Chinese Regime Laying Siege to US Semiconductor Industry

By Frank Fang

At the heart of the modern economy is the semi-conductor, and the United States is the world’s leader in producing the tiny microchips. Now China is seeking by fair means and foul to challenge America’s preeminence.

A courtroom in San Jose, California is the latest battleground in this ongoing industrial war.  On Nov. 30, four former engineers—Liang Chen, Donald Olgado, Hsu Weiyung, and Robert Ewald—at Applied Materials, an American firm that supplies equipment and software for the manufacturing of semiconductor chips, were indicted for stealing chip designs from their company and attempting to use them to set up a Chinese startup that would compete with Applied, according to Bloomberg.

They had downloaded data, including more than 16,000 drawings, from their former company’s internal engineering database. The stolen information also included details about the mass manufacturing of chips for powering flat-screen televisions and smartphones.

They are scheduled to be arraigned on Dec. 15, and if convicted, could face up to 10 years in federal prison.

‘Zero Sum’ Activities

Chips are the component that powers everything from electronic gadgets such as cellphones and computers, to military weapons like ballistic missiles and satellites. The demand for chips with high computing power has only increased with the need to support fast-growing tech industries such as cloud computing and cryptocurrencies like Bitcoin.

These more powerful chips can be made only with advanced semiconductor solutions, which are highly guarded secrets of semiconductor companies such as Intel, IBM, TSMC (Taiwan Semiconductor Manufacturing Company), and Samsung.

The United States President’s Council of Advisors on Science and Technology (PCAST), an advisory group, issued a report entitled “Ensuring Long-Term U.S. Leadership in Semiconductors,” in January, just before then-U.S. President Barack Obama left office.

The report warned of China’s “zero-sum” activities to advance its own semiconductor industry, including stealing intellectual property both “covertly and overtly.” One of the covert techniques is how the Chinese regime subjects U.S. tech companies operating in China to security reviews, which the report says can be used to “gain access to detailed knowledge of semiconductor technologies.”

Another Chinese tactic is forcing the transfer of technology in exchange for access to the Chinese market, according to the report. Last but not the least, the report pointed out Chinese companies, with the state’s funding, colluded to lower the value of companies that they wished to acquire with tactical business decisions, before buying these companies when their stock prices plummeted.

These tactics are part of a long-standing Chinese regime strategy of stealing intellectual property. According to a 2017 report by the Commission on the Theft of American Intellectual Property, China is still the world’s biggest thief of intellectual property, with 87 percent of all counterfeit goods that enter the United States coming from China.


While China currently lags behind the United States and many other countries in manufacturing the more advanced chips—its semiconductor foundries are still one-and-a-half generations behind the most cutting-edge processing technology—the report pointed out that China plans to be at an “advanced world-level [semiconductor capability] in all major segments of the industry by 2030.”

Currently, the country lacks a tier-one semiconductor equipment firm, which means companies that supply equipment directly to equipment manufacturers (OEMs), but it does have a tier-two company (suppliers to tier-one suppliers), called Advanced Micro-Fabrication Equipment (AMEC).

The report failed to mention how AMEC came to rise in the first place. The company’s founder and CEO, Gerald Z. (Zhiyao) Yin, who earned a Ph.D. in physical chemistry from University of California Los Angeles (UCLA), used to be the senior vice president of Applied Materials, in charge of the company’s plasma etching department.

Yin contributed 86 patents while working at Applied, according to a Dec. 6 report by China’s news portal Tencent. He later quit his job and returned to China, taking with him a group of more than 30 senior engineers to establish AMEC. Now, the company’s main products are ion etching machines and MOCVD systems—both devices are essential for chip production.   

According to multiple Chinese media reports, Yin once made the following comment as his reason for returning to China: “I have only studied so far so that one day I might return to my motherland, to allow Chinese chips to have a place in the world.”

Court Battles

AMEC was able to manufacture advanced etching machines as early as 2008, a move that resulted in patent lawsuits from Applied Materials and Lam, a supplier of semiconductor processing equipment headquartered in Fremont, California. According to the online electronics industry magazine, EE Times, in January 2010, AMEC and Applied Materials settled all litigation after Applied filed a lawsuit accusing AMEC of misappropriation of trade secrets. Lam’s case was dismissed.

In January 2011, AMEC scored another court victory, according to the EE Times, when a Chinese court rejected Lam’s appeal of an earlier court decision. Lam had appealed when a lower court dismissed Lam’s patent infringement lawsuit regarding one of AMEC’s etching machines in January 2009. Chinese courts are notorious for protecting Chinese companies.

Today’s chips are getting smaller and smaller in size; one reason for this is the shrinking in size of electronic gadgets, another is the need for greater computing power: small chips come with greater power and efficiency.

In June, IBM, in partnership with Samsung and GlobalFoundries, announced that it had developed a process for building 5-nm chips (nm stands for nanometer, one billionth of a meter). According to IBM, these latest chips will be 40 percent faster than today’s chips. If running at the same speed as today’s chips, it will save 75 percent in power.

Just a few months earlier, in April, AMEC announced its own breakthroughs in the 5-nm chip production process, with plans to roll out a new 5-nm etching tool by the end of this year.

On Dec. 11, AMEC scored another court victory, according to the DigiTimes, a newspaper focused on the IT industry and headquartered in Taipei. A high court in China’s Fujian Province ordered an injunction against a subsidiary of Veeco, a maker of semiconductor process equipment based in New York, operating in Shanghai. The injunction halted the company from importing, manufacturing, and selling three models of its MOCVD sets, thus barring a key product of an AMEC competitor from the Chinese market.

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From The Epoch Times

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