This story first appeared in China Report, MIT Technology Review’s newsletter about technology in China. Sign up to receive it in your inbox every Tuesday.
I don’t know about you, but I only learned last week that there’s something connecting MSG and computer chips.
Inside most laptop and data center chips today, there’s a tiny component called ABF. It’s a thin insulating layer around the wires that conduct electricity. And over 90% of the materials around the world used to make this insulator are produced by a single Japanese company named Ajinomoto, more commonly known for commercializing the seasoning powder MSG in 1909.
Hold on, what?
As my colleague James O’Donnell explained in his story last week, it turns out Ajinomoto figured out in the 1990s that a chemical by-product of MSG production can be used to make insulator films, which proved to be essential for high-performance chips. And in the 30 years since, the company has totally dominated ABF supply. The product—Ajinomoto Build-up Film—is even named after it.
James talked to Thintronics, a California-based company that’s developing a new insulating material it hopes could challenge Ajinomoto’s monopoly. It already has a lab product with impressive attributes but still needs to test it in manufacturing reality.
Beyond Thintronics, the struggle to break up Ajinomoto’s monopoly is not just a US effort.
Within China, at least three companies are also developing similar insulator products. Xi’an Tianhe Defense Technology, which makes products for both military and civilian use, introduced its take on the material, which it calls QBF, in 2023; Zhejiang Wazam New Material and Guangdong Hinno-tech have also announced similar products in recent years. But all of them are still going through industrial testing with chipmakers, and few have recent updates on how well these materials have performed in mass-production settings.
“It’s interesting that there’s this parallel competition going on,” James told me when we recently discussed his story. “In some ways, it’s about the materials. But in other ways, it’s totally shaped by government funding and incentives.”
For decades, the fact that the semiconductor supply chain was in a few companies’ hands was seen as a strength, not a problem, so governments were not concerned that one Japanese company controlled almost the entire supply of ABF. Similar monopolies exist for many other materials and components that go into a chip.
But in the last few years, both the US and Chinese governments have changed that way of thinking. And new policies subsidizing domestic chip manufacturing are creating a favorable environment for companies to challenge monopolies like Ajinomoto’s.
In the US, this trend is driven by the fear of supply chain disruptions and a will to rebuild domestic semiconductor manufacturing capabilities. The CHIPS Act was announced to inject investment into chip companies that bring their plants back to the US, but smaller companies like Thintronics could also benefit, both directly through funding and indirectly through the establishment of a US-based supply chain.
Meanwhile, China is being cornered by a US-led blockade to deny it access to the most advanced chip technologies. While materials like ABF are not restricted in any way today, the fact that one foreign company controls almost the entire supply of an indispensable material raises the stakes enough to make the government worry. It needs to find a domestic alternative in case ABF becomes subject to sanctions too.
But it takes a lot more than government policies to change the status quo. Even if these companies are able to find alternative materials that perform better than ABF, there’s still an uphill battle to convince the industry to adopt it en masse.
“You can look at any dielectric film supplier (many from Japan and some from the US), and they have all at one time or another tried to break into ABF market dominance and had limited success,” Venky Sundaram, a semiconductor researcher and entrepreneur, told James.
It’s not as simple as just swapping out ABF and swapping in a new insulator material. Chipmaking is a deeply intricate process, with components closely depending on each other. Changing one material could require a lot more knock-on changes to other components and the entire process. “Convincing someone to do that depends on what relationships you have with the industry. These big manufacturing players are a little bit less likely to take on a small materials company, because any time they’re taking on new material, they’re slowing down their production,” James said.
As a result, Ajinomoto’s market monopoly will probably remain while other companies keep trying to develop a new material that significantly improves on ABF.
That result, however, will have different implications for the US and China.
The US and Japan have long had a strategic technological alliance, and that could be set to deepen because both of them consider the rise of China a threat. In fact, Japan’s prime minister, Fumio Kishida, was just visiting the US last week, hoping to score more collaborations on next-generation chips. Even though there has been some pushback from the Japanese chip industry about how strict US export restrictions could become, this hasn’t been strong enough to sway Japan to China’s side.
All these factors give the Chinese government an even greater sense of urgency to become self-sufficient. The country has already been investing vast sums of money to that end, but progress has been limited, with many industry insiders pessimistic about whether China can catch up fast enough. If Ajinomoto’s failed competitors in the past tell us anything, it’s that this will not be an easy journey for China either.
Do you think China has a chance of cracking Ajinomoto’s monopoly over this very specific insulating material? Let me know your thoughts at zeyi@technologyreview.com.
Now read the rest of China Report
Catch up with China
1. Following the explosive popularity of minute-long short dramas made for phones, China’s culture regulator will soon announce new regulations that tighten its control of them. (Sixth Tone)
- This is not a surprise to the companies involved. Some Chinese short-drama companies have already started to expand overseas, driven out by domestic policy pressures. I profiled one named FlexTV. (MIT Technology Review)
2. There have been many minor conflicts between China and the Philippines recently over maritime territory claims. Here’s what it feels like to live on one of those contested islands. (NPR)
3. The Chinese government has asked domestic telecom companies to replace all foreign chips by 2027. It’s a move that mirrors previous requests from the US to replace all Huawei and ZTE equipment in telecom networks. (Wall Street Journal $)
4. A decade ago, about 25,000 American students were studying in China. Today, there are only about 750. It may be unsurprising given recent geopolitical tensions, but neither country is happy with the situation. (Associated Press)
5. Latin America is importing large amounts of Chinese green technologies—mostly electric vehicles, lithium-ion batteries, and solar panels. (The Economist $)
6. China’s top spy agency says foreign agents have been trying to intercept information about the country’s rare earth industry. (South China Morning Post $)
7. Amid the current semiconductor boom, Southeast Asian youths are flocking to Taiwan to train and work in the chip industry. (Rest of World)
Lost in translation
The bodies of eight Chinese migrants were recently discovered on a beach in Mexico. According to Initium Media, a Singapore-based publication, this was the first confirmed shipwreck incident with Chinese migrants heading to the US, but many more have taken the perilous route in recent years. In 2023, over 37,000 Chinese people illegally entered the US through the border with Mexico.
The traffickers often arrange shabby boats with no safety measures to sail from Tapachula to Oaxaca, a popular route that circumvents police checkpoints on land but makes for an extremely dangerous journey often rocked by strong winds and waves. There had always been rumors of people going missing in the ocean, but these proved impossible to confirm, as no bodies were found. The latest tragedy was the first one to come to public attention. Of the nine Chinese migrants onboard the boat, only one survived. Three bodies remain unidentified today.
One more thing
Forget about the New York Times’ election-result needles and CNN’s relentless coverage by John King. In South Korea, the results of national elections are broadcast on TV with wild and whimsical animations. To illustrate the results of parliamentary elections that just concluded last week, candidates were shown fighting on a fictional train heading toward the National Assembly, parodying Mission: Impossible’s fight scene. According to the BBC, these election-night animations took a team of 70 to prepare in advance and about 200 people working on election night.
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