the principles of prioritizing security interests over economic interests, and not contributing to the development of weapons of mass destruction.
The future of Dutch export controls
October 15, 2024 the ASML earning report was released. The stock tumbled and with it a large amount of the valuation of the company. Many analysts point to these restrictions as the reason   As a result there have been grumblings to revisit the law so that ASML doesn’t crater. 
Conclusion:
The impact of the Netherlands’ export control policies, particularly on semiconductor manufacturing, has drawn considerable attention, especially in light of the recent decline in ASML’s stock valuation. With such significant economic repercussions, discussions are emerging about possible adjustments to these restrictions. As the Netherlands continues to navigate its role in global trade and security, the future of these policies may hinge on balancing the interests of national security with the economic well-being of its high-tech industries.
Sources:
https://sanctionsnews.bakermckenzie.com/the-netherlands-to-introduce-supplemental-export-controls-for-advanced-semiconductor-production-equipment/
https://www.government.nl/topics/export-controls-of-strategic-goods#:~:text=Military%20goods%20(such%20as%20guns,export%20certain%20types%20of%20software
https://www.government.nl/topics/export-controls-of-strategic-goods/export-control-policy-for-strategic-goods
https://www.engage.hoganlovells.com/knowledgeservices/news/new-dutch-export-controls-on-advanced-semiconductor-manufacturing-equipment#:~:text=The%20Netherlands%20made%20use%20of,Associated%20software%20and%20technology
https://globalinvestigationsreview.com/review/the-european-middle-eastern-and-african-investigations-review/2024/article/netherlands-unilateral-export-controls-safeguard-national-security
https://www.twobirds.com/en/insights/2023/netherlands/dutch-national-additional-export-control-measures-for-advanced-semiconductor-manufacturing-equipment#:~:text=Countries&text=From%201%20September%202023%2C%20the,wish%20to%20export%20such%20equipment
https://jordantimes.com/news/business/dutch-match-us-export-curbs-semiconductor-machines#:~:text=%22Thus%2C%20the%20uncontrolled%20export%20of,3%20users%20have%20voted

EP62: The Silicon Gatekeepers: Taiwan’s Technology Defense and Its Global Ripple Effect

Summary:
In this episode we discuss Taiwan’s recent efforts to protect its vital technology sectors, particularly in semiconductors and advanced technologies. Taiwan has implemented stringent export restrictions under its National Security Act, aimed at preventing unauthorized transfer of key technologies, particularly to adversaries like China. We highlight the key role of the National Science and Technology Council (NSTC) and the list of “National Core Key Technologies” (NCKT) in safeguarding crucial innovations. These measures complement similar U.S. initiatives, creating a global defense against potential misuse of these technologies and ensuring a stable global supply chain.
Questions to consider as you read/listen:
1. How does Taiwan’s technology defense strategy impact the global tech landscape?
2. What are the main goals and implications of Taiwan’s “National Core Key Technologies” list?
3. How does the collaboration between Taiwan and the U.S. shape the global tech security landscape?
Long format:
 The Silicon Gatekeepers: Taiwan’s Technology Defense and Its Global Ripple Effect
Today, 4 November 2024 it was announced that Taiwan added 10 new technologies to its growing list of National Core Key Technologies that prohibited from being exported. 
(One sentence thesis: Taiwan’s stringent technology export restrictions complement U.S. efforts by creating a fortified defense around critical innovations, ensuring that essential technologies remain secure from adversarial exploitation and reinforcing global tech security.)
TL/DR:
This paper examines Taiwan’s recent measures to protect its high-value technology sectors, focusing on its National Security Act, the role of the National Science and Technology Council, and the regulated list of “National Core Key Technologies.” (NCKT) These controls target critical areas such as advanced semiconductors, quantum cryptography, and defense tech, with frequent reviews to adapt to evolving threats. Violations carry severe penalties, underscoring Taiwan’s commitment to prevent unauthorized technology transfers. China, as a primary consumer and competitor in these sectors, is directly impacted, while the U.S. and other global allies benefit from Taiwan’s heightened security measures, which help stabilize the tech supply chain and safeguard international economic and security interests. Together, Taiwan’s and the U.S.’s export restrictions create a robust defense against the potential misuse of crucial innovations. I go into a deep dive on Taiwan’s efforts. 
INTRODUCTION 
In recent years, the United States has tightened export restrictions on advanced technologies to curb their potential misuse by adversarial nations, particularly through initiatives led by the Department of Commerce. These restrictions, aimed at safeguarding sensitive technology sectors such as semiconductors, AI, and cybersecurity, have set a new precedent for international tech security. However, Taiwan, a global leader in semiconductor production and advanced tech development, has independently implemented its own stringent measures to protect its national interests and core technologies. Taiwan’s complementary efforts—encompassing the National Security Act, export controls, and designated protection for critical sectors—play a vital role in securing a supply chain that supports industries worldwide. Together, U.S. and Taiwanese policies form a layered defense strategy, protecting cutting-edge innovations from potential exploitation and underscoring the importance of collaboration in technology security. This paper explores Taiwan’s unique role in the global tech landscape and examines why its protections are crucial for both regional stability and international economic security.
