YouTube Transcript: This Company Is China’s Main Bet Against TSMC and Samsung | WSJ | The Wall Street Journal | YouTubeToText
YouTube Transcript: This Company Is China’s Main Bet Against TSMC and Samsung | WSJ
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- [Narrator] In the tech war
between the US and China,
Beijing lags behind on
cutting-edge semiconductors,
the chips that power
everything from smartphones
to artificial intelligence.
- The barrier to entry is really high,
because of the cost involved,
the concentration in the industry,
and also the technical know-how.
- [Narrator] Beijing's largest chip maker,
Semiconductor Manufacturing
International Corporation,
or SMIC, plays a key role in China's push
for chip self-sufficiency,
but faces significant
geopolitical challenges.
In 2020, citing national
security concerns,
the US imposed export
restrictions on the company,
cutting off access to vital
equipment needed to produce
the most advanced chips,
and impacting its ability to close the gap
with its larger rivals.
But US efforts to keep
the company in check
appear to have had the opposite effect.
- There is a growing
awareness in Washington
that there is an unintended consequence
to the export controls.
And this unintended consequence
has been that China's been galvanized
to create its own self-sufficient
semiconductor industry.
- [Narrator] SMIC was founded
in 2000 by Richard Chang,
a Taiwanese-American, and a
veteran of the chip industry.
After studying in the US,
Chang worked for American
semiconductor giant,
Texas Instruments.
Later, he returned to Taiwan,
where he founded Shida Semiconductor,
which he then sold to Taiwan's TSMC,
the world's most valuable
semiconductor company.
Chang then went to China
where he started SMIC.
- Fast forward to today,
it's actually become quite
a juggernaut in the space.
It's a decent chip foundry,
but in terms of the ability
to make advanced chips,
it's been very constrained.
US export controls have made
it really, really difficult,
or impossible to buy the same
sort of chip-making equipment
that allows them to make
advanced chips at scale in bulk,
and at a low cost.
- [Narrator] Despite these difficulties,
analysts believe SMIC is producing chips
that can rival those produced
by advanced factories
in the US and Taiwan, including
seven nanometer chips,
like those found in
Huawei phones last year.
- Many people expected SMIC
to be unable to make these chips,
at least unable to make them
in the quantities Huawei needed
to sell like a high-end smartphone.
- [Narrator] The speed of a chip
is determined by how many
transistors it contains.
The smaller the transistors,
which are measured in nanometers,
the more can be packed onto a
chip, making it more powerful.
- An industry teardown revealed that SMIC
was the maker of these powerful chips
that powered or enabled the smartphone
to offer the intelligent
capability that it did.
So that was really a wake
up call for Washington.
- [Narrator] However,
SMIC still lags behind,
with its two biggest
rivals, Taiwan's TSMC,
and South Korea's Samsung
aiming to produce even
more advanced chips.
- TSMC and Samsung are now
moving on to make five nanometer
and three nanometer chips.
SMIC is only at the point
where they're making
seven nanometer chips,
but in much smaller quantities
and not the commercial quantities
that China really needs.
- [Narrator] But analysts believe
that Beijing's ramp up in production,
a drive to produce chips locally,
and major government investments
will help China catch up.
- At the last installment
of the National Integrated
Circuit Fund was $48 billion.
And that's money that's pumped
in to grow the ecosystem
such as funding talent
development programs,
funding startups in this space,
startups that are working on
areas, not just chip design,
but chip production.
There are also startups
that are working on
making semiconductor
manufacturing equipment
that China is blocked out from.
So all that money is going in,
and it's helping to build a
whole ecosystem domestically
that China can tap into in the future
when it comes to semiconductors and chips.
- [Narrator] In addition, local
companies are also waking up
to the need for China
to be more self-reliant.
- A lot of Chinese companies
also saw the writing on the wall.
So instead of just being a top-down effort
by the Chinese government
to push the localization
of the industry and push
companies to use SMIC,
and not TSMC, Chinese
companies decided that,
maybe we should divvy up
a portion of our orders
and pass it to a local company,
just in case we were cut
off from Taiwanese foundries
like TSMC are cut off
from overseas chip makers.
- [Narrator] After imposing
retaliatory tariffs
on US goods last month,
China also issued new rules on determining
the origin of semiconductor imports.
Some analysts believe this move could give
domestic chip makers like SMIC
an advantage in gaining market
share over its US rivals.
What's more, a recent US
Senate committee hearing
saw top players in the AI industry
speak out on the looming threat
of China's technological advancements.
- As a matter of economic security,
as a matter of national security,
America has to beat China in the AI race.
- China's a really innovative country.
And the fact of the matter
is they're making inroads
in aspects such as EVs,
rechargeable batteries, AI.
It's much more difficult
to make the same strides
very quickly in chips.
That said, the fact that
China has made so much inroads
and so many strides in such short a time
really shows me that China
shouldn't be taken for granted.
And in a couple of years,
could be as formidable as
some of their Western rivals.
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