The US ban on Chinese industries has left China struggling with a seemingly severe shortage of chips. However, China’s tech giants refuse to surrender; instead, they’re pivoting quickly to survive the game.

Since 2019, the US Department of Commerce has added Chinese leading companies like Huawei to its entity list. Restrictions were expanded in 2020 to include semiconductor manufacturing, making a huge impact on SMIC’s advanced processes below 14nm.

Starting in 2021, the US has been intensifying its control by placing more IC design houses on the list, which include Jingjia (GPU), Shenwei (CPU), Loongson Tech (CPU), Cambricon (AI), Wayzim (RF&GPS), and Yangtze (NAND Flash). Furthermore, the export of advanced EDA tools, equipment, CPUs, and GPUs to China has also been banned.

The goal of such measures is to hinder China’s progress in high-tech fields such as 5G/6G, AI, Cloud computing, and autonomous driving by eroding the dominance of its tech giants over time.

China has been aggressively pursuing a policy of domestic substitution in response to the US’s increasing control. As part of this effort, leading domestic IC design companies like Horizon, Cambricon, Enflame, Biren, Gigadevice, and Nations Technologies have been ramping up their efforts for comprehensive chip upgrades in a variety of applications.

Chinese Brands Ramping up for ASICs

There is a particularly intriguing phenomenon in recent years. Since 2019, China’s leading brands have been venturing into chip design to develop highly specialized ASICs (Application Specific Integrated Circuits) at an unprecedented speed. This move is aimed at ensuring a stable supply of chips and also advancing their technical development.

A closer look at how top companies across diverse application fields integrate ASIC chips into their technology roadmap:

• AI Cloud computing: Alibaba, Baidu, Tencent

China’s tech giants are leveraging advanced foundry processes, such as TSMC’s 5nm and Samsung’s 7nm, to produce cutting-edge AI chips for high-end applications like cloud computing, image coding, AI computing, and network chips.

Alibaba launched its AI chip, Hanguang 800, and server CPU, Yitian 710, in 2019 and 2021, respectively. Both chips were manufactured at TSMC’s 5nm process and are extensively used on Alibaba’s cloud computing platform.

In December 2019, Baidu released its AI chip, Kunlun Xin, which uses Samsung’s 14nm process, followed by its 2nd generation, which uses a 7nm process, for AI and image coding.

• Smartphone: Xiaomi, Vivo, OPPO

Due to the high technical threshold of SoC technology used in smartphones, mobile phone brands mainly develop their own chips by optimizing image, audio, and power processing.

In the year of 2021, Xiaomi released the ISP Surge C1, followed by the PMIC Surge P1. Vivo first released the ISP V1 in September 2021, followed by an upgraded product, V1+, in April 2022, and then V2 in November 2022.
OPPO, on the other hand, unveiled the MariSilicon X NPU in December 2021, which enhances the image processing performance of smartphones, using TSMC’s 6nm process, and later revealed the MariSilicon Y Bluetooth audio SoC TSMC’s 6nm RF process later in 2022.

• Home appliance: Konka, Midea, Changhong, Skyworth

The brands are focusing primarily on MCU and PMIC chips that are essential to a wide range of home appliances. They’re also incorporating SoC chips into their smart TVs.

For example, Hisense has jumped into the SoC game in January 2022 by releasing an 8K AI image chip for their smart TVs. Changhong manufactured an MCU with RISC-V architecture and a 40nm process in December 2022.

• Autonomous driving: NIO, Xiaopeng, Li Auto, BYD

The leading companies are developing ISP and highly technical SoC chips for autonomous driving, which has resulted in a slower development process.

In 2020, NIO formed a semiconductor design team for Autonomous driving chips and ISP. Xiaopeng started its Autonomous driving and ISP chip R&D project in the first half of 2021. Li Auto established two subsidiaries in 2022, with a primary focus on power semiconductors and ISP chips.

Finally, BYD, which has a long history of working on MCU and power semiconductor components, also announced its entry into the autonomous driving chip market in 2022.

Navigating the US’ Tech Crackdown

So why are these brands investing so heavily in self-developed ASICs?