1. Taiwan’s National Security Act: Enactment and Purpose
The National Security Act (NSA) of Taiwan was enacted and promulgated on July 1, 1987, with subsequent amendments to address evolving security concerns. Its primary purpose is to ensure national security and maintain societal stability by preventing activities that could compromise the nation’s safety, including espionage, unauthorized disclosure of state secrets, and actions that threaten public order. 
2. Taiwanese National Science and Technology Council
The National Science and Technology Council (NSTC) is Taiwan’s primary agency responsible for formulating and implementing national science and technology policies. Established in July 2022, the NSTC succeeded the Ministry of Science and Technology, aiming to enhance the nation’s technological development and innovation. It focuses on long-term talent cultivation, research development in critical sectors like semiconductors, and fostering international cooperation to strengthen Taiwan’s position in the global technology landscape. 
3. Regulation for the Recognition of National Core Key Technologies
The “Regulation for the Recognition of National Core Key Technologies” is a framework established by the NSTC to identify and protect technologies vital to Taiwan’s national security and industrial competitiveness. Implemented on April 26, 2023, this regulation outlines the criteria and procedures for designating specific technologies as “National Core Key Technologies” (NCKTs), ensuring they receive appropriate protection against unauthorized transfer or exploitation.
4. Covered Technology Sectors
The regulation encompasses several critical technology sectors labelling them as NCKTs, including but not limited to:
Semiconductors: Advanced integrated circuit (IC) manufacturing processes of 14nm and below, along with essential materials and equipment.
Heterogeneous Integration and Packaging: Technologies such as wafer-level packaging and silicon photonics integration.
Information and Communication Security: Chip security, post-quantum cryptography protection, and proactive network defense technologies.
National Defense Technology: Technologies pertinent to national defense applications.
Space Technology: Including satellite launch systems and related technologies.
Agriculture: Advanced agricultural technologies critical to national interests.
5. Review Frequency of the List
The NSTC reexamines the list every three months and considers public comments.
6. Last Revision and Its Outcome
The most recent revision occurred or around 4 November 2024 with adding 10 new key technologies to the list. 
7. Penalties for Violating Export Restrictions
Violations involving the unauthorized transfer or exploitation of National Core Key Technologies are subject to stringent penalties under the amended National Security Act. Individuals found guilty of economic espionage related to these technologies may face imprisonment ranging from 5 to 12 years and fines between NT$5 million and NT$100 million.
8. Implications for China
China has a vested interest in Taiwan’s technological advancements, particularly in sectors like semiconductors, where Taiwan holds a significant global market share. The stringent controls and protective measures implemented by Taiwan aim to prevent unauthorized access and transfer of critical technologies to foreign entities, including China. These measures could limit China’s ability to acquire advanced technologies through non-transparent means, thereby affecting its technological development and strategic objectives.
9. Global Significance, Including for the United States
The protection of Taiwan’s critical technologies has broader implications for the global community, especially for countries like the United States. Taiwan plays a pivotal role in global supply chains, particularly in the semiconductor industry. Ensuring the security and integrity of Taiwan’s technological assets is crucial for maintaining global technological leadership, economic stability, and national security. Collaborative efforts to safeguard these technologies align with international interests in preventing the proliferation of advanced technologies to potentially adversarial nations.
CONCLUSION
Taiwan’s proactive measures to safeguard critical technologies are essential in the collective effort to secure global innovation and stability. By reinforcing export controls that align with U.S. Department of Commerce policies, Taiwan is creating a protective barrier against the unauthorized transfer of high-value technologies to adversarial nations. While these restrictions may impose immediate economic costs on Taiwanese companies by limiting exports to China, the long-term benefits—protecting Taiwan’s tech leadership, preserving U.S. security interests, and ensuring a stable global supply chain—far outweigh these losses. To maintain this delicate balance, it is crucial for the U.S. to continue encouraging Taiwan to not only uphold but expand these protections. Through diplomatic support, joint technology initiatives, and potential compensatory measures, the U.S. can help Taiwan navigate these challenges and foster a resilient alliance that upholds both nations’ technological and security interests amid growing global competition.
Sources:
https://www.leetsai.com/trade-secret/geopolitics-and-legal-risks-introduction-to-the-legal-framework-of-the-national-core-key-technologies
https://www.digitimes.com/news/a20241104PD206/technology-taiwan-design-security-nstc.html
https://www.taipeitimes.com/News/taiwan/archives/2024/11/02/2003826264
https://www.bakermckenzie.com.tw/-/media/minisites/taiwan/news-pdf/2023/20231027-terrence-wang.pdf?rev=d838bb64b1d442f78c0fa1e1c67c934c&sc_lang=ja
https://www.trendforce.com/news/2023/12/06/news-taiwan-lists-22-critical-technologies-to-face-strict-controls-included-14nm-processes-and-beyond/
https://focustaiwan.tw/sci-tech/202312050018
https://www.iam-media.com/article/amended-national-security-act-imposes-stricter-punishments-trade-secret-misappropriation-following-new-list-of-crucial-tech

EP61: The Power of Influence: How China’s United Front Seeks Control Abroad

Summary:
In this episode we examine the Chinese Communist Party's (CCP) United Front Work Department (UFWD), detailing its methods for influencing foreign governments and undermining democracies. The UFWD seeks to advance CCP interests through various tactics, including media manipulation, academic partnerships, economic coercion, and political influence. We compare and contrast the UFWD's approach with Russia's Active Measures campaign, highlighting their similarities in seeking to weaken democracies and their differences in methods and objectives. We stresses the need for democracies to recognize and address the UFWD's influence operations to protect their institutions and societal cohesion.
