Robert Maire President Semiconductor Advisors...

RobertMairePresidentSemiconductorAdvisorsLLC

SemiconductorAdvisorsLLC

¡  ChinaInvestments&AspirationsintheSemiconductorIndustry¡  Regulatoryissues-CFIUS¡  Currentadministrationpolicy&direction¡  Taiwan–TSMCandthesemiconductorindustry¡  Tradesecrets,espionage,IPprotection¡  The“DoubleEdgeSword”

SemiconductorAdvisorsLLC

¡  BroadcomacquisitionofQualcomm-Blocked¡  ChinesehandsetmakerZTEbannedfrombuyingUSsemiconductors

¡  LatticeacquisitionbyCanyonBridge–Blocked¡  XcerraacquisitionbyHubeiXinyan–Blocked¡  Aixtron(AGermancompany)acquisitionbyGrandChip–Blocked¡  FoxconntriedtobuyToshiba’sChipbusiness¡  Barrons–“ChipsLoomasaTargetifChinaTradeDisputeExpands”¡  Semiwatch–USSemiequipmentsalestoChinablocked(Aprilfoolsornot)

SemiconductorAdvisorsLLC

¡  Chinaconsumesmorethan60%ofchipsyetproduceslessthan15%

¡  Onefundof$21B–Totalfundsofover$100B§  NationalIntegratedCircuitryInvestmentFund

¡  Goal-TosupplythemajorityofChipsconsumedbyChineseElectronics

¡  TobecomeindependentoftheUSandothercountries§  ConcernsaboutUSleverageoverChinaChipshasskyrocketed§  PresidentXihasdirectlyaddressedtheissue

¡  TobetheleaderinAI,VR&5Getc;Semiconductorsarecrucialingredient

¡  Toincrease&dominateintelligence&defensetechnology§  Largestvideosurveillancesystemintheworld

SemiconductorAdvisorsLLC

SemiconductorAdvisorsLLC

SemiconductorAdvisorsLLC

SemiconductorAdvisorsLLC

¡  Tradehasemergedasthenumberoneinternationalissue(Afterthewall….)

¡  Chinaisatthetopofthelistoftradecomplaints¡  Sanctionsandtariffshavebeenfastandfurious¡  TitforTatincreaseshavebeengoingon-escalatingtensions¡  Chinacan’trespond100%totariffsduetomassivetradeimbalance

§  ChinadidrespondbyblockingQualcommacquisitionofNXP§  ThistriestoreduceUSdominancein5Gtechnology

¡  Thecurrenttradeissuere-doublesChina’sefforttobecomechipindependent

¡  China’sconcernsaboutsemiconductorsareequalpartsstrategic&economic

SemiconductorAdvisorsLLC

¡  Taiwanisviewedasa“Run–Away”provinceofChina§  Seerecentairlinelabelingissue

¡  Re-unificationisviewedasinevitable–PRCsaysbyforceifneeded¡  In1996,whenChinawasshootingmissilesoverTaiwan,wewroteanarticleabouttheimportanceofTaiwantothePCindustry(atthattimethecoreofalltech)asitproduced100%ofallmotherboards

¡  GetTaiwanandyougetTSMC¡  GetTSMCandyoubecomenumberoneinfoundry¡  GetTSMC&youhaveleverageoverApple,Qualcomm&UScompanies

SemiconductorAdvisorsLLC

¡  SMIC,China’slargestfoundryandmostadvancedwasprohibitedfrombuyingthelatestgenerationofUSsemiconductorequipmenttoolsastheUSdefensedepartmentwasconcernedaboutSMICasadualusefacility(commercial&military).ThispermanentlykeptSMICatthetrailingedge.

¡  TheUSdepartmentofdefensehadtheabilitytodo”inspections”onsiteinChina,atSMICtoinsurecompliance

¡  HowwouldpeopleintheUSfeeliftheChinesecould“inspect”Intel’sfabs?

¡  Theconcernoverselfsufficiencyinsemiconductorsislikelyjustified

SemiconductorAdvisorsLLC

SemiconductorAdvisorsLLC

¡  TherehasbeenlongstandingconcernsaboutKoreancopiesofUStools

¡  SamsunghasfosteredlocalcompetitorstoUScompanieswithsimilartools

¡  IssueswillbemanytimesworseinChinaasittriestorapidlygrow¡  Veeco&AMECisthetextbookexampleofwhatwillhappeninChina

§  VeecosoldMOCVDtoolsprimarilytoChinesecustomers§  AMECcopiedsomeaspectsofthetool&Veecosued,haltingsales§  AMECcountersued,stoppedVeeco&ChinesecourtssupportedAMEC§  Veecoisina“nowin”situation&willloseitsbiggestmarket

