The little details make the difference and in this respect the United States scored the first goal of the game. The agreement that ASML had with the Chinese company SMIC had ended on March 2, 2021, where the supply of equipment worth 1.2 billion dollars had been completed. SMIC’s strategy was to acquire equipment and EUV scanners to be able to catch up with the greats in the sector.
The US gets an indirect veto with SMIC through ASML
Although the news is the extended agreement that involves on the one hand ASML and SMIC, the real headline is behind the curtain that nobody sees. And it is that this agreement certifies the cooperation of both companies regarding the supply of tools for deep ultraviolet lithography or DUV scanners, by which the previous agreement that had already expired will be valid until the end of this year.
And is that the previous agreement was valid from March 16, 2020 until March 2, 2021, but as happened last year, the extension is now made until the end of this. It is not something new as such, since the initial agreement was made in 2018 and has been extended, the problem as we say is what is not said about all this.
SMIC will not have EUV equipment in 2021 and possibly not in 2022
Given the agreement and its extension, is China really lagging behind? Not having EUV scanners in the middle of the race to leave wafer dipping behind when all its rivals try to reduce the nanometric scale destroys all the efforts and the gigantic investment of the last 5 years to the ruin.
The problem for China is that only ASML has the necessary technology to create these scanners of such high precision and of course TSMC, Samsung and Intel raffle each unit regardless of the multi-million dollar price of each one of them. At stake is the supremacy of the next 5 years, which are vital given the problems and costs faced by downscaling.
Even Intel is requesting wafer quota from TSMC, Samsung is trying to get more EUV units for its GAA transistors, and the Taiwanese cannot keep up with their customer demand. In short, there is no room for SMIC in ASML’s plans until it can manufacture more scanners in volume and where its main customers already have enough units to alleviate the demand for wafers.
The US is clear that Intel and NVIDIA have to put pressure on the wafer stock, so that the status quo is maintained in the face of the shortage of chips and as the entire industry is lagging, it is more than likely that said shortage will carry over to 2022, leaving SMIC without the precious EUV technology for another year, which represents millions of dollars of losses for the Chinese and also forces them to focus their efforts on less profitable nodes.
A double blow that stops the Asian government’s claims for its Made in China plan in its tracks, where they cannot compete with Europe or the United States, given their dependence on ASML.