Questions to consider as you read/listen:
1. How does the Chinese United Front differ from Russian active measures tactics?
2. What are the main targets and tactics of the Chinese United Front’s influence campaign
3. What are the implications of the Chinese United Front for democratic societies and how can they mitigate its influence?
Long format:
The Power of Influence: How China’s United Front Seeks Control Abroad
We all have probably heard of Russia’s Active Measures campaign and tactics but have you heard of the Chinese United Front which is similar but different. This paper introduces the  Chinese United Front to the reader explaining its goals and why the reader should care. 
(One sentence thesis: This paper examines the Chinese Communist Party’s United Front Work Department (UFWD), its global strategies for influence and control, and the urgent need for democracies to understand, monitor, and counteract its tactics to protect social cohesion and institutional integrity.)
TL;DR:
China’s United Front Work Department (UFWD) and Russia’s active measures both seek to undermine democracies by shaping public opinion and leveraging diaspora communities, but they differ in method: Russia’s tactics are aggressive and disruptive, using disinformation and cyber-attacks to create chaos, while China’s UFWD employs a more subtle, long-term approach, embedding influence through economic dependencies, elite relationships, and cultural partnerships. Russia’s goal is often immediate destabilization, whereas China’s is building sustained influence and loyalty abroad, requiring democracies to adopt unique countermeasures for each.
INTRODUCTION 
A report on 4 November 2024 from Radio Free Asia which reads “Evidence is mounting of clandestine Chinese influence operations in the heart of America. Just in the last few months, a former aide to the governor of New York state and her husband were arrested for alleged illicit activities promoting the interests of China; a Chinese democracy activist was arrested and accused of spying for China; and a historian was convicted of being an agent for Beijing.” prompted this deep dive. 
1. What is the Chinese United Front
The United Front Work Department (UFWD) is a core component of the Chinese Communist Party (CCP) tasked with influence and intelligence operations. It works to advance Chinese interests both domestically and internationally through multi-dimensional influence tactics spanning political, social, and economic spheres. Operating in conjunction with China’s Foreign Ministry and intelligence agencies, the UFWD’s approach integrates soft power, coercion, and espionage to foster global conditions favorable to CCP policies.
2. What was its Historical Purpose
Historically, United Front work focused on consolidating domestic support for the CCP by unifying diverse groups within China. The UFWD initially concentrated on managing political dissent and garnering support among minority groups, intellectuals, and the business community. The CCP’s early use of the United Front reflects a domestic strategy designed to bolster internal control and align various social and political entities with CCP goals.
3. What is its Current Purpose
Today, the United Front’s mission has expanded significantly under Xi Jinping to include an international dimension. It is tasked with shaping perceptions, influencing policymakers abroad, and advancing CCP objectives globally. The UFWD’s primary goals include promoting the CCP’s narrative, gathering intelligence, and projecting CCP-friendly perspectives. United Front work is considered essential to achieving China’s “Great Rejuvenation” under the CCP’s ideological vision and is increasingly directed toward supporting China’s economic and geopolitical dominance worldwide.
4. How is it Organized
The UFWD operates under the CCP’s Central Committee, extending its reach through provincial and local United Front offices. This decentralized network coordinates with various government ministries, private entities, and academic institutions aligned with CCP interests. Chinese embassies, consulates, Confucius Institutes, Chinese Students and Scholars Associations (CSSAs), and other overseas Chinese organizations are also embedded in United Front work. This wide-reaching structure reflects the UFWD’s expansive role within the CCP, spanning both domestic and international spheres to facilitate cohesive, multi-layered influence campaigns.
5. What are its Goals Abroad and How Does it Try to Promote its Goals Abroad
Abroad, the United Front aims to reshape international opinion, counter negative perceptions of the CCP, and advance pro-China policies. Its tactics include but are not limited to:
Media Influence: Using Chinese-language media, civic groups, and partnerships to control narratives.
Academic Partnerships: Engaging with Confucius Institutes and CSSAs to shape educational discourse.
Political Influence: Building relationships with foreign political figures and contributing to campaigns.
Economic Coercion: Leveraging economic power to incentivize or pressure foreign entities to support CCP-friendly policies.
Here is a list of organizations per Wikipedia and its sources that are Chinese United Front organizations or influenced:
In 2020, Newsweek identified nearly 600 united front organizations in the United States and 384 in the United Kingdom as of 2023.
Organizations managed by or affiliated with the United Front Work Department: All-China Federation of Industry and Commerce Center for China and Globalization; China Council for the Promotion of Peaceful National Reunification; China News Service; Chinese People's Association for Friendship with Foreign Countries; and Chinese Students and Scholars Association.
Religious organizations formerly managed by the State Administration for Religious Affairs: Buddhist Association of China; Chinese Taoist Association; Islamic Association of China; Three-Self Patriotic Movement; Catholic Patriotic Association; and National Ethnic Affairs Commission.
Other United Front organizations: China Council for the Promotion of International Trade (Ministry of Commerce); China International Culture Exchange Center (Ministry of State Security); and Institute for China-America Studies.
