According to sources cited in a report from Bloomberg, the US administration is expected to announce its decisions on tariffs for imported goods from China as early as next week. The tariff decision is anticipated to target key strategic industries, including electric cars, The tariff decision is anticipated to target key strategic industries, such as electric cars, and will reject the across-the-board hikes sought by previous policies.

Bloomberg further indicates that the latest tariff decision is the culmination of a review of the final outcome of the so-called Section 301 tariffs, which were initially implemented during the previous US administration starting in 2018.

The US government is now preparing to impose targeted new tariffs on key industries such as electric cars, batteries, and solar cells. The full decision statement is expected to largely maintain existing tariffs.

Two sources cited by the report stated that the US government plans to announce this tariff policy next Tuesday. The full details are currently unclear.

Regarding this matter, the White House has declined to comment.

Besides the rumored new tariffs, per an announcement of the US government, it indicated that the US government would triple the tariff rate on steel and aluminum imports from China. The US believes it is necessary to strengthen countermeasures against products overcapacity and non-market investments from the Chinese government.

The punitive tariff rate was previously at 15%. In 2020, during the administration of the previous government, it decreased to 7.5% after the US-China trade negotiations reached an agreement. If the rate triples, it will approach the highest level of punitive tariffs, nearly 25%.

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According to a report from Economic Daily News citing The Wallstreet Journal, Apple is rumored to be developing its own AI chips tailored for data centers, which could potentially give the world’s top smartphone seller a crucial advantage in the AI arms race. The report, quoting sources familiar with the matter, stated that Apple has been working closely with its chip manufacturing partner TSMC to design and produce these chips in the primary stage. However, it is still unclear whether the final version has been produced yet.

It is suggested that Apple’s server chips may focus on executing AI models, particularly in AI inference, rather than AI training, where Nvidia’s chips currently dominate.

Over the past decade, Apple has gradually become a major player in chip design for products like iPhone, iPad, Apple Watch, and Mac. The latest project involving Apple chips for data center servers, internally named “Project ACDC” (short for Apple Chips in Data Center), will integrate Apple’s IC design capabilities into the operation of clients’ servers, sources said.

The project has been in operation for several years, though the timetable for launching this server chip remains unclear. Apple is expected to unveil more new AI products and AI-related updates at its Worldwide Developers Conference (WWDC) in June.

An Apple spokesperson declined to comment on the reported developments.

According to reports from Wccftech on April 23rd, Apple is said to be working on a self-developed AI server processor using TSMC’s 3-nanometer process, with plans for mass production expected in the second half of 2025.

Four major cloud service providers (CSPs) including Google, Microsoft, Amazon, and Meta, sequentially released their first-quarter financial performance for the year 2024 (January 2024 to March 2024) at the end of April.

Each company has achieved double-digit growth of the revenue, with increased capital expenditures continuing to emphasize AI as their main development focus. The market’s current focus remains on whether AI investment projects can successfully translate into revenue from the previous quarter to date.

TrendForce’s Insights:

1. Strong Financial Performance of Top Four CSPs Driven by AI and Cloud Businesses

Alphabet, the parent company of Google, reported stellar financial results for the first quarter of 2024. Bolstered by growth in search engine, YouTube, and cloud services, revenue surpassed USD 80 billion, marking a 57% increase in profit. The company also announced its first-ever dividend payout, further boosting its stock price as all metrics exceeded market expectations, pushing its market capitalization past USD 2 trillion for the first time.For Google, the current development strategy revolves around its in-house LLM Gemini layout, aimed at strengthening its cloud services, search interaction interfaces, and dedicated hardware development.

Microsoft’s financial performance is equally impressive. This quarter, its revenue reached USD 61.9 billion, marking a year-on-year increase of 17%. Among its business segments, the Intelligent Cloud sector saw the highest growth, with a 21% increase in revenue, totaling $26.7 billion. Notably, the Azure division experienced a remarkable 31% growth, with Microsoft attributing 7% of this growth to AI demand.

In other words, the impact of AI on its performance is even more pronounced than in the previous quarter, prompting Microsoft to focus its future strategies more on the anticipated benefits from Copilot, both in software and hardware.

This quarter, Amazon achieved a remarkable revenue milestone, surpassing USD 140 billion, representing a year-on-year increase of 17%, surpassing market expectations. Furthermore, its profit reached USD 10.4 billion, far exceeding the USD 3.2 billion profit recorded in the same period in 2023.

The double-digit growth in advertising business and AWS (Amazon Web Services) drove this performance, with the latter being particularly highlighted for its AI-related opportunities. AWS achieved a record-high operating profit margin of 37.6% this quarter, with annual revenue expected to exceed $100 billion, and short-term plans to invest USD 150 billion in expanding data centers.