One reason is to avoid the risks associated with export control policies from the US and its allies. Developing their own chips would mitigate the risk of supply chain disruptions caused by potential blockades, ensuring a stable supply and the sustainability of their technology roadmap.

In addition, there are many internal incentives for these brands – for instance, companies that have self-developed chips will be eligible for more government subsidies, as this aligns with the government’s aggressive policy to foster the semiconductor industry. Brands can also reduce their reliance on external suppliers by using their own ASIC chips, which can further lower the operating costs.

Technology wise, ASIC chips allow brands to enhance the features they require and enable better integration with the software, which could provide efficiency gains at system level – similar strategies are also being employed by Google and AWS with their AI chips, as well as by Apple with its M1 SoC.

With all things considered, it is certainly possible that we will see a persistent trend of more self-developed ASIC chips made by Chinese brands, which could potentially lead to significant changes in China’s semiconductor supply chain from the ground up.

Chinese semiconductor companies are once again quickly making their presence known in the power semiconductor market, particularly in the fields of MOSFET, IGBT, and SiC.

Among various types of power ICs and power devices, MOSFET and IGBT-based voltage-controlled switching devices have become the mainstream products, accounting for more than 70% of power devices due to their ease of use, fast switching speed, and low power loss. They are mainly used in end markets such as automobiles, industry, and consumer electronics.

On the other hand, SiC can further assist in breakthroughs in EV technology and has become the most popular alternative technology route in the market, with its strong material properties such as low resistance, high temperature resistance, and high voltage resistance.

From IGBT and MOSFET to SiC, there has been a surge in demand in recent years, indicating the enormous growth potential of power semiconductors for automotive use. This has attracted many Chinese players to enter the competition.

IGBT: Explosive Growth for Chinese Players

As the core component of new energy vehicles, demand for IGBT is increasing. Looking at the financial reports of overseas large factories, the top five IGBT chip manufacturers in Q1 of this year still face tight delivery times, with the longest reaching 54 weeks.

The rapid growth of the EV and energy storage markets has resulted in a supply-demand imbalance for SiC MOSFETs. Major international IDM factories’ production capacity won’t be able to meet the demand in the coming years. Consequently, Infineon, STMicroelectronics, and ON Semiconductor are focusing on local supply in Europe and America. This has led to Chinese suppliers replacing automotive IGBTs for the domestic market.

In 2022, the IGBT industry in China saw a surge in demand. After a two-year auto chip shortage starting in 2020, the supply of IGBTs has become even tighter. In the second half of 2022, IGBT surpassed automotive MCU and became the biggest supply bottleneck affecting automotive production expansion.
According to the latest statistics from the China Association of Automobile Manufacturers, China’s new energy vehicles continued to explode in 2022, with production and sales reaching 7.058 million and 6.887 million vehicles, respectively, a year-on-year increase of 96.9% and 93.4%, maintaining the world’s first for eight consecutive years.

Many representative companies in China continue to strengthen their IGBT technology research and development:

• In the first half of 2022, StarPower Semiconductor developed a new generation of 650V/750V IGBT chips for the new car standard based on the seventh-generation microgroove Trench Field Stop technology, which passed customer verification and began mass production in the second half of 2022.
• Silan is keeping up with the trend of new energy development and has entered the field of vehicle-grade IGBT modules and SiC MOSFETs through a private placement financing. Its vehicle-grade IGBT and other products have been verified and have been delivered in bulk.

Since the end of 2021, the IGBT capacity of companies such as CRRC Times Electric, Silan, and Huahong Grace has been ready, and their revenue has also been rising. Combining the data of major companies with revenue exceeding 10 billion yuan that have released their 2022 financial reports, the power device companies are CRRC Times Electric, with 18.034 billion yuan, and Hua Run Micro, with 10.06 billion yuan.

MOSFET: Demand Doubles with the Rise of EVs

MOSFETs are used in high-voltage applications, such as DC-DC and OBC, to convert and transmit electrical energy. On average, there are now over 200 MOSFETs per car. As cars become more advanced and incorporate features like ADAS, safety, and entertainment, the number of MOSFETs per car is expected to double to 400 in high-end models.
With major companies such as Renesas gradually withdrawing from the low and medium-voltage MOSFET market, Chinese players have been accelerating their entry into the automotive supply chain. Currently, companies such as Silan and Nexperia are continuously expanding their global market share of MOSFETs, while other companies such as China Resources Microelectronics, Yangjie Electronic, Good-Ark Electronics, Jilin Sino-Microelectronics, NCE Power Co, New Jie Energy, Oriental Semi and Jiejie Microelectronics have been continuously developing in the field of automotive-grade MOSFETs in recent years.