6. What are its Current Targets Abroad
The UFWD specifically targets eleven distinct groups for co-optation and influence, including but not limited to:
Members of China’s eight minor political parties,
Intellectuals and non-CCP elites,
Ethnic minorities,
Private business owners,
PRC nationals abroad,
Overseas Chinese communities,
People from Hong Kong, Macau, and Taiwan,
PRC-returned overseas students,
Private business owners and urban professionals,
Individuals in non-public economic sectors, and
Those who influence public opinion.
7. How Does it Advance its Goal to Seed Discord Abroad and Why is it a Goal of the United Front
The United Front seeks to weaken Western societies by exploiting internal divisions, which it views as a means of reducing these societies’ capacity to counter CCP influence. This strategy, called “sowing discord,” leverages social media campaigns, alliances with fringe political groups, and strategic use of foreign media to amplify divisive narratives. While not as aggressive as similar Russian tactics, CCP efforts focus on undermining societal cohesion in democratic nations, diverting attention from Chinese influence efforts and decreasing resistance to CCP policies.
8. What are its Intellectual Property Theft and Academic Influence Goals and Operations
Academic institutions are a primary target of the UFWD for both influence and intellectual property theft:
Confucius Institutes and CSSAs: Used to influence campus discourse, monitor Chinese students, and promote CCP-aligned views.
Academic Partnerships: Facilitate IP theft through collaborative research, pressuring researchers to share sensitive information.
9. What are its Political Influence and Economic Coercion Goals and Operations
In the political sphere, the UFWD establishes connections with foreign politicians and decision-makers, aiming to create favorable policies or reduce criticism on issues such as human rights. In terms of economic coercion, the UFWD exploits dependencies created by Chinese investments in foreign markets. Businesses with significant Chinese market stakes face pressure to adopt CCP-friendly stances, particularly in sectors where China has made substantial investments. The CCP also recruits elite intermediaries, such as business leaders or former officials, who leverage their positions to advocate for CCP-aligned policies.
10. What are Some Examples of its Influence Operations Outside of China
Recent examples include but are not limited to:
Illegal Chinese Police Stations: A UFWD-linked association in New York City operated a covert Chinese police station, conducting surveillance on Chinese nationals. The FBI raided this station in 2022.
Alliance for China’s Peaceful Reunification: This UFWD-backed organization in the U.S. has organized protests supporting CCP stances, such as the 2023 protests against Taiwanese President Tsai Ing-wen’s U.S. transit.
11. Why Should Chinese Citizens Care About the United Front
For Chinese citizens, United Front work represents a tool of internal repression and control that extends overseas. The UFWD often exerts pressure on Chinese nationals abroad, sometimes threatening family members in China to coerce desired behaviors. This highlights the CCP’s willingness to use Chinese citizens, even those abroad, as instruments of its foreign policy, raising concerns about freedom, privacy, and safety among overseas Chinese communities.
12. Why Should Non-Chinese Care About the United Front
Non-Chinese citizens should be aware of the UFWD because its operations pose a direct challenge to democratic freedoms, national security, and institutional independence. Through covert influence campaigns, economic coercion, and targeted intellectual property theft, the United Front actively undermines the sovereignty of other nations. Recognizing the UFWD’s activities and taking preventative actions are essential steps for protecting democratic institutions and maintaining resilience against authoritarian influence from the CCP.
IN COMPARISON TO RUSSIAN ACTIVE MEASURES TACTICS 
Both China’s United Front Work Department (UFWD) and Russia’s active measures tactics aim to extend influence and shape global perceptions to serve their respective authoritarian regimes, yet they differ significantly in approach, style, and focus.
Similarities:
Goal of Undermining Democracies: Both the UFWD and Russian active measures target democratic countries, seeking to weaken societal cohesion, erode trust in institutions, and foster instability.
Influence Over Diaspora and Foreign Audiences: Each uses cultural organizations, media, and diaspora communities as conduits for influence. Russia’s tactic often involves manipulating Russian-speaking populations abroad, while China’s UFWD focuses heavily on Chinese diaspora communities, leveraging them to project CCP narratives and monitor dissent.
Manipulation of Public Opinion: Both employ propaganda and information manipulation. Russia leverages disinformation and “fake news,” while China’s United Front uses controlled narratives, media partnerships, and academic influence to promote pro-China perspectives and downplay criticism.
Differences:
Degree of Covert Operations: Russia’s active measures are typically more direct and aggressive, using cyber-attacks, disinformation campaigns, and political subversion to rapidly destabilize target countries. In contrast, the UFWD is subtler, using social and academic partnerships, economic influence, and elite co-optation over a longer term to shape perceptions and establish influence.
Sowing Discord vs. Building Dependency: Russia primarily aims to sow chaos and division within societies through polarizing issues like race, immigration, and social inequality. The UFWD, while also seeding discord, focuses more on building long-term economic dependencies and leveraging political and business relationships to secure pro-China policies and silence criticism.
Tactics for Influence Operations: Russia frequently uses “active measures,” including financing opposition movements or hacking political entities, which create immediate impact. In contrast, the UFWD relies on cultivating influencers, building relationships with foreign elites, and embedding influence in academia and businesses, often masking these efforts within cultural and educational exchange programs.
In sum, while both the UFWD and Russian active measures are tools of authoritarian influence, Russia’s approach is often more combative and disruptive, aiming to destabilize, whereas China’s United Front is more nuanced and long-term, seeking to integrate influence subtly and build loyalty within foreign institutions. Together, these distinctions highlight the need for democratic societies to adopt tailored strategies to counter each nation’s unique approach to influence.
