China's new chip machine is 25 years behind, and still matters
It goes from having no plane to having a propeller plane, while rivals fly jets, and that leap is harder to copy than it looks.
Invest Like the Best with Patrick O'Shaughnessy · Why the Markets Are Pricing AI Wrong | Gavin BakerChina may now be able to build its own advanced chip printing machine, and that matters even if the machine is a generation out of date.
That is the view of Gavin Baker, an investor who follows artificial intelligence hardware closely. Both types of machines at issue print circuits onto silicon wafers using light. The older type, called DUV, uses longer wavelength light. The newer type, called EUV, uses much shorter wavelength light and can print finer, more powerful circuits.
Baker compares the older DUV machine to a propeller plane and the newer EUV machine to a jet engine. Before, he says, China did not have the capability at all and now it allegedly does. He calls that a phase transition, like going from liquid to solid. For a country that sees domestic chip production as vital, that shift from nothing to something is important.
It is still about 25 years behind, roughly equivalent to what ASML, the Dutch company that leads the world in making these machines, could make around 2001. Baker says that gap cannot be closed quickly because progress comes from learning by doing. You cannot accelerate the doing or teleport into the future, he says. "You actually have to go through those learning cycles," Baker says.
Baker thought the stock market reaction to the news was an overreaction. If the advance ever affects ASML orders, it might do so in about five years, he says. Along the way, he says, the market has forgotten about this kind of news, gotten worried about it, and forgotten about it again, multiple times.
There are also reports that an EUV machine was smuggled into China, which would be a remarkable feat of espionage because the machines are enormous. Baker says he does not know if those reports are true, and that you cannot speed up the doing. He adds that China works very hard and sees this as super important, that people in the United States lack clear insight into developments inside China, and that decoupling now feels self reinforcing on each side.
Questions people ask
Why does the wavelength of light matter for chips?
Shorter wavelength light can draw smaller features on silicon. Smaller features mean more transistors fit on each chip, which makes chips faster and more efficient. That is why the shift from DUV to EUV allowed the industry to keep improving leading edge chips.
Why can't China just buy the most advanced machines?
The Netherlands and the United States restrict exports of EUV machines and advanced DUV machines to China. ASML is the only maker of EUV machines, so the controls effectively block China from buying them legally. That is why building a domestic machine would be strategically important for Beijing.
What does learning by doing mean in chip making?
It means yields and quality improve only by running factories over many months and years. Engineers must tune chemicals, masks, software, and maintenance through repeated cycles. Buying or copying a blueprint does not transfer that operating experience.