Chinese ingenuity is tested as semiconductor sanctions bite

At the time of writing, Taiwan’s defence ministry is reporting a record 16 Chinese warships around Taiwanese waters, accompanied by numerous military aircraft. Chinese state media has acknowledged that its navy is “breaking the record for the number of vessels deployed in its drills in the region”, noting that the exercises “likely feature amphibious landing training”.

The supply of advanced semiconductors worldwide is dominated by foundry plants in Taiwan, in particular by the contract manufacturers TSMC and UMC. Concerned by US vulnerability to the concentration of chip manufacturing in Taiwan, the Trump administration underwrote a major TSMC investment in a new fabrication plant in Arizona.

The Biden administration then led last year’s bipartisan “CHIPS and Science Act”, to reinvigorate domestic semiconductor manufacturing and advanced research.

President Biden followed up by imposing stringent export restrictions on American semiconductor technology to China, during President Xi Jinping’s national party congress celebration of a new era of Chinese technology.

US Treasury Secretary Janet Yellen recently visited Beijing, during which she appealed to China not to allow frustration over US technology exports disrupt bilateral relations

The timing appeared intentional, and some in China interpreted the message as “we have it and you do not”. The comprehensive regulations halted exports by American chip sector to China, and barred its citizens and companies from assisting the Chinese semiconductor industry.

Under American pressure, TSMC has stopped producing advanced chips in China. Japan has imposed export controls on Nikon, Tokyo Electron and others. The Dutch government is forbidding ASML – the key worldwide manufacturer of photolithography machines for chip fabrication – to export its high-end systems to China, and likewise to stop maintaining any of its products already operating there.

Beijing has retaliated by restricting exports of both gallium and germanium from next month. It controls about 90 percent of the global gallium market and 70 per cent of the germanium one. Both metals are used widely across the semiconductor industry. Gallium is also a critical component in advanced military radars.

However, the exports are only worth a few hundred million euro per year to China. Rising prices for these metals will encourage renewed mining by other global suppliers.

The very slightest misalignment with a chiplet culminates in an unusable result

Chinese technology firms have been startled by the scope of the new American sanctions, but naturally are innovating. Huawei in particular has been actively researching a novel approach to packaging semiconductor chips since 2021. It was reputedly granted over 900 Chinese patents relating to its “chiplet” technology in 2022.

Others elsewhere, including Sony, AMD and Intel, and silicon valley start-ups such as ZGlue and Eliyan, are also innovating chiplet technology.

In contrast to monolithic chips, chiplets are smaller units stacked together. Different suppliers and different manufacturing technologies can be assembled into a tower of chiplets. Chiplets avoid having to integrate different subsystems with the same manufacturing technology into a monolithic chip.

However the considerable challenge with chiplet technology is to extremely precisely orientate the vertical connections up and down neighbouring chiplets, including connections which pass completely through an intermediary chiplet from the those above and below it. The very slightest misalignment results in an unusable result.

Huawei’s approach is to partially overlap chiplets with respect to each other. This reduces the alignment complexity to wire together the chiplet stack. The larger exposed surface area also assists cooling of the assembly.

ZGlue was founded in 2014 by three engineers with careers at AMD, Intel, Samsung and TSMC. Their innovation is a proprietary layer, with multiple connection pins, sandwiched between each pair of chiplets. Each chiplet is intended to connect with a particular pattern of these pins, but may become slightly misaligned during manufacturing and so incorrectly attach the wrong points. However the ZGlue layer is programmable.

After assembling each chiplet stack, ZGlue’s technology detects which pins have actually been connected, and then by software adjusts the routing within each layer to compensate for any alignment errors. Thus, each chiplet stack need not necessarily be absolutely identically assembled.

ZGlue went into voluntarily bankruptcy in January 2021, at the height of the Covid pandemic and when venture funding in Silicon Valley almost dried up. One early investor was Skywood Capital, a cross-border venture capital firm in Silicon Valley, Beijing and Shanghai. Intriguingly, a Shenzhen-based startup, Chipuller, then purchased the ZGlue portfolio of 28 patents out of bankruptcy.

The timing of the Biden administration’s restrictions appeared intentional, and some in China interpreted the message as “we have it and you do not”

This transaction has recently raised some eyebrows in Washington, including by the powerful Committee on Foreign Investment in the United States (CFIUS), a body which reviews business acquisitions for potential threats to US security. However, since a patent portfolio is not an entire business, the Chipuller IP purchase does not appear to currently fall under CFIUS’s remit.

US Treasury Secretary Janet Yellen recently visited Beijing, during which she appealed to China not to allow frustration over US technology exports disrupt bilateral relations.

Greeting her, Chinese premier Li Qiang poetically referred to a rainbow over the airport when she landed, noting that while there may be wind and rain, there will always be hope in the sky. Perhaps Yellen was charmed, but Li may also have been thinking of the Chinese ingenuity when presented with challenges.