In its FY2Q24 earnings report for 2023, NVIDIA disclosed that the U.S. government had imposed controls on its AI chips destined for the Middle East. However, on August 31, 2023, the U.S. Department of Commerce stated that they had “not prohibited the sale of chips to the Middle East” and declined to comment on whether new requirements had been imposed on specific U.S. companies. Both NVIDIA and AMD have not responded to this issue.

TrendForce’s analysis:

• Close ties between Middle Eastern countries and China raise U.S. concerns:

In NVIDIA’s FY2Q24 earnings report, it mentioned, “During the second quarter of fiscal year 2024, the USG informed us of an additional licensing requirement for a subset of A100 and H100 products destined to certain customers and other regions, including some countries in the Middle East.” It is speculated that the U.S. is trying to prevent high-speed AI chips from flowing into the Chinese market via the Middle East. This has led to controls on the export of AI chips to the Middle East.

Since August 2022, the U.S. has imposed controls on NVIDIA A100, H100, AMD MI100, MI200, and other AI-related GPUs, restricting the export of AI chips with bidirectional transfer rates exceeding 600GB/s to China. Saudi Arabia had already signed a strategic partnership with China in 2022 for cooperation in the digital economy sector, including AI, advanced computing, and quantum computing technologies. Additionally, the United Arab Emirates has expressed interest in AI cooperation with China. There have been recent reports of Saudi Arabia heavily acquiring NVIDIA’s AI chips, which has raised concerns in the U.S.

• Huawei is expected to release AI chips comparable to NVIDIA A100 in the second half of 2024; competition is yet to be observed:

Affected by U.S. sanctions, Chinese companies are vigorously developing AI chips. iFlytek is planning to launch a new general-purpose LLM (Large Language Model) in October 2023, and the AI chip Ascend 910B, co-developed with Huawei, is expected to hit the market in the second half of 2024, with performance claimed to rival that of NVIDIA A100. In fact, Huawei had already introduced the Ascend 910, which matched the performance of NVIDIA’s V100, in 2019. Considering Huawei’s Kirin 9000s, featured in the flagship smartphone Mate 60 Pro released in August 2023, it is highly likely that Huawei can produce products with performance comparable to A100.

However, it’s important to note that the A100 was already announced by NVIDIA in 2020. This means that even if Huawei successfully launches a new AI chip, it will already be four years behind NVIDIA. Given the expected 7nm process for Huawei’s Ascend 910B and NVIDIA’s plan to release the 3nm process-based Blackwell architecture GPU B100 in the second half of 2024, Huawei will also lag behind by two generations in chip fabrication technology. With the parameters of LLM doubling annually, the competitiveness of Huawei’s new AI chip remains to be observed.

• China remains NVIDIA’s dominion in the short term:

Despite the active development of AI chips by Chinese IC design house, NVIDIA’s AI chips remain the preferred choice for training LLM models among Chinese cloud companies. Looking at the revenue performance of the leading Chinese AI chip company, Cambricon, its revenue for the first half of 2023 was only CNY 114 million, a YoY decrease of 34%. While being added to the U.S. Entity List was a major reason for the revenue decline, NVIDIA’s dominance in the vast Chinese AI market is also a contributing factor. It is estimated that NVIDIA’s market share in the Chinese GPU market for AI training exceeded 95% in the first half of 2023. In fact, in the second quarter of 2023, the China market accounted for 20-25% of NVIDIA’s Data Center segment revenue.

The main reason for this is that the Chinese AI ecosystem is still quite fragmented and challenging to compete with NVIDIA’s CUDA ecosystem. Therefore, Chinese companies are actively engaged in software development. However, building a sufficiently attractive ecosystem to lure Chinese CSPs in the short term remains quite challenging. Consequently, it is expected that NVIDIA will continue to dominate the Chinese market for the next 2-3 years.

(Photo credit: NVIDIA)

According to a report from Taiwan’s TechNews, Huawei’s Mate 60 Pro smartphone, powered by its in-house Kirin 9000S processor, quietly appeared on the market recently, testing has shown that its network speed approaches that of 5G. This development has sparked enthusiastic discussions in the market about the manufacturing and development of this chip.