On the other hand, Meta reported revenue of USD 36.46 billion this quarter, marking a significant year-on-year growth of 27%, the largest growth rate since 2021. Profit also doubled compared to the same period in 2023, reaching USD 12.37 billion.

Meta’s current strategy focuses on allocating resources to areas such as smart glasses and mixed reality (MR) in the short and medium term. The company continues to leverage AI to enhance the user value of the virtual world.

2. Increased Capital Expenditure to Develop AI is a Common Consensus, Yet Profitability Remains Under Market Scrutiny

Observing the financial reports of major cloud players, the increase in capital expenditure to solidify their commitment to AI development can be seen as a continuation of last quarter’s focus.

In the first quarter of 2024, Microsoft’s capital expenditure surged by nearly 80% compared to the same period in 2023, reaching USD 14 billion. Google expects its quarterly expenditure to remain above USD 12 billion. Similarly, Meta has raised its capital expenditure guidance for 2024 to the range of USD 35 to USD 40 billion.

Amazon, considering its USD 14 billion expenditure in the first quarter as the minimum for the year, anticipates a significant increase in capital expenditure over the next year, exceeding the USD 48.4 billion spent in 2023. However, how these increased investments in AI will translate into profitability remains a subject of market scrutiny.

While the major cloud players remain steadfast in their focus on AI, market expectations may have shifted. For instance, despite impressive financial reports last quarter, both Google and Microsoft saw declines in their stock prices, unlike the significant increases seen this time. This could partly be interpreted as an expectation of short- to medium-term AI investment returns from products and services like Gemini and Copilot.

In contrast, Meta, whose financial performance is similarly impressive to other cloud giants, experienced a post-earnings stock drop of over 15%. This may be attributed partly to its conservative financial outlook and partly to the less-than-ideal investment returns from its focused areas of virtual wearable devices and AI value-added services.

Due to Meta’s relatively limited user base compared to the other three CSPs in terms of commercial end-user applications, its AI development efforts, such as the practical Llama 3 and the value-added Meta AI virtual assistant for its products, have not yielded significant benefits. While Llama 3 is free and open-source, and Meta AI has limited shipment, they evidently do not justify the development costs.

Therefore, Meta still needs to expand its ecosystem to facilitate the promotion of its AI services, aiming to create a business model that can translate technology into tangible revenue streams.

For example, Meta recently opened up the operating system Horizon OS of its VR device Quest to brands like Lenovo and Asus, allowing them to produce their own branded VR/MR devices. The primary goal is to attract developers to enrich the content database and thereby promote industry development.

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On April 24, Horizon Robotics, a Chinese autonomous driving solution provider,  officially released six chips of Horizon Journey™ 6 series, supporting low, medium, and high-scale intelligent driving applications. Among them, the Journey 6E/M chips feature computing power of 80 TOPS and 128 TOPS respectively; while the Journey 6P chip is suitable for intelligent driving in all scenarios, with a computing power of up to 560 TOPS.

The first cooperative auto companies and brands for the Journey 6 series chips include SAIC Moto, Volkswagen Group, BYD, Li Auto, GAC Group, Deepal, BAIC Group, Chery Auto, EXEED, VOYAH, as well as multiple Tier1, software, and hardware partners. Horizon stated that the Journey 6 series will start delivery of the first mass-produced model within 2024 and is expected to achieve mass delivery of over 10 models by 2025.

BYD’s director Mr. Wang Chuanfu made a surprise presence at the product launch. Assuming the development of new energy industry is a game, Wang thought that the first half of this game focused on electrification, and the second half will be on intelligence. If the first half is about batteries, then the second half will be chips.

It is reported that as early as 2021, BYD and Horizon had established a strategic cooperation relationship, and millions of BYD vehicles have been equipped with Horizon’s Journey 2, 3, and 5 series chips in 2024. As BYD will continue to integrate Horizon Journey 6 chips into its automobiles, the two parties will promote the popularization of advanced intelligent driving by deepening collaboration.

Amid the development trend of electrification and intelligence in automotive industry, intelligent driving chips will embrace vast growth. As to manufacturers, representatives from abroad include Tesla, NVIDIA, Mobileye, Qualcomm, and AMD, while Chinese manufacturers include Horizon, Black Sesame, and others.

Meanwhile, the research and production of intelligent driving chips also face technological and performance challenges. Due to the characteristics of automotive chips, intelligent driving chips are required to meet high stability and long lifespan under extreme conditions.

In addition, with the continuous development of autonomous driving technology, the performance and computing power requirements for intelligent driving chips are also constantly increasing, which requires chip manufacturers to pursue further innovation and breakthroughs in the future.

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