On March 7, the United States placed ZTE Corporation and its three affiliates on the sanctions list and imposed restrictions on export measures. The United States intends to cause a devastating blow to ZTE and form a strategic deterrent for the Chinese government and industry to increase the bargaining power. Through the ZTE Incident, CCID think tank IC Research Institute believes that SMIC may be the next target of US sanctions. Sanctions SMIC, the United States can achieve the strategic effect of stifling the Chinese IC industry. In the short term, China The most pressing task is to resolve the issue of ZTE’s sanction as soon as possible. In the long run, strategic risk management must be strengthened. The US approach can be used to strengthen the security compliance review and product safety evaluation of domestic enterprises, and the US’s overall strategic intentions will be continuously studied in depth. To prevent it from happening.
On March 7, 2016, the US Department of Commerce’s Bureau of Industry and Security (BIS) placed ZTE Corporation and its three affiliates on the sanction list on the ground of a violation of U.S. export control regulations, and imposed export restrictions on them. All US suppliers' exports of goods (including equipment and parts) to ZTE must be submitted to the U.S. Department of Commerce in advance for permission. Although the United States temporarily lifted its sanctions on ZTE on March 20, its influence is still fermenting. This move is a severe blow to ZTE. At the same time, it also has a warning effect on our government and industry. We must analyze in depth and strengthen our response.
First, U.S. sanctions will cause devastating blows to ZTE
ZTE Corporation is the fifth largest in the world and the second largest manufacturer of communications equipment in China. Its business covers wireless networks, optical transmission, broadband access, data communications, core networks, and cloud computing mobile terminals, but its main business areas are for overseas chips. The dependence is serious. The details are as follows:
Wireless network products. In terms of baseband chips, ZTE has achieved self-contained support for 2G and 3G baseband chips and digital IF chips, but 4G and above basebands are mainly based on Xilinx or Intel/Altera high-speed FPGA chips; in terms of RF chips, mainly from Skyworks And Qorvo and other companies; In the analog chip, including PLL chip, high-speed ADC / DAC chip, power management chip mainly from TI and other companies.
Optical transmission products. For optical switching chips, ZTE has achieved self-contained support for midrange and low-end wavelength division and SDH chips, but mid- to high-end optical switching and optical multiplexing chips such as 10G/40G/100G are mainly from companies such as Broadcom; optical transceiver modules mainly come from Oclaro. , Acacia and other companies.
Data communications products. In terms of routing and switching chips, ZTE has achieved self-contained support for low-end chips. High-end switch routing chips such as 100G are mainly from Broadcom; Ethernet PHY and high-speed interface chips, all still from Broadcom, LSI (Broadcom/ (acquired by Avago), PMC (acquired by Microsemi) and other companies.
Broadband access products. XPON office and terminal chips, ADSL office and terminal chips, CMTS office and terminal chips, and wireless router chips, all from Broadcom.
Core network products. Media Gateways, Session Controllers, Packet Gateways, Packet Controllers and other products are mainly based on Xilinx or Intel/Altera-based high-speed FPGA chips; user authentication, authorization, billing, operation and maintenance, and management platforms are based on X86 servers. to fulfill.
Mobile phone terminal products. High-end products, the chip mainly comes from Qualcomm (including BB / AP, WiFi / BT / GPS, RF, power management kit), PA chip is mainly from Skyworks and Qorvo; low-end products, the main chip sets come mainly from MTK, Spreadtrum, Lianxin and other companies.
As ZTE's 2015 annual report has not yet been disclosed, according to its 2014 annual report and related data analysis, ZTE’s chip purchases in 2014 were US$5.9 billion, of which US$3.1 billion was purchased from the United States, accounting for 53% of total purchases (see Table 1). From the perspective of external chip suppliers, Broadcom/Avago is ZTE’s largest chip supplier. In 2014, Zhongxing Broadcom/Avago purchased chips totaling US$1.3 billion, which accounted for 22% of its total purchases. Followed by display modules and optical module suppliers; Further followed by SK Hynix, TI, MTK, Skyworks, Xilinx, Spreadtrum, etc. Intel and Qualcomm did not have a large proportion of ZTE's chip procurement.
ZTE’s microelectronics products are still based on ZTE’s internal support at this stage (see Table 2).
In 2014, sales of chips were US$675 million, which accounted for 11% of total ZTE chip purchases. They mainly included wireless baseband and digital IF chips, low-end and medium-end optical communication chips, low- and medium-end routing and switching chips, and 3G data card baseband chips. .
First, U.S. sanctions will cause devastating blows to ZTE. ZTE's entire line of products relies too much on U.S. chip and optical module manufacturers. Even in the areas where ZTE Microelectronics has an advantage, it can only achieve the independent support of main control chips, and the peripheral chips are still subject to control. Before the sanctions were lifted, ZTE and its affiliates could not directly or indirectly purchase US suppliers' products. According to the latest news, all US suppliers basically stopped supplying ZTE, as well as telephone, mail, and on-site technical support. service.
In terms of chip stocking, under normal circumstances, the entire machine manufacturer will prepare its own one-month stock, and its component agencies will prepare one month for stocking. According to the Zhongxing Annual Report, the inventory of raw materials in 2013 and 2014 were 540 million yuan respectively. The U.S. dollar and U.S. $420 million are all about 1/12th of the total chip purchases for the year. This also confirms that ZTE's own chip preparation is only a month or so, plus one month's stock of channel agents. It is estimated that there will only be two ZTEs at most. Monthly chip stocks. Under normal circumstances, delay in the delivery of products in the communications industry is 30%, so if the sanctions cannot be lifted within three months, ZTE will be on the verge of bankruptcy.