Chinese IDM companies have expanded their market share by offering high-voltage super junction products:

• Silan has completed the development of a 12-inch high-voltage super junction MOS process platform.
• China Resources Microelectronics has achieved revenue of over 100 million yuan in the first quarter of 2022 for high-voltage super junction products.
• Yangjie Electronic has achieved a significant increase in MOS orders for automobiles in the first quarter of 2022.

SiC: Entire Supply Chain Enters the Game

The growth of EV and energy storage markets has been causing a supply shortage in SiC. As major international IDMs are expected to expand their SiC capacity and potentially engage in more M&A activities, Chinese manufacturers are simultaneously make more investments throughout SiC supply chain:

• IDM: Sanan Optoelectronics, Inventchip, Silan, and Sichain are trying to transform the IDM model by improving their processes but face development obstacles.
• Foundry: Besides Fabless manufacturers are participating in the SiC market, foundry companies such as X-FAB are also actively developing related businesses, especially Taiwanese manufacturers. After EPISIL Hong Young Semiconductor and ProAsia Semiconductor have also entered the market.

XinYueNeng a new foundry invested by Geely Auto, has also attracted market attention. Its related projects are expected to be put into operation in the second half of this year, and its partner AccoPower is already producing SiC power modules for vehicles.

It’s also important to note the development of the SiC specialized production equipment market. Some key equipment, such as the epitaxial reactor, is experiencing delivery delays, which may impact the expansion plans of suppliers like Tianyu Semiconductor and EpiWorld. On the positive side, it still presents great opportunities for local equipment manufacturers.

Read more:

• SiC vs. Silicon Debate: Will the Winner Take All?
• The M&A battle for SiC: Who’s the Top Acquirers?

The SiC market has been very active lately, with constant news coming from device suppliers and car makers. And there seems to be an ongoing tug-of-war between supply and demand.

Toshiba announced in April the groundbreaking of its power semiconductor fab for SiC in Ishikawa Prefecture, with the first stage beginning in the 2024 fiscal year. This news echoes earlier reports from Japanese media that Toshiba is strengthening the vertical integration throughout SiC equipment, wafers, and devices, and planning to increase the production by three times in 2024 and 10 times by 2026.

Meanwhile, over the past two years, leading companies in the Europe and the US such as Infineon and ST have also accelerated M&A as well as internal expansion for SiC production devices at an unprecedented pace, aiming to expand their SiC-related businesses and maintain their core competitiveness in the market.

Despite aggressive demand-driven expansion plans, the unexpected announcement from Tesla in mid-March that it plans to reduce overall SiC usage by 75% in the next generation of electric vehicle platforms has sparked various speculations in the industry. This move was made without compromising the performance and efficiency of the cars and represents one of the few specific details that Tesla has revealed about its new car plans.

Now here is the question – will the popularity of SiC be a genuine trend, or merely a passing fad that could lead to a potential bubble in the market?

SiC or Si-based solutions?

Compared to IGBT and MOSFET, the dominant technologies in power semiconductor, SiC offers stronger advantages such as low resistance, high temperature and high voltage tolerance that can overcome the technical bottlenecks of EVs by improving battery efficiency and solving component heat dissipation issues. SiC can also make chip design sizes smaller, which means more flexibility in vehicle design.

These advantages have made SiC the most sought-after technology. According to TrendForce, the SiC power device market is expected to grow at a CAGR of 35% to reach $5.33 billion annually from 2022 to 2026, driven by mainstream applications such as electric vehicles and renewable energy.

There is a long-standing debate among the industry about whether SiC will replace IGBTs entirely. What we believe is that SiC may not completely replace IGBTs considering their distinct targeted use scenarios.

In terms of use cases, SiC is particularly suitable for high-frequency, high-voltage applications, especially in the field of new energy vehicles. Traditional Si-based IGBT chips have reached the physical limit in high-voltage fast charging models, making SiC more favorable for new energy vehicles.

