Chinese Chip Gear Leader Achieves Key Breakthrough, Backer Says

(Bloomberg) -- Shanghai Micro Electronics Equipment Group Company achieved a technological breakthrough in chipmaking gear, a major state-backed shareholder declared, suggesting the US-blacklisted firm has made advances in China’s fight to overcome US chip sanctions.

Known as SMEE, the company developed a lithography machine that can be used to make 28-nanometer chips, Zhangjiang Group said in a post on WeChat on Tuesday. Zhangjiang is the parent of listed Shanghai Zhangjiang Hi-Tech Park Development Company, which is SMEE’s fourth largest shareholder, according to data provider Tianyancha. 

Zhangjiang stock surged as much as 8%, before the state-backed firm later amended that post to remove references to 28nm. Instead, the post now reads simply that SMEE is committed to building advanced lithography machines. 

The Biden administration is leading a multilateral campaign to undermine China’s efforts to become self-sufficient in semiconductors and chipmaking tech, including lithography. SMEE is regarded by experts as China’s best hope to contend with ASML Holding, which has a monopoly on the cutting-edge extreme ultraviolet lithography systems required to make advanced semiconductors. 

The US Department of Commerce blacklisted SMEE late last year after American officials ramped up efforts to thwart Beijing’s attempt to build a world-class chip industry. ASML has not been able to provide China with its EUV machines as Dutch officials would not give the company licenses to do so, under pressure from the US. A SMEE representative who answered a call to its general number on Wednesday said the company has no additional information to offer.

While 28nm chips first became available in 2011, SMEE’s latest achievement means China may have reduced the gap with the field’s leader by several years. Previously, China’s own lithography technology had lagged the Dutch company’s by about 20 years. Though more mature, 28nm chips are also still essential for a plethora of products including smartphones and electric vehicles. 

US and European officials have also become increasingly concerned about China’s accelerated push into the production of older-generation semiconductors and are debating new strategies to contain the country’s expansion.