China's SMIC producing 7nm chips is a breakthrough but experts suggest yields are low due to lacking EUV; SMIC must now decide if it wants to mass produce 7nm
they are using extra exposure to make up for the lack of EUV,” says Douglas Fuller, an expert on the Chinese semiconductor industry. “But it is understood that the yield is terrible.” https://www.ft.com/... @fudaoge : 2/@niubi “The furore over SMIC's progress is quite overblown — they are using extra exposure to make up for the lack of EUV,” says Douglas Fuller... “But it is understood that the yield is terrible.” not a real tech breakthrough if so far far away from commercially viable @jenkspl64 : Terrible yield in production but it is not about profitability, it is all about catching up to TSMC and the West for national pride https://twitter.com/... Murad Ahmed / @muradahmed : And must read commentary by @KathrinHille in @FT on China'a SMIC on whether the latest breakthrough on chips with lead to ramped up production allied to country's strategic goals https://www.ft.com/... @berthofmanecon : Good explainer what the SMIC 7 nanometer breakthrough really meant. First noted by @FuDaoge https://twitter.com/... @berthofmanecon : On SMIC's dilemma—their production process is less efficient—I guess China has little choice but to support it as it has no access to other technologies yet. James Pethokoukis / @jimpethokoukis : “A breakthrough by China's largest chipmaker revealed last month triggered a gasp of surprise among observers outside the industry. ... But how much time and money will SMIC sink into producing its new semiconductor at scale?” https://www.ft.com/...
Context & Ripple Effects
The yield question raised here reframes what looked like a leap: a July teardown had already shown SMIC quietly shipping 7nm silicon and closing on TSMC and Samsung as the world's third-largest foundry per a chip teardown, but Douglas Fuller's read is that the process leans on repeated DUV exposure to substitute for EUV tools ASML has never been allowed to sell into China — workable for demonstration dies, punishing at volume.
The strategic frame matters more than the process node: as @jimpethokoukis's interlocutor notes, this is about catching up to TSMC, not profitability, which fits Beijing's plan-era strategy of making do with constrained toolchains while prioritizing domestic capability.
First-order effects
- Huawei's access to advanced chips now rides on a process with yields Fuller describes as terrible, so every 7nm part costs SMIC far more in scrapped wafers than an equivalent TSMC or Samsung run.
- SMIC faces a binary it did not choose: commit capacity to money-losing 7nm volume to serve Huawei, or hold the line as a capability demonstration while staying commercially focused on mature nodes.
Second-order effects
- If SMIC scales multi-patterned DUV production, its orders for retooled ASML DUV tools and US etch/deposition gear from Applied Materials and Lam Research become the choke point — later reporting confirmed exactly that ASML DUV stack behind the Huawei chip built on ASML's DUV machines, making existing-tool exports the next target for tightening controls.
- TSMC and Samsung can treat SMIC's 7nm as a non-threat at the leading edge, since low-yield DUV patterning cannot compete on cost or density — the competitive pressure lands instead on second-tier Chinese fabless customers priced out of TSMC by geopolitics.
Third-order effects
- The pattern points toward a bifurcated global foundry map: one track where node leadership follows EUV economics, and a subsidized Chinese track where progress is measured in demonstrated capability rather than viable yield — a path whose endpoint is visible in SMIC's later testing of a domestically built DUV machine China's first homegrown deep-ultraviolet lithography tool, aimed at removing the western-tool dependency entirely.
- Sustained state backing decouples SMIC's investment decisions from foundry profitability, meaning export controls that raise its costs slow but do not stop the catch-up — they redirect it toward domestic toolmakers.
The trend: Chinese semiconductor advancement is shifting from chasing commercial node economics to state-funded capability demonstrations, with each western export restriction accelerating the buildout of a parallel domestic toolchain.