However, SiC transistors are expensive due to complex production processes, slow crystal growth, and difficult cutting. Unlike silicon, which can be pulled quickly, SiC crystals grow at a slow rate of 0.2-1mm/hour and are prone to cracking during the cutting process due to their high hardness and brittleness, leading to hundreds of hours of cutting time.

Additionally, SiC transistors also have some drawbacks such as vulnerability to damage and temperature sensitivity, which makes them unsuitable for low-cost and low-power applications.

IGBT, on the contrary, is preferred over SiC in such a field because it is more cost-effective, reliable, and has better capacitance and surge capability for high-power and high-current applications. In certain scenarios, such as DC-DC charging piles, IGBT is irreplaceable due to its cost advantage and suitability.

Could a Hybrid Solution be the Answer?

The premise above can help to explain Tesla’s conflicting decision to cut back on SiC usage.

Tesla’s reluctance to fully adopt SiC technology is mainly due to concerns about reliability and supply chain stability, as evidenced by a mass recall of Model 3 due to issues with SiC components in the rear electric motor inverter.

In addition, the shortage of substrate materials is another challenge facing the SiC industry as a whole, with major manufacturers such as Wolfspeed, Infineon, and ST ramping up production capacity to address the issue. As a result, Tesla is considering alternative ways to mitigate the risks associated with supply chain constraints.

Despite these challenges, SiC remains a promising trend for the EV industry. Even Tesla recognizes its enormous potential commercial value.

In terms of technological innovations, Tesla’s next-generation EVs may feature a novel packaging design for the primary inverter, utilizing a hybrid SiC/Si IGBT packaging approach that leverages the unique strengths of both technologies while avoiding potential pitfalls. This technological advancement poses certain difficulties, but the groundbreaking innovation at the engineering design level is definitely something to look forward to.

Read more:

• Chinese Players Rally for Demand Surge in MOSFET, IGBT, and SiC
• The M&A battle for SiC: Who’s the Top Acquirers?

(Photo credit: Tesla)

Sodium-ion batteries are burgeoning as a popular alternative to lithium-ion batteries, thanks to the efforts of Chinese automakers who are pushing for its mainstream adoption.

Leading Chinese companies like CATL and BYD are ramping up the production of sodium-ion batteries. In mid-April, CATL and Chery unveiled their new battery brand, “ENER-Q”, which includes full product lines including sodium-ion, iron phosphate lithium, and ternary lithium batteries. Chery’s new energy vehicles will be the first to use CATL’s sodium-ion batteries.

Following CATL, BYD is rumored to start mass production of its sodium-ion batteries in the second half of this year, which will be used in its compact hatchback, the Seagull series. Both the moves have once again sparked discussions about battery technology in the market.

Geopolitical risks fuels Sodium-ion Batteries

Considering market supply and technical stability, lithium-ion batteries and iron phosphate lithium batteries are still the most popular types of batteries for electric vehicles. The former has a higher energy density but contains cobalt and nickel, which drives up costs. The latter has a lower cost but a lower energy density.

Sodium-ion batteries, on the other hand, have been overlooked due to their low energy density compared to traditional lithium-ion batteries.

So, why are companies like CATL and BYD turning to sodium-ion batteries?

Geopolitical risk is a major factor. Most lithium mines are located in countries like the US, Australia, and Canada. In today’s anti-China political climate, these materials could be used as bargaining chips to curb China’s electric vehicle industry. China won’t want to be at the mercy of other countries when it comes to the fate of its EV industry, so developing new technological routes is crucial.

From a mass production perspective, sodium is a more abundant element in the Earth’s crust than nickel, cobalt, or lithium carbonate, with a distribution that’s more evenly spread out. As such, sodium could be a better fit as a positive electrode material in batteries in the long run. Industry experts predict that sodium-ion batteries could even cost 20% less than iron phosphate lithium batteries once it reaches economies of scale.

The Supporting Actor in EV Batteries

However, a closer look into the pros and cons of both the materials may reveal that it’s not a zero-sum game. Instead, their characteristics can complement each other and help to accelerate battery technology development.

