Daniel C

Look, a lot is being written about export controls on semiconductor manufacturing equipment (SME) by people who haven't gone deep on the science of immersion lithography or chip supply chains. I'm out with a new report today with @AEI's Julia Torres on this exact question. Here's the deal: Huawei and other Chinese chipmakers spent 2023-2024 importing hundreds of older-generation "deep" ultraviolet lithography machines from the Netherlands that fell below the level of American and Dutch export controls on "extreme" UV. These are the machines needed to "print" circuit patterns onto silicon wafers—the basis of a modern computer chip. We thought controlling high-end printers would be enough to stop China from printing high-end chips. But China has steadily upgraded these "older" lithography machines, effectively jailbreaking them to print more sophisticated logic chips than previously thought possible—by having them run over the same patch of silicon multiple times, a process called "multipatterning." It's a super inefficient process that is causing Huawei to struggle with yield rates—they can't make as many chips as efficiently as TSMC. But the bottom line is this: The hundreds of DUV machines already imported by China are more than capable of (expensively) printing the millions of logic dies Huawei needs to build huge quantities of cutting-edge AI chips. These are the chips that will power China's frontier AI systems in 2027-2028. And, unless we do something about it, these old machines will allow Huawei to print—by our estimate—*millions* of high-end (7nm and better) logic chips in the coming years. That would allow Huawei to actually start competing with U.S. chip giants like NVIDIA and AMD in global markets—threatening our goal of exporting the American AI Stack. Thankfully, lithography machines are hundred-million-dollar pieces of equipment—so large and complex, they need to be shipped in 40+ freight containers and serviced constantly by engineers from the single Dutch company that makes them, because their scanner optics degrade over time, and Chinese engineers are working them round-the-clock. Obviously, Chinese chipmakers know they are vulnerable, so they are working on their own optics and lithography equipment to break free of their dependence on ASML. That's why everyone freaked out in December when @f_potkin reported a lab in Shenzhen made its own DUV prototype. China's eventually going to succeed at building its own lithography industry. But a really easy way to hamstring Huawei and frustrate its logic chip production for several years (right now, during the heat of the AI race) would be to stop these older "DUV" machines from being serviced in China, and to stop selling them new ones. We just need to get the Netherlands on board with blocking older equipment sales and servicing. (Het spijt me, Dutch friends). That's what @RepBaumgartner's MATCH Act does. The @HouseForeign will vote on it Wednesday. aei.org/research-produ…

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