OVERALL CONCLUSION 
Understanding China’s United Front Work Department (UFWD) is essential for non-Chinese citizens and countries as its influence strategies pose significant challenges to democratic institutions, social cohesion, and national sovereignty worldwide. The UFWD operates with a multi-faceted approach, embedding influence within political, academic, business, and media environments to further the Chinese Communist Party’s (CCP) objectives. Through targeted influence and often covert coercion, it seeks to shape foreign narratives, deter criticism, and ultimately erode the foundations of open societies.
The UFWD’s “sowing discord” strategy aims to amplify societal divisions in democratic nations, weakening their ability to respond effectively to Chinese influence. By exploiting existing tensions and fostering disunity, the UFWD distracts from its own agenda while weakening the resilience of target nations. Recognizing these tactics and understanding the broader goals of the United Front is vital for developing effective countermeasures.
To protect democratic values and maintain institutional independence, countries must enhance monitoring and transparency efforts within their own borders. Increased vigilance toward foreign influence operations, stricter regulations on political and academic funding, and greater public awareness are all crucial in mitigating the UFWD’s divisive goals. By proactively addressing the CCP’s influence operations, democratic nations can preserve their social cohesion, defend against authoritarian encroachment, and ensure that their policies reflect the will of their citizens rather than the interests of a foreign power.
Sources:
https://selectcommitteeontheccp.house.gov/sites/evo-subsites/selectcommitteeontheccp.house.gov/files/evo-media-document/uf-101-memo-final-pdf-version.pdf
https://securingdemocracy.gmfus.org/wp-content/uploads/2020/04/Friends-and-Enemies-A-Framework-for-Understanding-Chinese-Political-Interference-in-Democratic-Countries.pdf
https://www.uscc.gov/sites/default/files/Research/China%27s%20Overseas%20United%20Front%20Work%20-%20Background%20and%20Implications%20for%20US_final_0.pdf
https://africacenter.org/spotlight/china-united-front-africa/
https://foreignpolicy.com/2023/10/03/china-united-front-ccp-religion-sports-influence-operations/
https://selectcommitteeontheccp.house.gov/media/press-releases/select-committee-unveils-ccp-influence-memo-united-front-101
https://vsquare.org/china-ccp-united-front-influence-hungary/
https://www.aspistrategist.org.au/how-chinas-united-front-system-works-overseas/
https://jamestown.org/program/united-front-work-and-beyond-how-the-chinese-communist-party-penetrates-the-united-states-and-western-societies/
https://2017-2021.state.gov/chinas-coercive-tactics-abroad/

EP60: Is Intel going to be a CHIPS Act success or failure?

Summary:
In this episode, we examine Intel's role in the success of the CHIPS Act, focusing on its acquisition of advanced High NA EUV lithography machines from ASML, which are critical for producing smaller, more powerful microchips.  We highlight the significance of this technology for advancing Moore's Law and its potential impact on various technological fields, including AI, IoT, and robotics. We also explore the financial implications of the CHIPS Act for Intel, noting the significant government funding it has received, and the potential for Intel to succeed in the chip fabrication market where companies like Samsung and TSMC have faced challenges. Ultimately, we suggest that Intel's success in utilizing these advanced machines will be key to determining the ultimate success of the CHIPS Act.
Questions to consider as you read/listen:
1. What are the technological and economic implications of Intel's acquisition of ASML's High NA EUV lithography machines for the future of chip manufacturing?
How does Intel's strategy of both designing and fabricating chips compare to its competitors, and what are the potential consequences of this approach for the industry?
How will the US government's investment in Intel through the CHIPS Act affect the global semiconductor landscape and the future of semiconductor fabrication?
Long format:
 Is Intel going to be a CHIPS Act success or failure?
Without a doubt the Intel story is setting up to be a success story of the CHIPS Act. We are far from unfurling the “Mission Accomplished” sign. To me, the single biggest bit of news in Intel’s favor was someone there developing an amazing relationship with ASML. 
Intel was the first company to buy and assemble one of ASML's High Numerical Aperture (High NA) Extreme Ultraviolet (EUV) lithography machines. The machine is called the TWINSCAN EXE:5000. 
This next-generation lithography system will be key to advancing Moore's Law towards logic well under 2nm technology generation.
What is High NA EUV Lithography?
High NA EUV lithography is the latest advancement in creating smaller and more powerful features on microchips. Like its predecessor, the NXE system, it uses EUV (extreme ultraviolet) light to print tiny patterns on silicon wafers. The new High NA EXE platform allows for an even finer pattern, achieving an 8 nm critical dimension (CD), enabling transistors 1.7 times smaller and increasing transistor density by 2.9 times compared to NXE systems.
Key Innovations in High NA EUV:
1. Enhanced Optics for Better Resolution:
The system’s “NA” (numerical aperture) has been increased from 0.33 to 0.55. This provides better resolution but required larger mirrors. To manage this, the EXE system uses anamorphic optics, shrinking patterns by 4x in one direction and 8x in the other. This innovative design preserves reflectivity, letting chipmakers use standard-sized reticles.