CATL’s new sodium-ion battery has an energy density of up to 160Wh/kg, which is comparable to the iron phosphate lithium battery in its Kirin battery system, but still lags behind the 255Wh/kg of ternary lithium batteries.

As a result, CATL is mixing sodium-ion and ternary lithium batteries in Chery’s new energy vehicles to balance cost and performance.

BYD is also expected to use a mix of sodium-ion and iron phosphate lithium batteries. Assuming this is true, it will echo the market’s assumption that sodium-ion batteries are not overturning the battery industry, but rather helping battery manufacturers maintain flexible product portfolios that cater to different market segmentations.

To give an example, CATL’s lithium iron phosphate batteries have been utilized in heavy-duty vehicles like 120-ton ore trucks and marine service vessels since 2022, where charging efficiency and cost take precedence over high energy density.

Therefore, sodium-ion batteries are likely to become a complimentary choice for lithium iron phosphate batteries, as they offer advantages such as high-rate charging, low cost, and high safety. This will definitely give car makers more flexibility in their future product strategies.

OpenAI’s ChapGPT, Microsoft’s Copilot, Google’s Bard, and latest Elon Musk’s TruthGPT – what will be the next buzzword for AI? In just under six months, the AI competition has heated up, stirring up ripples in the once-calm AI server market, as AI-generated content (AIGC) models take center stage.

The convenience unprecedentedly brought by AIGC has attracted a massive number of users, with OpenAI’s mainstream model, GPT-3, receiving up to 25 million daily visits, often resulting in server overload and disconnection issues.

Given the evolution of these models has led to an increase in training parameters and data volume, making computational power even more scarce, OpenAI has reluctantly adopted measures such as paid access and traffic restriction to stabilize the server load.

High-end Cloud Computing is gaining momentum

According to Trendforce, AI servers currently have a merely 1% penetration rate in global data centers, which is far from sufficient to cope with the surge in data demand from the usage side. Therefore, besides optimizing software to reduce computational load, increasing the number of high-end AI servers in hardware will be another crucial solution.

Take GPT-3 for instance. The model requires at least 4,750 AI servers with 8 GPUs for each, and every similarly large language model like ChatGPT will need 3,125 to 5,000 units. Considering ChapGPT and Microsoft’s other applications as a whole, the need for AI servers is estimated to reach some 25,000 units in order to meet the basic computing power.

As the emerging applications of AIGC and its vast commercial potential have both revealed the technical roadmap moving forward, it also shed light on the bottlenecks in the supply chain.

The down-to-earth problem: cost

Compared to general-purpose servers that use CPUs as their main computational power, AI servers heavily rely on GPUs, and DGX A100 and H100, with computational performance up to 5 PetaFLOPS, serve as primary AI server computing power. Given that GPU costs account for over 70% of server costs, the increase in the adoption of high-end GPUs has made the architecture more expansive.

Moreover, a significant amount of data transmission occurs during the operation, which drives up the demand for DDR5 and High Bandwidth Memory (HBM). The high power consumption generated during operation also promotes the upgrade of components such as PCBs and cooling systems, which further raises the overall cost.

Not to mention the technical hurdles posed by the complex design architecture – for example, a new approach for heterogeneous computing architecture is urgently required to enhance the overall computing efficiency.

The high cost and complexity of AI servers has inevitably limited their development to only large manufacturers. Two leading companies, HPE and Dell, have taken different strategies to enter the market:

• HPE has continuously strengthened its cooperation with Google and plans to convert all products to service form by 2022. It also acquired startup Pachyderm in January 2023 to launch cloud-based supercomputing services, making it easier to train and develop large models.
• In March 2023, Dell launched its latest PowerEdge series servers, which offers options equipped with NVIDIA H100 or A100 Tensor Core GPUs and NVIDIA AI Enterprise. They use the 4th generation Intel Xeon Scalable processor and introduce Dell software Smart Flow, catering to different demands such as data centers, large public clouds, AI, and edge computing.

With the booming market for AIGC applications, we seem to be one step closer to a future metaverse centered around fully virtualized content. However, it remains unclear whether the hardware infrastructure can keep up with the surge in demand. This persistent challenge will continue to test the capabilities of cloud server manufacturers to balance cost and performance.

(Photo credit: Google)