Rewind the clock back to 2018, when the China-US trade war broke out.

In April 2018, the United States imposed a product ban on ZTE as a bargaining chip in the trade war negotiations, marking the beginning of the US's control over China's semiconductor industry.

In May 2019: Targeting Huawei and its 70 affiliated companies, the US required American companies or foreign suppliers using US technology not to sell products to Huawei without permission.

In December 2020: Targeting 10 Chinese enterprises including SMIC, the US prohibited American enterprises from selling manufacturing technologies for 10-nanometer and below processes to SMIC.

In August 2022: The US restricted American enterprises from exporting EDA software used for 3-nanometer chips to China and prohibited NVIDIA from exporting high-speed GPUs to China.

In October 2022: American enterprises were prohibited from exporting high-computing-power semiconductor products and equipment to China without permission. It also restricted US citizens and green card holders from assisting in the production or development of chips in China's semiconductor factories.

Even today, as the China-US semiconductor war has entered the deep water area of AI chips, the US export controls to suppress the development of China's semiconductor industry are still being escalated. In the past, the semiconductor industry was a global ecosystem. The completion of a single chip, from raw materials, design, wafer manufacturing to foundry and packaging and testing, etc., often involved the collaboration of different companies around the world.

However, nowadays, every country hopes to have its own ecosystem, and the semiconductor industry is facing a "new fragmentation" model.

From advanced-process AI chips to chips with mature manufacturing processes, the US has frequently taken measures, attempting in all aspects to slow down the development pace of China's semiconductor industry. However, in order to break through the US bans, China has also continuously stepped up the development of its local semiconductor ecosystem. It has to be admitted that under the US sanctions, China indeed cannot obtain some crucial extreme ultraviolet lithography (EUV) technologies. In fact, when there are no other options, there are many innovative ways to approach the capabilities of advanced manufacturing processes... and this is exactly the situation China is currently in. For example, Huawei, together with its partners, has applied for patents involving self-aligned quadruple patterning (SAQP) technology, hoping to produce 5-nanometer advanced-process chips while reducing reliance on lithography machines.

Currently, China has achieved remarkable results in establishing an independent and controllable semiconductor supply chain. Under the US export controls, according to SEMI statistics, although the semiconductor industry was sluggish in 2023, the global wafer factory capacity still grew by 5.5% to 29.6 million wafers per month, and China led this wave of expansion. Data shows that in 2023, the mature manufacturing process capacity of the Chinese mainland accounted for 29% of the global total, ranking first. According to statistics, there are currently 44 wafer factories on the Chinese mainland, including 25 12-inch wafer factories, 4 6-inch factories, and 15 8-inch factories. In addition, there are 22 wafer factories under construction, including 15 12-inch factories and 8 8-inch factories. In the future, manufacturers such as SMIC, NEXchip, Hefei Changxin, and Silan Micro also plan to build 10 wafer factories, including 9 12-inch factories and 1 8-inch factory. Overall, it is expected that by the end of 2024, 32 large wafer factories will be built on the Chinese mainland, and most of them will be for mature manufacturing processes. It is expected that by 2027, the global proportion of the mature manufacturing process capacity of the Chinese mainland will reach 39%.

Some people may also wonder why the whole world is developing advanced manufacturing processes while we are continuously expanding production in mature manufacturing processes.

Because China is the world's largest chip market. In 2023, China's share in the global semiconductor market exceeded 30 percent, becoming the largest single market, with the majority being mature manufacturing processes. The value of China's imported integrated circuits reached $349.4 billion, surpassing the amount of crude oil imports. For the Chinese government, chips are the foundation of new quality productive forces, the "new three" (new energy vehicles, lithium batteries, and photovoltaic products), and the artificial intelligence competition, thus occupying an extremely important position. At present, however, China's domestic chip self-sufficiency rate is not high, and it is necessary to expand production to increase this rate.

On the other hand, as advanced manufacturing processes are restricted by the US, China needs to accumulate experience from mature manufacturing processes and then gradually evolve towards advanced manufacturing processes.

Our company, Hongce Precision, as one of the earliest enterprises in the Chinese mainland, Hong Kong, and Taiwan to achieve mass production of MEMS probe cards, has successfully delivered products to global leading customers such as TSMC and ASE. We are among the very few manufacturers in the world capable of producing cantilever probe cards with a micro-spacing of only 18 micrometers for probe insertion and a high pin count. The production is extremely difficult, and we are also the only domestic enterprise that has independently developed probe card maintenance equipment and successfully delivered it to domestic customers such as Huicheng, V-Test, and Advanced Semiconductor Engineering (ASE) China.

Certainly, with the rapid development of AI (artificial intelligence), the importance of computing power has become increasingly prominent. As a key component providing computing power, AI chips occupy a core position. The CEO of Intel once said that in the next 50 years, chips will replace oil and dominate and reshape global geopolitics.

Although the sanctions have slowed down the development process of China's semiconductor industry, they have also promoted the development of local Chinese enterprises in advanced manufacturing processes and packaging technologies. In the future, I will also share with you more excellent semiconductor companies that we have noticed, their domestic substitution efforts and even their independent innovations in certain manufacturing processes. In fact, when there are no other options, many innovative methods will emerge. All roads lead to Rome. We believe that the future of China's semiconductor industry is promising.