Chiplets become a core element in China's technology self-reliance strategy

The sale of patents from zGlue, a struggling Silicon Valley startup, was unremarkable except for one thing: Its technology, designed to reduce the time and cost of chip manufacturing, appeared in the patent portfolio of Chipuller, a Shenzhen, China, startup, 13 months later.

Alternatives to transistor miniaturization

Chippuller has acquired what is known as chiplet technology — a method of efficiently packaging small groups of semiconductors to form powerful “brains” capable of providing computing power for everything from data centers to smart home devices.

Chiplet is a technology that packages small chips to form a more powerful microprocessor.

“Chiplets are particularly important for China, as they have limited access to advanced wafer fabrication equipment,” said Charles Shi, a chip analyst at Needham. “To overcome these shortages, they can develop alternatives such as 3D stacking or chiplets. This is a great strategy and I think it will work.”

Chiplets consist of microprocessors the size of a grain of sand or larger than a thumb, assembled together through an advanced packaging process. In recent years, the global chip industry has turned to this technology to cope with rising manufacturing costs as the race to shrink transistors to the size of atoms has reached.

Tightly interconnecting chiplets allows for more powerful systems without reducing the size of transistors, as the chips can function as a single processor. Apple's high-end computers also use chiplet technology, as do the super-powerful chips from Intel and AMD.

The technology transfer deal between zGlue and Chipuller coincides with China's push to promote chiplet technology in the mainland, according to a Reuters analysis of hundreds of patents in the United States and China, as well as dozens of procurement, research and subsidy documents from Beijing.

“The US-China competition is just at its beginning stage. In other chip technologies, there is a big gap between China and the US, Japan, South Korea and Taiwan,” said Chippuller chairman Yang Meng.

Chiplet technology has become even more important to Beijing since Washington imposed restrictions on exports of advanced machinery and materials needed in the production of cutting-edge semiconductors, industry experts say.

Core driving force of semiconductor industry development

Barely mentioned before 2021, chiplets have appeared more frequently in Chinese official statements in recent years. At least 20 policy documents from local to central governments mention the technology as part of a broader strategy to increase China’s self-sufficiency in “critical and cutting-edge technologies.”

According to Dongguan Securities, about a quarter of the global chip packaging and testing market is in China. Some say this gives the mainland an advantage in leveraging chiplet technology, but Yang at Chipuller says the proportion of packaging considered advanced by domestic companies is “not very large.”

Under the right conditions, a custom-tailored chiplet could be completed in “three to four months.”

The chiplet is manufactured by zGlue, which has licensed the technology to Shenzhen-based Chipuller.

According to official import data from China's customs, China's purchases of chip packaging equipment jumped to $3.3 billion in 2021 from $1.7 billion in 2018. In 2022, the figure dropped to just $2.3 billion due to the semiconductor market downturn.

In early 2021, research papers on chiplets began to appear from researchers in the People's Liberation Army (PLA) and universities under the Ministry of National Defense . In the past three years, state and PLA laboratories have conducted six production trials using this packaging technology.

Numerous public government documents also show multimillion-dollar subsidies for research into chiplet technology, and dozens of startups have sprung up across China in recent years to meet domestic demand for advanced packaging solutions.

“Chiplet technology is the core driving force for the development of the domestic semiconductor industry,” Chippuler Chairman Yang said on the company’s official WeChat channel. “It is our mission and duty to bring it back to China.”

(According to Reuters)

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