2. Faster Stages for Increased Productivity:
The EXE system has a smaller exposure field, which would normally slow down production, but it compensates with much faster wafer and reticle stages, enabling it to print over 185 wafers per hour. Aiming for 220 wafers per hour by 2025, this speed ensures High NA integration is cost-effective for chipmakers.
3. Simplified Manufacturing for Cost Efficiency:
High NA EUV allows chipmakers to produce tiny features more efficiently, reducing the need for complex, defect-prone production workarounds. This results in faster, more reliable production of advanced chips.
4 Improved Chip Efficiency and Performance:
The EXE system’s 8 nm resolution lets chipmakers fit more transistors on a chip, enhancing functionality and energy efficiency. This advancement will drive next-generation microchips for technologies like AI, IoT, and robotics.
Impact of High NA EUV Lithography:
With the EXE:5000 system, chipmakers can meet consumer demand for smaller, faster, and more efficient electronics. The first EXE:5000 chips will be used in 2 nm Logic chips, setting the stage for cutting-edge technology in various fields.
THE COST TO TAXPAYERS 
And this set up hasn’t been cheap either…
Back in March 2024, the Department of Commerce announced that Intel Corporation will receive $8.5 billion in direct funding from the CHIPS and Science Act, in addition to $11 billion in loans.
I can’t think of a single company in the history of the United States that has received that much in taxpayer money in such a short amount of time. 
It’s an eggs all in one basket approach it seems both for the US government and for the company. 
Interestingly enough, as of October 25, 2024 has received $0 of the US government money. 
<<<<TSMC received $6.6 billion in CHIPs funding, while Samsung rounded out the top three with $6.4 billion from the US government.>>>>
WILL THE STRATEGY WORK?
Recall TSMC is not a chip designer. They are chip fabricators for the chip designers. That distinction and division of purpose is entirely how TSMC came to capture its market share. 
Samsung and Nikon and Rapidus are designers and fabricators. Therefore a lot of designers refused to move their fabrication to Samsung and Nikon and Rapidus because they didn’t want to fuel their chip design competition. This dual purpose company design led to lower market share for them. 
Intel, at least so far, has retained its intent to design and fabricate. We will see what the market will do ultimately with that. Will Intel succeed where Samsung, Nikon and Rapidus did not? Time will tell. 
Sources:
https://www.intel.com/content/www/us/en/newsroom/resources/intel-high-na-euv.html
https://www.datacenterdynamics.com/en/news/intel-acquires-asmls-entire-2024-stock-of-high-na-euv-machines/
https://www.reuters.com/technology/asml-ships-first-high-na-lithography-system-intel-statement-2023-12-21/
https://www.intel.com/content/www/us/en/newsroom/news/us-chips-act-intel-direct-funding.html
https://finance.yahoo.com/news/intel-ceo-frustrated-chips-act-173132913.html
https://www.forbes.com/sites/willyshih/2024/03/20/195-billion-chips-act-package-for-intel-is-a-diversified-bet/
https://www.semiconductors.org/chips-incentives-awards/

EP59: China’s overcapacity problem aka Dumping

Summary:
In this episode, we examine the issue of China's overcapacity problem and its impact on global trade. The problem arises from excessive production in various sectors like steel, cement, and solar panels, leading to low export prices and accusations of dumping by China's trading partners. These low prices threaten the viability of foreign competitors and distort global markets. We analyze the factors contributing to overcapacity, including government subsidies, tax breaks, and strategic policies aimed at promoting domestic industries. They also explore the consequences of China's overcapacity, such as deflationary pressures, trade tensions, and the potential for economic instability. We conclude by discussing the challenges posed by China's overcapacity, emphasizing the importance of maintaining fair trade practices and competitive neutrality in the global economy.
Questions to consider as you read/listen:
1. How has China's overcapacity affected global markets and competition?
2. What are the economic and political implications of China's export practices?
3. How is China's "Made in China 2025" strategy shaping the global economy?
Long format:
 China’s overcapacity problem aka Dumping
TL;DR: China is flooding global markets with artificially dirt-cheap goods in some industries, from steel to solar panels, using aggressive government subsidies and tax rebates as trade tactics that make it difficult or impossible for foreign competitors to compete who don’t have these advantages. Critics decry that China isn’t practicing free trade but rather it’s a means of bankrupting non-Chinese capacity by supplanting competition for long term hopes of driving non-Chinese companies out of business and therefore the only suppliers to survive are Chinese monopolies. The result is eventually we are all at the mercy of Chinese supplies and Chinese prices for these products and goods. Industries in the U.S. and Europe are scrambling to fight back as China’s overproduction, pumped up by billions in subsidies, slashes prices and threatens jobs worldwide. The EU and American politicians are awakening to this. China’s “Made in China 2025” plan? Is it a blueprint for total tech and manufacturing dominance? Are we now or about to be in a trade war fueled by heavy government subsidies to bankrupt foreign competition to gain long term dominance, featuring tactics of forced tech transfers and industrial/commercial espionage, and raw material hoarding, all while the world struggles to keep up playing by rules that China neither accepts or follows? I look at these issues using sources and data. 
WHAT IS OVERCAPACITY 
China's overcapacity problem is the result of high production levels in certain industries, which leads to low prices on exports and can harm foreign competitors. This issue has become a contentious topic in global trade, and the US and European Union have responded with countervailing and antidumping duties.
