CHINA- The sale of zGlue’s patents in 2021 may have seemed ordinary, but it had one notable aspect: The technology it possessed, which aimed to reduce the time and cost of chip production, surfaced in the patent portfolio of a Chinese startup called Chipuller just 13 months later. Chipuller acquired chiplet technology, a cost-effective method of packaging multiple small semiconductors together to create a powerful unit capable of powering a range of devices, from data centers to household gadgets.
This transfer of technology, previously unreported, aligns with China’s push for chiplet technology that began approximately two years ago. A Reuters analysis of numerous patents in the United States and China, along with Chinese government procurement documents, research papers, grants, and interviews with Chinese chip executives, indicates that chiplet technology has gained increasing importance in China. It has become a critical component of the country’s plans for self-reliance in semiconductor manufacturing, especially after being barred from accessing advanced machines and materials required for cutting-edge chip production.
“U.S.-China competition is on the same starting line,” said Yang Meng, the chairman of Chipuller, in an interview with Reuters.
While chiplets were scarcely mentioned before 2021, Chinese authorities have recently emphasized their significance. Over 20 policy documents from local to central governments refer to chiplets as part of a broader strategy to enhance China’s capabilities in “key and cutting-edge technologies.”
This is particularly crucial for China due to restrictions on wafer fabrication equipment, making chiplet technology a viable workaround. Beijing is rapidly utilizing chiplet technology in various applications, including artificial intelligence and self-driving cars. Tech giant Huawei Technologies and military institutions are among the entities exploring its use.
The advantage of chiplets lies in their packaging technique, where small chips are bonded together in a process known as advanced packaging. The global chip industry has increasingly embraced this technology in recent years as the cost of chip manufacturing soars and manufacturers strive to make transistors smaller than ever before, now measured in the number of atoms. By tightly bonding chiplets, more powerful systems can be created without reducing the transistor size, as multiple chips can function collectively.
“In other (chip technologies), there is a sizable gap between China and the United States, Japan, South Korea, Taiwan.”
Notable players like Apple, Intel, and AMD already employ chiplet technology in their high-end computer lines. According to Dongguan Securities, approximately 25% of the global chip packaging and testing market is based in China. However, Chipuller’s chairman Yang cautioned that the proportion of China’s advanced packaging industry is relatively small.
Nevertheless, chiplets offer China an advantage if personalized according to customer needs. Yang stated that under favorable conditions, chiplets could be completed quickly, within three to four months, giving China a unique advantage. Import data from China’s customs agency reveals a significant increase in chip packaging equipment purchases, reaching $3.3 billion in 2021, compared to $1.7 billion in 2018. Although the figure dropped to $2.3 billion last year due to the chip market downturn.
Chinese military institutions, universities, and state-run laboratories have shown interest in chips made using domestic chiplet technology, as evidenced by research papers and tenders published over the past three years. The government has also provided substantial grants to researchers specializing in chiplet technology, while numerous smaller companies have emerged in China to meet the growing demand for advanced packaging solutions.
Amid escalating tensions between the U.S. and China, the acquisition of zGlue’s patents by Chipuller attracted attention. According to an analysis using IP management technology firm Anaqua’s Acclaim IP database, Chipuller acquired 28 patents from zGlue or inventors associated with zGlue’s patents. The transaction took place through a two-step transfer involving North Sea Investment Co Ltd, registered in the British Virgin Islands.
The Committee on Foreign Investment in the United States (CFIUS), responsible for reviewing transactions for potential threats to U.S. security, did not comment on whether the sales required their approval.
Representative Mike Gallagher, an influential lawmaker, highlighted the need to reform CFIUS, stating that PRC entities should not exploit distressed U.S. firms to transfer intellectual property to China. Chipuller’s chairman, Yang, stated that the sale was conducted transparently and in accordance with U.S. law, emphasizing that the discussions with CFIUS and the Department of Commerce did not mention Chipuller or the possibility of a Chinese entity acquiring the patents.
Chipuller is not the sole company involved in chiplet technology. Huawei, despite being on the U.S.’s most restricted list, has actively filed chiplet-related patents. The company published over 900 such patents in China last year, a substantial increase from 30 in 2017. Other Chinese companies in the tech sector have also announced new factories or expansions, representing a total investment of over 40 billion yuan, showcasing the widespread adoption of chiplet technology.
Chipuller’s chairman, Yang, emphasized the importance of chiplet technology for the development of China’s semiconductor industry. He stated on the company’s official WeChat channel, “It is our mission and duty to bring it back to China.”
