"Stop all cooperation with ZTE, including ongoing, no longer deliver any products to ZTE, nor provide technical support and services to this company."
On April 19, US time, all employees of Silicon Valley Technology Cadence received such an email from management. Cadence is a provider of system design tools, known in the industry as EDA (computeraided design), which develops software tools for designing chips.
On the evening of April 16, the U.S. Department of Commerce announced that because ZTE violated the relevant regulations of the United States, it "prohibited US companies from selling components and technology to Chinese telecom equipment manufacturer ZTE within the next seven years." This "most rigorous sanction ban" of the United States against ZTE took effect on April 15, 2018, U.S. time, until the ban on March 13, 2025, was lifted.
Cadence's suspension of ZTE's cooperation was the tip of the iceberg after the US Commerce Department ban. According to the interface news reporter, many companies in the Bay Area have issued similar internal notices.
Seven days after the ban was announced, Yin Yimin, chairman of ZTE Corporation, stated that in the incident, the United States ignored ZTE's arduous efforts, huge investment, and considerable progress in compliance with export control compliance, as well as the initiative in finding and handling problems. It is unfair and unacceptable that the US Department of Commerce’s Bureau of Industry and Security imposes the most stringent sanctions before the relevant investigation has been concluded.
In reality, this kind of sanctions has already landed, and all Silicon Valley technology companies have begun to implement them.
ZTE without "PlanB"
EDA is an essential production factor for chip production. At present, the two most mature EDA companies in the world are all located in Silicon Valley, including Cadence and Synopsys. Companies with top chip production capabilities such as Apple, Qualcomm, and Intel all need to purchase software and services from these companies. Cadence also set up a 50-person team for Apple.
"Most companies will purchase Cadence and Synopsys services at the same time, and then assess which of their tools work better on which chip, and eventually select one of them." Cadence employee Mike told the interface news reporter.
EDA is a complex system service. "The chip is designed from the beginning to the end and it needs to be designed, integrated with other homes' IP, memory and storage, and integrate the architecture and other processes. For example, simulation, packaging, and finally sent to the forging factory production, the EDA involved in the middle less than 20. "This employee explained that there are many companies that do EDA, but most of them can only provide one or two of them. The only EDA providers that can cover the entire production chain are Cadence and Synopsys.
This is also the reason why all chip makers, including ZTE, can only choose the above two companies. “Providing a single service is generally a small company. Software performance is often better than Cadence and Synopsys. In addition, the interface between more than a dozen tools of the same company is more mature and complete, and the next tool output will not appear. On the situation. But if you spread the twenty steps in the software of more than twenty companies, there will certainly be a lot of dice," Mike explained.
In addition to EDA services, Cadence also provides IP services. IP can be understood as a component on a well-designed chip, such as a mobile phone processor chip, a processor that processes audio signals and processes image signals, a central processing unit for main operations, and various types of A variety of sensors. Even if manufacturers such as Apple are producing chips, these parts are all procurement integration.
Cadence's IP department also received the email from management, but it did not have any impact. When ZTE first encountered a dispute with the United States in 2016, the department had also received a related ban on services.
For Cadence, stopping to provide services to ZTE will not bring negative impact on them because ZTE is not a big customer.
"If it were changed to Huawei, it would be different." Mike said that Cadence has a list of priority customers with more than 80 companies. Huawei Hass entered the list in early 2017 and was only a small customer before.
At present, the reliance of ZTE's chips on the United States mainly consists of three major areas: mobile phones, optical communications, and RUU. The latter two belong to the field of communications.
The threshold in the field of mobile phone chips does not seem high in the industry. "You can refer to Qualcomm's situation. If the threshold is high in this field, Qualcomm will not be as miserable as it is today." A chip developer explained to the interface news.
From the financial report, it is not difficult to see that ZTE’s main revenue comes from the communications sector. ZTE’s revenue in 2017 was 108.82 billion yuan, the operator’s network revenue was 63.8 billion yuan, accounting for 58.62%; the government’s business income was 9.8 billion yuan, accounting for 9%; Consumer business income was 35.2 billion yuan, accounting for 32%.
Comprehensive data shows that in the core components of ZTE's communications equipment, 100% of the base station parts are from American companies, and 65% of ZTE's mobile phones use Qualcomm chips.
The RRU base station chip in the communication field can hardly find a substitute. It requires a chip with high efficiency. The FPGA chip used by ZTE is mainly from Altera and Xilinx in the United States. The more severe situation is that this high-performance chip is basically produced in the United States. Data shows that Altera and Xilinx have occupied more than 90% of the market.
In other words, the United States uses precision razors to "plug in" the heart of ZTE - the chip field. Once the ban is strictly enforced, if Zhongxing sells the only inventory on the hand, it will be unable to survive even if it does not die.
Disrupt 5G R&D Plan
“The 2020 Tokyo Olympics is the key point of 5G technology.†Erica, a R&D staff at a chip R&D center in Silicon Valley, said that in her view, the U.S. move would be able to interrupt ZTE’s and even China’s R&D plans on 5G.
According to Erica's analysis, 2018 is the final stage of 5G R&D. 2019 is an industrialization process that is generally not felt by users, but it will be implemented in the user experience by 2020. ZTE now encounters "black swan" at such an important R&D node and is cut off all technology sources. It is easy to miss the best time for 5G layout. "If the research and development stage starts later than other companies, there is basically no chance."