Second, the U.S. sanctions will also have a devastating impact on ZTE Microelectronics. Although ZTE Microelectronics is not on the current list of sanctions, its procurement, finance, and legal affairs all comply with the requirements of the Zhongxing company system and will therefore be severely affected. The mainstream chip design EDA tools used by ZTE Microelectronics are all provided by American companies such as Synopsis, Cadence, Mentor, etc. The domestic Huada EDA tool software can only meet some of the single-point requirements. On the other hand, the high-speed logic required for chip logic simulation FPGA chip, also mainly provided by two American companies Xilinx and Intel/Altera. In addition, it can not continue to obtain ARM CPU authorization and technical support. Due to the sanctions, the above basic tools and platforms will be stuck, ZTE Microelectronics will Unable to conduct chip design development.
Second, Why did the United States choose to sanction ZTE?
The United States has an all-round advantage in the field of IT, and has mastered the commanding heights, especially in the field of computer and network communications, including CPUs, GPUs, FPGAs, DSPs, EDA tools, baseband chips, radio frequency chips, high-end switch routing chips, high-speed interface chips, and counts. Modules for chip conversion, power management chips, optical modules, and other core components. It stands to reason that the United States can sanction many of China's technology companies, including Huawei, Lenovo, and other small and medium-sized companies, but ultimately choose to sanction ZTE, which should be a comprehensive trade-off of various factors. result.
First, it has strategic deterrence. ZTE's large-scale enterprises have large international influence. Sanctions against ZTE intentionally formed strategic deterrence for the Chinese government and industry, and also enhanced the bargaining power with the Chinese government.
The second is that it will not 'kill the enemy one thousand, self-harm to 800.' Sanctions ZTE's overall harm to the U.S. chip companies is relatively small, especially to Intel, Qualcomm and the two leading U.S. industry leaders are less harmed. If sanctioned Lenovo, Huawei, will As a result, the performance of leading chip companies in the United States has fallen sharply, which may even cause a large decline in U.S. technology stock prices (Figures 2 and 3).
The fourth is to master ZTE's conclusive evidence of violations. The US Department of Commerce’s Bureau of Industry and Security published on its website evidence of ZTE’s violations, namely a top-secret document and a confidential document within ZTE.
Third, the United States to me the next possible object of sanctions: SMIC
Sanctioned Lenovo, Huawei may have a strong impact on the operating performance of leading chip companies in the United States, but sanctions against other companies in the computer and communications equipment sector will not achieve the corresponding strategic deterrence. In the field of consumer electronics, automotive electronics, industrial control, the United States, Japan and Europe are three-way, with more replaceable chips of the same type, which cannot achieve the effect of sanctions. Therefore, the next US sanctions target is likely to be locked in another core area of advantage—semiconductor equipment, that is, the use of its semiconductor equipment field to the world. The control of the chip manufacturing industry has hit China's chip industry.
Since the launch of the National Outline for the Development of the Integrated Circuit Industry in June 2014, China has established hundreds of billions of integrated circuit investment funds. At the same time, the global IC investment and acquisition activities have become increasingly active and have also aroused the attention of the U.S. government. Jiang Chuangtou’s acquisition of Philips Lumileds Corporation and Ziguang Investment’s acquisition of Micron’s, Western Digital’s obstruction are all signs. From a strategic perspective, the US government does not want to see the rapid rise of the Chinese IC industry.
The Citi think tank believes that SMIC may be the next target of sanctions for the United States. If it can successfully sanction SMIC, the United States will achieve the strategic effect of stifling China's integrated circuit industry, and a large number of national investments will not be able to land (60% of the national funds Mainly to the chip manufacturing field. Prior to SMIC and TSMC's many commercial litigation were heard in the United States, the United States has mastered a large number of relevant evidence that is detrimental to SMIC. This deserves our high vigilance!
Fourth, China's response measures
The U.S. sanctions against ZTE were not an isolated incident. As early as April 2015, the US Department of Commerce banned Intel from selling Xeon CPU chips to four national supercomputer centers in China. At the same time, ZTE is not the last object of sanctions in the United States. Our country must Positive response.
First, it is necessary to solve the current ZTE sanctions issue. It is imperative that ZTE must find the top one in the United States, be familiar with defense lawyers in export control, and organize lobbying groups to lobby for legal evidence for the US Department of Commerce’s Ministry of Industry and Security. Sexual and other suspicious points will be actively appealed. All US component suppliers’ payment swiftly will be frozen immediately. If possible, the existing resources of US companies such as Broadcom can be combined and utilized.
The second is to learn from US practices, strengthen the review of safety compliance with domestic companies, and evaluate product safety. Through civil means for penalties, the implementation of compulsory compliance procedures must be strengthened, and companies should be required to implement and enforce the implementation of specific agencies. In compliance with the compliance procedures stipulated by our laws, to ensure that companies can identify risks in a timely manner and comply with reporting obligations, establish a database of safety and compliance review for domestic and foreign companies. At the same time, we must strengthen product safety evaluation, especially at the level of the bottom chip. Security evaluation, establish a corresponding enterprise product security evaluation database.
The third is to strengthen risk management and conduct continuous in-depth research on the overall strategic intentions of the United States so as to prepare for the rainy day. Analysis and research on industrial trends should be intensified. In particular, research on industrial macro strategies at the national level should be strengthened to clarify the strategic intentions of the United States. Take proactive measures to cope with the risks and minimize the losses. Strengthen the safety protection and risk management of the key enterprises in the industry, especially strengthen the protection of China's enterprises belonging to the next potential target of sanctions in the United States, so as to take preventive measures.