WHAT OVERPRODUCTION CAN DO
Excess supply can create deflationary pressure in the world market which can lead to lower prices, which can create a cycle of lower wages, lower consumer spending, and even lower prices. Overcapacity can distort global prices and threaten the long-term viability of foreign competitors. Supportive policies can keep firms alive that should have failed under normal market competition (zombie companies). 
DUMPING
People and countries on the receiving end of the subsidized overproduction exports call the practice “dumping”. 
China is accused of “dumping” a variety of products including:
Steel: China exported 90 million tons of steel in 2023, which was a 35% increase from the previous year. In the first nine months of 2024, China's steel exports increased 21.2% year-on-year to 80.7 million tons. The low cost of Chinese steel is driving down domestic steel prices in other countries.
Cement: China's industrial policies have led to overinvestment in production facilities, resulting in a surplus of cement. While not as extreme as the case of Chinese steel, it is growing. China's domestic cement market is struggling due to a real estate bubble that burst in 2021.
Non EV (ICE) cars, diesel powered trucks heavy equipment and New Energy Vehicles (NEVs) (think EVs): The increase in NEV exports, especially in the ASEAN region, crowned China as the top vehicle exporter in the first half of 2023, with 1.07 million sales, leaving Japan behind, which managed only 950,000 vehicle sales. China's construction equipment exports were higher than domestic sales in 2023 for the first time (Zoomlion, Sany Heavy Industry, Xuzhou Construction Machinery Group Co., Ltd). The issues both in Europe and America as far as EV cars has been well documented and covered in the press and therefore will not be further addressed.
Solar panels: China is the world's top exporter of solar panels and modules, and its low manufacturing costs have led to accusations that it's "dumping" solar panels on foreign markets. In 2023, China exported over 212 gigawatts of solar PV modules and 39 gigawatts of solar cells. In 2022, the value of China's solar photovoltaic equipment exports was $52 billion. Thanks in part to government subsidies Chinese companies can manufacture solar panels for around $0.15 per watt, while the average cost for U.S.-made and EU-made solar modules is $0.46 and $0.34 per watt, respectively. To highlight how bad the overproduction is consider China's production capacity is double the global installations, and prices have fallen 42% in 2023. 
Chemicals: Biodiesel In 2024, the EU imposed anti-dumping duties of up to 36.4% on Chinese biodiesel imports due to the influx of cheap Chinese imports. Alkyl phosphate esters (APE) The European Commission initiated an anti-dumping investigation into imports of APE from China in August 2023. The investigation was launched after a complaint from the Union industry of APE. Polyoxymethylene copolymer China launched an anti-dumping probe into imports of this plastic, which is used in electronics and cars.
Lithium batteries: China's production costs for lithium iron phosphate (LFP) prismatic cells have fallen dramatically in 2023. This is due to cost savings in the cathode, especially lithium carbonate.
Dumping is when a company exports goods at a lower price than its domestic price. China's oversupply of goods is due to a number of factors, including factories producing more than the economy can use, a global trade surplus, and slower economic growth.
Undoubtedly a reason for the overproduction is that the Chinese are concerned with high unemployment. Disaffected folks who are unemployed tend to organize into long marches and gatherings that seek regime change. Xi Jinping knows this leading him to pledge to make full employment a “priority goal” and youth employment the “focus of the focus” at the May party meeting.
HOW THE CHINESE GOVERNMENT CREATES DUMPING
The Chinese government subsidizes dumping in a number of ways, including:
Subsidizing companies: The Chinese government heavily subsidizes companies in industries like wind power, rolling stock, and electromobility. Subsidies are often conditional on production within China.
Providing tax breaks: Chinese producers benefit from tax breaks, below-market credits, and below-market equity.
Providing public support: The Chinese government provides public support at almost every stage of production.
Safeguarding raw materials: The Chinese government safeguards critical raw materials. 
Forced technology transfer: The Chinese government forces technology transfer. This comes in the form of forced joint ventures, licensing, industrial espionage or outright demands of surrendering of intellectual property or technical knowledge in order to access the Chinese marketplace. 
Strategic use of public procurement: The Chinese government strategically uses public procurement.
Preferential treatment: The Chinese government gives preferential treatment to domestic firms in administrative procedures.
The Chinese government's subsidies have been shown to promote exports and limit imports. The effects of these subsidies are magnified by supply-chain linkages.
China's "Made in China 2025" strategy is focused on developing the country's own intellectual property and products. China's technology transfer policies have helped the country become a leader in sectors like artificial intelligence and high-speed rail. However, these policies have also contributed to the U.S.-China trade war.
CONCLUSION
In conclusion, China’s overcapacity and subsidy-driven export practices have significant implications for global markets, competition, and economic stability. By bolstering domestic industries with subsidies, tax incentives, and strategic policy measures, China has enabled overproduction across multiple sectors, including steel, cement, vehicles, solar panels, chemicals, and lithium batteries. These practices, often perceived as “dumping,” distort market prices, disrupt foreign industries, and pressure global economies through deflationary trends and the erosion of competitive balance.
Countries impacted by China’s low-cost exports, such as the United States and European Union, have responded with trade remedies like countervailing and antidumping duties to protect domestic industries. However, the issue persists, amplified by China’s focus on self-sufficiency and technological advancement under initiatives like “Made in China 2025.” While this strategy strengthens China’s domestic industrial base and global market presence, it has contributed to rising tensions in international trade relations, as other economies grapple with the effects of cheap Chinese exports and the strategic advantages these policies afford China in high-tech and resource-critical sectors.