ZTE has always had a large investment in 5G.
In February 2017, ZTE released a full range of 5G pre-commercial base stations and the first Flexhual 5G bearer solution based on IP+Light. In October of that year, it cooperated with Italy's WindTre and OpenFiber and launched Europe's first 5G pre-commercial network. In December, it launched a 5G core product based on a service architecture.
On April 2, 2018, ZTE stated at the official micro-level: “ZTE and China Mobile Guangdong have successfully opened the first phone based on the 3GPPR15 standard in Guangzhou recently and officially launched an end-to-end 5G commercial system scale outfield site. Further accelerated the 5G commercial process."
"The United States is worried about the 5G of China's communications industry. ZTE is only the first step for the United States." According to Erica, 2G, 3G, and 4G are all leading in the United States. Standards are set by the United States, but 5G will be reversed. It is determined by China. Because there are only four 4G/5G equipment suppliers in the world, Chinese companies Huawei and ZTE occupy two seats.
Many people in the industry also believe that it is Huawei that really scares the United States. "Huawei is more radical than ZTE's investment in 5G," Erica pointed out.
5G's R&D is a technical game process to a certain extent. When technical specifications are finalized, there are roughly three routes that can be selected, but we do not know which of the final technical routes will win. For example, Cisco is betting one of them, and Huawei's approach is to do research and development on all technology routes.
The final technology path will be finalized in June this year.
“No one likes Huawei to invest huge amounts of R&D funds in 5G. There are risks like Cisco's approach. If the bets fail, it means that you will have to relearn and you may miss the 2020 time point,†said Erica.
Shortly before the U.S. Department of Commerce issued a ban on ZTE, the United States Wireless Communications and Internet Association (CTIA) released a report called Raceto5G. The report stated that China is aggressive in its deployment of 5G. If the United States does not publish more "middle band" as soon as possible, China will win 5G competition.
National security has also been one of the reasons why the United States has boycotted Chinese communications equipment. As early as February, FBI Director Christopher Wray once stated to the public: “We are very worried about letting foreign companies enter our communications network, so that our telecommunication infrastructure will be subject to pressure or control from abroad, as well as the risk of malicious tampering or stealing information. At the same time, it provided opportunities for espionage."
In addition to considering national security, it is also a huge market interest - the United States does not want to become the second Japan and Europe.
The loss of wireless leadership in the 3G and 4G sectors has major and long-term negative effects on the telecommunications industry in Japan and Europe. Europe once led the world with 2G speed, while Japan is 3G. In 2010, the United States won 4G competition. Today, the wireless industry in the United States supports more than 4.7 million jobs and contributes 475 billion U.S. dollars annually to the economy.
At present, China is not only a Huawei-like company that maintains a rapid pace of research and development. The country has also provided a huge market space for 5G in its overall strategy, such as the "Belt and Road Initiative."
The “One Belt and One Road†involves half of the population along more than 60 countries and the world. In this regional market, China has an absolute advantage, and the United States does not have such influence.
Jumping out of China's perspective, technical people in Silicon Valley believe that if more than half of the world’s people use 5G, which is standardized by China, it is a handover of leadership in the communications field.
Now, the Sino-U.S. trade war has become the sword of Damocles suspended in China's 5G R&D field.
China relies heavily on the American core
However, it is also difficult for China to get rid of its dependence on American chips. According to data from the General Administration of Customs of China, in 2017, China’s chip imports exceeded US$260.1 billion, making it the world’s largest.
Interface news reporters learned that there are four key nodes in the chip production industry—first, software (EDA tools), second, chip design and packaging and testing (here IP includes intellectual property), and third, chip manufacturing (foundry or This is called a forging factory. The fourth is the basic part of the chip.
At the first key node EDA, Cadence mentioned above, after it stopped delivering products and services to ZTE, ZTE could not find alternative products, which is enough to show that US chips are restrictive for Chinese companies.
In terms of chip manufacturing, the world's largest chip maker is TSMC, and other chip makers are behind many of TSMC.
"Taiwan Semiconductor Manufacturing Co., Ltd. has reached a production level of 7 nanometers, but most of the manufacturers did not even get micron-level things. The size is a hundred times smaller, the single-sided scale is a hundred times worse, the 2D scale is 10,000 times worse, and the 3D scale is even worse. Million times.†A former employee of TSMC revealed to the interface news reporter that the size is directly linked with the performance of the chip.
Fortunately, TSMC, ZTE, and China's mainland have no trade and technical know-how.
In the area of ​​chip design, China has seen Huawei Hass, Spreadtrum, and MediaTek emerge in recent years. These companies can basically achieve chip self-sufficiency in the mobile phone field.
"The lack of Foundry and EDA has made it impossible for China's mainland to develop a completely autonomous chip industry for at least a decade." The industry insiders pointed out that chip manufacturing is a task that requires more efforts. In addition to the above key nodes, there are numerous. Small links require very deep technical accumulation.
"The components needed to convert a digital signal to an analog signal are small, but it's critical that China is currently unable to produce a particularly high-performance part. This market is in Texas Instruments." He pointed out that Texas Instruments can achieve the current The level may come from a 30- to 40-year-old foundation. Most domestic companies that lack such strong technology accumulation mainly target the low-end market. This is also one of the reasons that a widget has very high technical barriers.
China's chip industry wants to be completely autonomous and has a long way to go.
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