[Apple Shockwave](30) TSMC Traitor Shakes the United States

TSMC Alum Ryang Myeong-sung Breaks Through US Semiconductor Regulations
Success in 7nm Chip Production Saves Declining Chinese Huawei
Also Struck TSMC After Passing Through Samsung and SMIC

Editor's Note[Apple Shockwave] is a content series that examines the upheaval caused by Apple entering the semiconductor market. You might wonder why Apple is involved in semiconductors. Apple is no longer just a company that makes smartphones and computers. After long efforts starting from the late founder Steve Jobs, Apple has designed world-class semiconductors used in mobile devices. If Intel was the leader in the PC era, Apple has become the top predator in the mobile era semiconductor ecosystem. Amid the global semiconductor supply chain crisis and massive investments in semiconductor production facilities, we will carefully examine the upheaval and prospects in the semiconductor market brought about by Apple Silicon to broaden our readers' insight. Apple Shockwave will visit readers every Saturday. After more than 40 installments, it will be published as a book.

"He is a chip wizard with a magical touch. He can turn even mediocre people into champions. He is stubborn, causing conflicts, and often becomes a free agent (FA) in the semiconductor industry again." (Wall Street Journal)

Chinese Huawei, targeted by U.S. semiconductor export restrictions, has unveiled the smartphone 'Mate 60 Pro' using SoCs produced with a 7nm process and 5th generation communication (5G) chips.

This move preempted TSMC and Apple’s launch of the first 3nm process chips in the iPhone 15. It was an event that shook the United States to its core. China is enjoying this situation. The Mate 60 Pro, released to coincide with U.S. Secretary of Commerce Gina Raimondo’s visit to China, was a hidden card demonstrating the strength of China’s semiconductor industry.

The Mate 60 Pro has greatly boosted China’s confidence. The Chinese government is reportedly instructing civil servants and employees of state-owned enterprises not to use iPhones for work purposes. As a result, the stock prices of Apple and TSMC have been under pressure.

Let’s turn back the clock to 2015. At that time, Samsung overtook TSMC by starting the 14nm process, surprising the global semiconductor industry.

Behind these two events stands a semiconductor industry maverick. Liang Mong Son, CEO of China’s SMIC, a foundry company.

The Wall Street Journal described Liang Mong Son as follows:

"He is a chip wizard with a magical touch. He can turn even mediocre people into champions. He is stubborn, causing conflicts, and often becomes a free agent (FA) in the semiconductor industry again."

Liang Mong Son was the figure who frustrated Morris Chang in Apple Shockwave episode 28. Or perhaps Chang owes a debt to Liang Mong Son. Chang played a major role in making TSMC what it is today.

Chinese netizens popularized memes mocking US Secretary of Commerce Gina Raimondo, who visited China around the unveiling of Huawei's Mate 60 Pro smartphone using Chinese-made semiconductors.

Liang Mong Son: Obsession with Semiconductor Integration Wherever He Goes

Revolutionary geniuses in the semiconductor ecosystem have not stayed at just one company. The "Eight Traitors" who left Bell Labs, where the first transistor was born, founded Fairchild, which in turn gave birth to Intel and AMD.

Apple Silicon’s "captain" George Suh is from IBM and Intel. Recently, Jim Keller of Tenstorrent, which received investment from Samsung, has an impressive resume. He has worked at DEC, Broadcom, PA Semi, Apple, AMD, Intel, and Tesla, earning a reputation as a semiconductor industry maverick for decades.

Morris Chang, founder of TSMC and a Texas Instruments (TI) alumnus, poured the technology and network he secured in the U.S. into creating TSMC.

Chang rose as a semiconductor expert at TI, but was it really so? TI’s status in the semiconductor industry sharply declined after the mid-1970s. The germanium transistors and TTL that Chang focused on were relegated from leading roles in the semiconductor market.

Following the IC (integrated circuit) era, new chips began to dominate the world. Intel opened a new era with the 4004 in 1971, 8080 in 1974, and 8086 in 1976, but TI remained stagnant. As the semiconductor business declined, Chang was relegated to a minor role producing calculators and toys at TI. Considering these circumstances, it is hard to call Chang an expert of the microprocessor era. It is understandable that he was pushed out of the U.S. semiconductor industry. Chang’s innovation lies in foreseeing the growth of fabless companies and creating the new foundry industry.

Then who laid the technological foundation for TSMC? A hint can be found in 2003 when TSMC overtook IBM to become the industry leader in the 130nm process. That was Liang Mong Son. Liang and TSMC rejected IBM’s technology provision offer and succeeded in independent development.