¡  TheUSslowingtechnologysalestoChinawillresultintheaccelerationofIPtheft,muchworsethanexperiencedinanyothermarket

SemiconductorAdvisorsLLC

¡  SamuelSlater,“thefatheroftheAmericanindustrialrevolution”copiedBritishcottonmillsandstartedtheUSindustrialrevolutiononcopiedBritishtechnology

¡ Wascalled“SlatertheTraitor”

SemiconductorAdvisorsLLC

¡  HeadedbytheUSTreasurysecretary¡  Representativesfrom16agencies–Defense,Commerce,State,Homeland

¡  EstablishedbyPresidentFordin1975¡  Reviewfor30daysormore-Canaskfor“resolutions”toissues¡  SendsrecommendationtoPresidentforfinalyeaornay

SemiconductorAdvisorsLLC

¡ WascreatedduringtheCarteradministrationtodealwiththeIranianhostagesituation

¡  TheIEEPAauthorizesthepresidenttodeclaretheexistenceofan"unusualandextraordinarythreat...tothenationalsecurity,foreignpolicy,oreconomyoftheUnitedStates"thatoriginates"inwholeorsubstantialpartoutsidetheUnitedStates."Itfurtherauthorizesthepresident,aftersuchadeclaration,toblocktransactionsandfreezeassetstodealwiththethreat.IntheeventofanactualattackontheUnitedStates,thepresidentcanalsoconfiscatepropertyconnectedwithacountry,group,orpersonthataidedintheattack

¡  TheIEEPAcanbeusedtoblockthesaleoftechnology

¡  ZTEcomponentsaleswereblockedbythecommercedepartmentafterZTEviolatedtradesanctionsonIranandNorthKoreaaswellasallegationsoftrojanhorsesoftware

SemiconductorAdvisorsLLC

¡  AftermakingZTEtheposterchildasa“badactor”Chinesecompany,theadministrationhasdonea180,“tosaveChinesejobs”andwillapparentlynullifytheblockadeofchipsales

¡  UScompaniesprovideapproximately60%bydollarvolumeofsemiconductorcontentintheirlatestphones

¡ MostUScompaniesandagenciesstillwillnotselloruseZTEphones

SemiconductorAdvisorsLLC

¡  Googlehasbeenfrustrated¡  Uberhasbeenshutoutandgaveupandsoldout¡  AppleisbeingforcedtogiveupIPandcontrol¡  IntelbuiltafabinChinaasa“QuidproQuo”¡  UScompaniescan’towna51%stakeinoperationsinChina¡  Chinahassomeofthestrongestprotectionistpoliciesandlegislation

¡  Report:“MadeinChina2025”byUSChamberofCommerce

SemiconductorAdvisorsLLC

¡  SemiconductorandsemiconductorequipmentmakerscanillaffordtoignoreorstayoutoftheChinamarket

¡  OneoutofthreeIphonessoldareinChina¡  LastyearChinawas20%ofApplerevenueat$45B¡  65%ofQualcommsbusinesswasChina¡  Chinawas23%ofIntelsbusiness¡ MostoftheupsideinthesemiconductorequipmentindustryisthebuildupofdomesticfabcapacityinChina

SemiconductorAdvisorsLLC

SemiconductorAdvisorsLLC

SemiconductorAdvisorsLLC

¡  BoththeLEDandsolarpanelindustriesweredestroyedbyChina’sentranceintotherespectivemarkets.

¡  Thesemiconductormarketissignificantlydifferentasmostlogicsemiconductordevicesarenot“commodities”likeLED&solarpanels

¡  ThebiggerriskistothememorymarketofbothNANDandDRAM,whicharecommoditiesmuchlikeLED&solar

¡  ItismoredifficultforChinatorun“ataloss”inmemorygiventheveryhighcapitalcostsascomparedtolowcapitalcostsforsolarandLED§  $50Mversus$7B

SemiconductorAdvisorsLLC

¡  MuchlikeJapan,Taiwan&Koreabeforethem,Chinaenteringthesemiconductorindustryisanormalprogressionofmodernization

¡  TheUSwillalsoneedalternativesupplierslikeMicron&GloFo¡  TheUScanparticipateandprofitinChina–Ahuuuugemarket¡  Everyonemustparticipatewitheyeswideopentorisks¡  TheUSgovernmentcanhelpleveltheplayingfieldoftrade&IPconcerns

¡  ChinawilllikelybefasterthanJapan,KoreaorTaiwaninbuildup¡  USmustpromote&protect&investinnewtech–AI,VR,IOTetc;¡  Chinaremainsaverysharpdoubleedgeswordthatcutsbothways

SemiconductorAdvisorsLLC

¡  Q&A

SemiconductorAdvisorsLLC