Goldman Sachs Report: China’s Lithography Technology 20 Years Behind Western Advancements

In a recent report, Goldman Sachs, the renowned investment bank, has made a bold claim about the current state of China’s semiconductor manufacturing capabilities, particularly in the realm of lithography. According to their findings, China’s lithography industry is lagging at least two decades behind the leading technology currently found in the West, notably with the Dutch company ASML, which dominates the market for high-end lithography machines.

Lithography plays a crucial role in semiconductor fabrication as it is the process that transfers intricate chip designs onto silicon wafers. The quality of the lithography machines determines how small and precise the chip’s circuits can be, which directly impacts the performance and power of the final product. With the most advanced semiconductor companies, such as Taiwan’s TSMC, already producing 3-nanometer chips and gearing up to manufacture 2-nanometer variants, the gap between China and the West is becoming more pronounced.

The root cause of this delay, according to Goldman Sachs, lies in the bottleneck caused by the lack of advanced lithography technology in China. China’s domestic manufacturers are currently stuck at the 65-nanometer threshold, far behind ASML’s cutting-edge extreme ultraviolet (EUV) and High-NA EUV scanners. These machines are capable of transferring circuits as small as 3nm and below, a critical capability that powers the current generation of high-performance chips used in everything from smartphones to advanced servers.

The problem is compounded by the fact that the most sophisticated lithography machines, including ASML’s EUV models, rely on critical components that are predominantly sourced from the United States and Europe. This international dependency has become a significant stumbling block for China, especially in light of the ongoing trade restrictions. The US government has imposed strict sanctions that limit Chinese companies like Huawei from acquiring the most advanced semiconductor technologies, including chips made by Taiwan’s TSMC. As a result, Huawei and other Chinese firms are forced to rely on SMIC, China’s largest domestic chipmaker, which faces its own set of limitations, including restrictions on accessing EUV machines.

With these constraints in place, Chinese manufacturers are left producing chips using older technologies like ASML’s deep ultraviolet (DUV) machines. While still capable, these machines are no match for EUV technology when it comes to fabricating cutting-edge, sub-10nm chips. The result is a technological gap that, as Goldman Sachs argues, may take decades to close.

Goldman Sachs’ report sheds light on the immense challenges that China faces in its quest to catch up with Western semiconductor capabilities. It took ASML more than 20 years and $40 billion in research and development to advance from 65nm to below 3nm technology. With the Chinese industry still struggling to match the 65nm standard, it seems unlikely that they will be able to bridge the gap any time soon.

Despite these obstacles, China is not sitting idle. The Chinese government has poured substantial resources into developing its domestic semiconductor industry, but as of now, the prospects of closing the technological gap with the West in the near future remain slim. China’s ambition to become self-sufficient in chip production is being held back by the complexity and cost of advanced lithography technology, which is not only difficult to develop but also requires highly specialized components that are not readily available in China.

In conclusion, Goldman Sachs’ report serves as a stark reminder of the significant technological and geopolitical challenges China faces in the semiconductor race. While China has made impressive strides in areas like electric vehicles and consumer electronics, it remains far behind when it comes to the production of high-end semiconductors. The development of next-generation chips may remain firmly in the hands of Western and Taiwanese companies for the foreseeable future.