As global trade partners address the challenges posed by China’s overcapacity, the balance between fostering fair trade and maintaining competitive neutrality will remain a critical issue, particularly as the world navigates the economic ripple effects of China’s approach to industrial and economic growth.
Sources:
https://www.cnn.com/2024/03/28/business/china-goods-exports-trade/index.html
https://www.oxfordeconomics.com/resource/dumping-key-categories-of-chinese-imports-have-surged-in-europe/
https://www2.deloitte.com/us/en/insights/economy/global-impacts-of-chinese-overcapacity.html#:~:text=Excess%20capacity%20itself%20has%20contributed,spending%2C%20and%20even%20lower%20prices
https://eastasiaforum.org/2024/08/04/if-chinese-industrial-capacity-is-a-problem-the-us-has-better-measures-to-deal-with-it/#:~:text=In%20Brief,unfair%20component%20of%20Chinese%20exports
https://home.treasury.gov/news/press-releases/jy2455#:~:text=Chinese%20production%20is%20also%20less,in%20that%20politically%20important%20sector
https://think.ing.com/articles/chinas-overcapacity-debate-is-a-collision-course-avoidable/#:~:text=%E2%80%9CChina's%20overcapacity%20is%20exporting%20deflation,prevent%20correction%20of%20excess%20production
https://www.reuters.com/breakingviews/chinas-overcapacity-is-here-stay-2024-04-09/#:~:text=There%20are%20signs%20that%20this,inventory%20levels%20have%20also%20risen.&text=That's%20largely%20due%20to%20Beijing's,is%20going%20full%20speed%20ahead
https://www.imf.org/en/Publications/WP/Issues/2024/08/15/Trade-Implications-of-China-s-Subsidies-552506#:~:text=The%20results%20indicate%20that%20the,the%20exports%20of%20downstream%20industries
https://www.wita.org/atp-research/china-foul-play/#:~:text=The%20Chinese%20government%20heavily%20subsidizes,conditional%20on%20production%20in%20China
https://www.intereconomics.eu/contents/year/2024/number/4/article/eu-concerns-about-chinese-subsidies-what-the-evidence-suggests.html#:~:text=Public%20support%20is%20provided%20at,the%20competitiveness%20of%20Chinese%20industries
https://www.cnbc.com/2024/10/25/chinas-steel-exports-face-headwinds-expected-to-drop-in-2025-after-hitting-eight-year-high.html#:~:text=In%20September%2C%20China's%20steel%20exports,the%20customs%20data%20last%20week
https://www.economist.com/business/2024/09/17/chinese-overcapacity-is-crushing-the-global-steel-industry#:~:text=Each%20year%20China%20makes,year%20(see%20chart%201)
https://www.cnbc.com/2024/08/21/the-worlds-largest-steel-industry-is-going-through-a-winter-amid-a-supply-glut-and-weak-demand-.html#:~:text=July%20saw%2057.1%20million%20tons,%25%2C%20according%20to%20BofA's%20statistics
https://oilprice.com/Metals/Commodities/Is-Chinas-Steel-Industry-on-the-Brink-of-a-Major-Crisis.html#:~:text=China's%20direct%20dumping%20of%20steel,driving%20down%20domestic%20steel%20prices
https://www.bloomberg.com/opinion/articles/2024-07-22/end-of-china-s-cement-boom-is-good-for-the-planet#:~:text=David%20Fickling%20is%20a%20Bloomberg,Cracks%20are%20appearing.&text=Imagine%20if%20France%2C%20or%20Taiwan,carbon%20pollution%20of%20nearly%201%25
https://oec.world/en/profile/bilateral-product/cement/reporter/chn#:~:text=Exports%20In%202022%2C%20China%20exported,and%20Japan%20($10.9M)
https://www.reuters.com/business/energy/china-solar-industry-faces-shakeout-rock-bottom-prices-persist-2024-04-03/
https://www.ciphernews.com/articles/chinese-solar-firms-pursue-u-s-europe-markets-despite-obstacles/#:~:text=According%20to%20Wood%20Mackenzie%2C%20the,the%20country's%20signature%20climate%20law
https://www.reuters.com/markets/commodities/china-steers-solar-module-export-stream-towards-asia-2024-02-28/
https://www.statista.com/statistics/1391057/solar-photovoltaic-export-volume-by-component-china/#:~:text=In%202023%2C%20solar%20PV%20module,billion%20U.S.%20dollars%20in%202022
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L_202401064#:~:text=(1)%20On%2011%20August%202023,the%20European%20Union%20(3).
https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/agriculture/081624-eu-imposes-anti-dumping-duties-targeting-cheap-chinese-biodiesel-imports#:~:text=EU%20imposes%20anti%2Ddumping%20duties%20targeting%20cheap%20Chinese%20biodiesel%20imports,-Author%20Kelly%20Norways&text=The%20EU%20has%20pushed%20ahead,to%20an%20influx%20of%20supply
https://www.bbc.com/news/articles/cw004vvkj1xo
https://www.reuters.com/markets/commodities/china-is-oversupplying-lithium-eliminate-rivals-us-official-says-2024-10-08/#:~:text=Along%20with%20neighbouring%20Spain%2C%20the,Sign%20up%20here