Prominent analyst Andrew Lu also expressed that if the semiconductor manufacturer, SMIC, which handles the production of the Kirin 9000S processor, makes significant breakthroughs in both 7nm process technology and capacity, it should not be underestimated. Additionally, with Huawei’s reintroduction of the Kirin 9000S processor through the Mate 60 Pro, they are expected to continue launching products that are likely to have an impact on the mobile phone and mobile chip market.

Andrew Lu outlined the following points on his personal Facebook fan page:

1. The Kirin 9000S processor is likely manufactured by SMIC using N+2 process technology, with N+1 being a pseudo-7nm process that is closer to 8-9nm. N+2 is a 7nm process (not the rumored 5nm), but it does not use EUV, so multiple exposures are needed. Due to insufficient capacity, shipping 40 million units would likely take several months. Assuming a die size of 169mm² and an 80% yield rate, SMIC would need to prepare 144k N+2 capacity, this indicates a monthly production capacity requirement of 24,000 units. The monthly production capacity appears significantly higher than what was previously anticipated. If these assumptions hold, it indicates that SMIC has made significant breakthroughs in 7nm process technology and capacity.
2. Apple’s iPhone doesn’t emphasize Antutu benchmark scores as much, and Android phones typically fine-tune their systems for benchmarking, making comparisons between iOS and Android phones less fair. However, compared to other Android flagship phones scoring around 1.5-1.6 million, the Mate 60’s 1.1 million still falls short, but it excels in satellite phone functionality.
3. Huawei/Huawei’s HiSilicon’s return is likely to continue with the release of new devices, aiming to reach annual sales of 100 million phones within 5 years, which should not be difficult. This means Huawei/Huawei’s HiSilicon will regain approximately 5-10% of the global market share, while other phone and chip manufacturers will lose 5-10% of their market share with flagship brands likely being more affected.
4. Despite the U.S. putting SMIC on the Entity List, how does SMIC still have so much advanced process capacity? Lu Xingzhi believes that being placed on the Entity List doesn’t entirely prohibit companies from purchasing all advanced U.S. equipment (EUV scanners are absolutely prohibited), but it requires approval from the U.S. Department of Commerce to purchase such equipment. Additionally, the rapid emergence of many semiconductor startups in China (some of which disappear shortly after) makes it challenging for U.S. equipment manufacturers and the U.S. Department of Commerce to determine if the purchased equipment is being resold to SMIC. Therefore, SMIC’s expansion of advanced process capacity is not surprising. According to Lu’s data, SMIC’s capital intensity, capital expenditure as a percentage of revenue, was 110% over the past year, significantly higher than TSMC’s 50% and Samsung LSI’s and GlobalFoundries’ 40% range, indicating that capacity expansion is likely to be considerably higher than peers in the industry.

(Photo credit: Huawei)

According to a report by Taiwan’s TechNews, the Huawei Kirin 9000S mobile processor, dubbed by Chinese media as “4G technology with 5G speed,” was incorporated into the Huawei Mate 60 Pro smartphone on the 29th. The phone was made available for purchase directly without a launch event or prior promotion, priced at 6,999 Chinese Yuan, sparking significant industry discussion.

The discussion around the Huawei Kirin 9000S mobile processor stems from the fact that, for the first time post the US-China trade war, a chip foundry has manufactured chips for Huawei, featuring an advanced 5-nanometer process. Does this signify a breakthrough for Chinese chip production amidst US restrictions and a leap forward in China’s semiconductor industry? At present, the answer seems to be negative.

According to insiders’ revelations, the Mate 60 Pro’s Kirin 9000S chip was manufactured by SMIC. However, key production aspects are still under US control, making breaking through these limitations quite challenging.

Screenshots shared by users indicate that Kirin is on a 5nm process. Nonetheless, technical experts widely believe that the 9000S isn’t on a 5nm process; rather, it’s on SMIC’s N+2 process.

Source: fin

SMIC is the only Chinese enterprise capable of mass-producing 14-nanometer FinFET technology. Both N+1 and N+2 processes are improvements based on the 14nm FinFET technology and are achieved through DUV lithography, bypassing US restrictions. (The most advanced processes currently require EUV lithography machines.)

