The sale of patents by struggling Silicon Valley business zGlue in 2021 was unremarkable save for one detail: 13 months later, startup Chipuller in southern China’s tech hub Shenzhen acquired the technology zGlue held, which was intended to reduce the time and cost of fabricating chips.
Chipuller invested in “chiplet technology,” a low-cost method of grouping together microscopic semiconductors to create a single, potent brain that can run anything from home appliances to data centres.
The previously unreported technology transfer coincides with a push for chiplet technology in China that began around two years ago, gotten from hundreds of patents in the U.S. and China, as well as dozens of Chinese government procurement documents, research papers and grants, local and central government policy documents, and interviews with Chinese chip executives.
Since the United States denied China access to the cutting-edge equipment and resources required to produce today’s most cutting-edge chips, chiplet technology, according to industry experts, has become even more significant to China and now largely supports the nation’s plans for self-reliance in semiconductor manufacture.
With regard to chiplet technology, Chipuller chairman Yang Meng told reporters that “U.S.-China competition is on the same starting line.” “In other (chip) technologies, China and the United States, Japan, South Korea, and Taiwan are separated by a significant margin.”
Given the limitations on wafer production equipment, Charles Shi, a semiconductor analyst with brokerage Needham, stated that “Chiplets have a very special meaning for China.” To get over those limitations, they can still develop 3D stacking or other chiplet technologies. The big plan, in my opinion, just might pan out.
Beijing is quickly utilizing chiplet technology in fields ranging from artificial intelligence to self-driving vehicles, and companies including tech giant Huawei Technologies and military organizations are investigating its potential applications.
According to an analysis of company announcements, additional significant investments in the region are forthcoming.
ADVANTAGE OF CHINA’S CHIPLET
Advanced packaging is the method used to assemble chiplets, or small chips, which can range in size from a grain of sand to a thumbnail.
In recent years, the global chip industry has adopted this technique more and more as chip production prices skyrocket in the quest to create transistors that are so tiny that they are now measured in the number of atoms.
Chiplets can function as a single brain if they are firmly bonded together, enabling the creation of more powerful computers without reducing transistor size.
Chiplet technology is used by Apple’s premium computer lines as well as the more potent chips from Intel and AMD.
According to Dongguan Securities, China accounts for around a quarter of the world’s semiconductor packaging and testing market.
While some claim that this provides China a competitive edge in utilizing chiplet technology, Chipuller chairman Yang cautioned that the “not a very big” section of China’s packaging business could be deemed advanced.
In the correct circumstances, chiplets customized to requirements can be finished fast, in “three to four months, this is the unique advantage China holds,” according to Yang.
According to import data provided by China’s customs office, Needham’s Shi reported that China’s purchases of chip packing equipment increased to $3.3 billion in 2021 from a previous record of $1.7 billion in 2018, though they decreased to $2.3 billion last year due to the slump in the chip sector.
According to six tenders published over the past three years, state-run and PLA-affiliated laboratories are looking to use chips made using domestic chiplet technology. Since early 2021, research papers on chiplets have been published by researchers of the Chinese military People’s Liberation Army and the universities it runs.
While dozens of smaller businesses have sprung up all around China in recent years to address domestic demand for innovative packaging solutions like chiplets, public documents from the government also indicate millions of dollars worth of funding to researchers who specialize in chiplet technology.
CHIPLETS ON THE TABLE
An examination using the Acclaim IP database from IP management technology company Anaqua revealed that Chinese company Chipuller purchased 28 patents that were either owned by zGlue or created by people whose names are on zGlue’s patents amid rising U.S.-China animosity.
According to documents obtained by reporters and confirmed by Yang, the transaction was made through a two-step transfer, first through a company established in the British Virgin Islands called North Sea Investment Co Ltd.
Patent sales alone would not necessarily grant CFIUS control over the acquisition, according to CFIUS attorneys Laura Black at Akin’s Trade Group, Melissa Mannino at BakerHostetler, and Perry Bechky at Berliner Corcoran & Rowe. It depends on whether the assets purchased represent a U.S. firm.
Representative Mike Gallagher said that the zGlue case illustrates the “urgent need to reform CFIUS.” Gallagher is a powerful legislator whose select committee on China has pushed the Biden administration to adopt harder policies against China.
In a statement sent to me through email, he added that “(People’s Republic of China) entities should not be able to act with impunity to take advantage of struggling U.S. companies to transfer their IP to China.”
In order to assure that the transaction to the North Sea would not violate export restrictions, Chipuller’s Yang said that zGlue’s attorney spoke with CFIUS and the Department of Commerce.
According to a Chipuller spokesman, neither Chipuller nor the potential for a Chinese firm to get the patents were mentioned in these negotiations.
Everything, according to Yang, “was done very transparently and in compliance with (U.S.) law.”
Yang claimed to be a founder of zGlue since he invested in the business in 2015, just after it was founded, and then rose to the positions of chairman and director.
Yang, the company’s main non-U.S. investor, is from China, according to the chairman, and CFIUS visited zGlue offices in 2018 to conduct an enquiry.
Yang stated, “So we have spent a lot of time communicating with CFIUS,” and added that Chipuller does not currently supply the Chinese military or any U.S.-sanctioned organizations.
Not only Chipuller but other companies also use chiplet technology.
The U.S. has placed the Chinese tech and chip design giant Huawei on its most restricted list, and it has been actively filing patents for chiplets.
Shayne Phillips, director of analytics solutions at Anaqua, reports that Huawei published over 900 chiplet-related patent applications and approvals in China last year, up from 30 in 2017.
Huawei opted against commenting.
Over the past two years, corporations throughout China’s IT sector have made over a dozen announcements for new factories or expansions of existing ones, totaling over 40 billion yuan in investment.
They include domestic behemoths JCET Group and TongFu Microelectronics, as well as quickly expanding start-ups like Beijing ESWIN Technology Group which invested 5.5 billion yuan in a plant for a subsidiary that focuses on chiplets and just started functioning in April.
In a May article, the Ministry of Industry and Information Technology of China (MIIT) pushed large Chinese tech companies to partner with domestic packaging enterprises like TongFu to help the country become self-sufficient in computing power.
It read, “Break the siege of my country’s advanced process chips by the United States with Chiplet technology.”
An enquiry for comments was not answered by MIIT.
The chief executive officer of Chipuller, Yang, put it this way: “Chiplet technology is the core driving force for the development of the domestic semiconductor industry,” he said on the business’s official WeChat channel. “It is our duty and mission to return it to China.”