The person who developed the semiconductor copper wiring process that replaced aluminum at IBM is Lisa Su, current CEO of AMD. The semiconductor process created by Su was enhanced by TSMC, which employed Liang Mong Son. AMD, once known for the phrase "a real man needs a fab," now entrusts chip manufacturing to TSMC, which advanced Su’s copper process. This is an example of the semiconductor industry’s evolving trends.

After losing the TSMC CEO competition without Chang’s endorsement, Liang Mong Son moved to Samsung and succeeded in the world’s first 14nm semiconductor process in 2015. In 2017, Liang moved to China’s SMIC. This time, he sent a serious warning to the U.S., which had taught him about semiconductors.

Liang Mong Son challenged TSMC and Chang, who were about to deliver a death sentence to Chinese semiconductors in line with U.S. regulations.

Richard Thurston, former legal counsel for TSMC, explained in an interview with WSJ, "He was a very talented scientist and engineer. He had an excellent memory and was systematic."

Liang Mong Son Finds Loopholes in U.S. Regulations

Let’s look at the background of Huawei developing 5G communication chips, which even Apple struggles with, and producing 7nm-class semiconductors without EUV equipment. Since entering the semiconductor industry, Liang Mong Son has devoted himself to advancing fine processes. Morris Chang and TSMC once got distracted by solar power and other ventures, causing conflicts with Liang Mong Son.

Many experts reveal that the key chip used in Huawei's 'Mate60 Pro' smartphone is produced in China. Photo by X

Huawei and SMIC sided with Liang Mong Son and ultimately succeeded. Although some SMIC shareholders once opposed Liang, the rebellion failed.

The chip 'Kirin 9000S' used in the Mate 60 Pro was designed by Huawei’s semiconductor design subsidiary HiSilicon and produced by foundry SMIC. The original plan was production by TSMC. Chang, who also holds U.S. citizenship, complied with U.S. semiconductor export restrictions on China. For Huawei to break through U.S. 5G chip export restrictions and launch a phone capable of ultra-fast 5G communication, there was no choice but to design chips in-house. To extend battery life and improve performance of the Mate 60 Pro, a process below 10nm was necessary.

The 7nm process is generally considered an extension of the 10nm process. Naturally, it requires the extreme ultraviolet (EUV) lithography equipment from Dutch company ASML, which can draw extremely fine circuit lines on wafers. ASML is the exclusive supplier of EUV equipment essential for producing semiconductors below 10nm. The U.S. regulated ASML’s EUV equipment exports to prevent China from producing semiconductors below 14nm.

However, signals that SMIC produced 7nm process chips had already been detected. In July 2022, Canadian analysis firm TechInsights reported that SMIC produced chips for cryptocurrency mining using the 7nm process. At that time, concerns arose in the U.S., but with the Kirin 9000S used in the Mate 60 Pro, those concerns became reality.

Dealer Paytel, founder of semiconductor analysis firm SemiAnalysis, diagnosed that China can produce products below 7nm with the equipment it possesses.

This is because multiple exposures using older deep ultraviolet (DUV) lithography equipment can draw 7nm-class semiconductor circuits. This is the multi-patterning technology also used by TSMC. It is understood that SMIC was able to achieve the 7nm-class process by performing lithography more than four times, as TSMC did in the past.

China has been aggressively purchasing DUV equipment. According to the South China Morning Post (SCMP), between January and July 2023, China imported $2.5 billion worth of ASML’s DUV equipment, a roughly 65% increase compared to the same period last year. At this point, it can be considered stockpiling. Chinese companies had good reasons to gather DUV equipment.

Huawei and SMIC reportedly also purchased used DUV equipment. U.S. regulations only applied to new equipment produced by ASML and Tokyo Electron in Japan. Used equipment was exempt from regulation.

ASML announced that DUV equipment would only be delivered to China until the end of the year, but this is like locking the barn door after the horse has bolted. China had already secured a sufficient amount of DUV equipment. The effectiveness of the regulations is diminishing. If ASML had regulated after-sales services for existing equipment, the situation might have been different, but that too was empty talk.

Although the U.S. was surprised by the progress of Chinese semiconductors despite strong regulations, by now it is clear that the U.S. miscalculated. The regulations that were supposed to be effective did not work on China. The obsession of one semiconductor expert has shaken the U.S.

The relationship between Liang Mong Son and Morris Chang will continue in the next installment.