SMIC has not openly stated that N+1 and N+2 are on the 7nm process. However, the chip industry generally considers N+1 to be equivalent to 7nm LPE (Low Power) technology, and N+2 to be equivalent to 7nm LPP (High Performance) technology. The shipment of the Mate 60 Pro seems to have openly revealed information about SMIC’s N+2 process reaching maturity and entering mass production.

(Photo credit: Huawei)

According to Taiwan’s TechNews report, Intel has revealed the architecture and supply schedule of the new generation data center Xeon processors, Sierra Forest and Granite Rapids. They are also set to unveil the consumer processor codenamed Meteor Lake in mid-September. However, with the semiconductor market’s current weak recovery, the impact of Intel’s new processors on driving upgrades and benefiting Taiwanese supply chain manufacturers remains uncertain, making it a market focal point.

Regarding the consumer-oriented Meteor Lake processor, industry sources suggest that it will not only be the first to adopt “Intel 4” technology, but also the first to utilize EUV lithography for cost reduction in mass-producing CPU tiles. TSMC will assist in production using the 5/6 nanometer process for graphics chip modules (GFX tile), system chip modules (SoC tile), and input/output chip modules (IOE tile), aiming for higher yields to decrease production costs.

Furthermore, the Meteor Lake processor shifts from traditional monolithic chip design to chiplet technology. After separating functions like graphics, system, and I/O chips, it employs the 3D Foveros advanced packaging technology. Through Foveros interconnects, multiple chiplets are vertically stacked into one chip. This approach not only increases the yield of critical modules but also reduces costs, granting Intel greater flexibility in rapidly creating next-generation chip capacities.

For the upcoming Meteor Lake processor, its direct beneficiary is undoubtedly TSMC, which assists in producing graphics chip modules, system chip modules, and input/output chip modules using the 5/6 nanometer process. This collaboration not only boosts revenue but also maintains the ongoing partnership with Intel.

However, despite Taiwanese foundries and board manufacturers securing orders for Intel’s new-generation processors, the current economic environment remains unfavorable. With a cautious and conservative outlook on consumer spending in the global market, the launch of Intel’s new products could either boost supply chain revenue or lead to increased inventory in the next phase, requiring further observation.

(Photo credit: Intel)

NVIDIA Beats Expectations with Q2 Financial Results and Optimistic Q3 Outlook, But Overall Semiconductor Short-Term Prospects Remain Weak, According to Taiwan’s Central News Agency.

While the semiconductor industry remains subdued, NVIDIA stands out with robust operational performance and a positive outlook. The company reported Q2 revenue of $13.51 billion, an 88% increase from the previous quarter and double the figure from the same period last year. Net income reached $6.19 billion, translating to $2.48 per share. NVIDIA anticipates Q3 revenue to further reach around $16 billion, marking a 170% YoY increase.

According to research firm TrendForce, NVIDIA’s rapid data center business growth is the primary driver. In Q4 of the fiscal year 2022, data center revenue accounted for about 42.7% of the total, surpassing gaming. In Q1 of FY 2023, it exceeded 45%, and by Q2 of FY 2024, data center revenue reached $10.32 billion, a 141% increase from the previous quarter and a 171% YoY increase, making up more than 76% of total revenue.

TrendForce notes that AI server solutions are pivotal in propelling NVIDIA’s data center growth, including AI accelerator GPUs and AI server reference architecture like HGX.

Arisa Liu, a researcher and director at Taiwan Industry Economics Services, mentioned that NVIDIA’s outstanding performance underscores its solid leadership in the AI market. She emphasized that customer demand for AI-related solutions is consistently on the rise.

Liu also mentioned that NVIDIA’s supply chain is expected to benefit in tandem. Orders for TSMC’s 7nm, 4nm, and 3nm advanced processes might increase. Advanced packaging technologies like CoWoS are expected to remain in high demand. In addition, orders for silicon intellectual property, high-speed transmission components, power supply, PCBs, chassis, and server OEMs are likely to see growth.

However, Liu indicated that due to the relatively low share of the AI market, it cannot fully offset the impact of sluggish demand in major application markets such as computers, smartphones, and consumer electronics. As a result, the short-term semiconductor market conditions are expected to remain weak.

(Photo credit: NVIDIA)