Sam Altman, the CEO of OpenAI, the developer of the ChatGPT, is reportedly expected to visit Korea on January 26th. Altman may hold meetings with top executives from Samsung Electronics and SK Group to strengthen their collaboration on High-Bandwidth Memory (HBM).

According to sources cited by The Korea Times, Sam Altman is making a slight adjustment for the potential meeting details with Samsung Electronics’ Chairman Lee Jae-yong and SK Group’s Chairman Chey Tae-won. 

OpenAI is set to engage in discussions with Samsung Electronics and SK Group to collaboratively develop artificial intelligence (AI) semiconductors, as part of OpenAI’s strategy to reduce heavy reliance on the AI chip leader NVIDIA.

Reportedly, Altman visited Korea in June of last year, and this upcoming visit is expected to last only about six hours. Most of the time is anticipated to be spent in closed-door meetings with leaders of Korean chip companies or other high-profile executives. 

Altman is keen on strengthening relationships with Korean startups and chip industry players, as it contributes to OpenAI’s development of large-scale language models, powering ChatGPT. OpenAI unveiled its latest model, GPT-4 Turbo, at the end of last year and is currently proceeding with planned upgrades to related services.

Regarding this matter, The Korea Times also cited a spokesman at SK Group, indicating that SK Group also did not confirm whether Chey and Altman will meet.

“Nothing specific has been confirmed over our top management’s schedule with Altman,” an official at SK Group said.

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(Photo credit: OpenAI)

The Center for Strategic and International Studies (CSIS) in the United States published a new article on the January 12th, 2024, suggesting that the new battleground in the US-China tech war could be silicon photonics technology. This technology aims to enhance transmission efficiency, reduce latency, and reshape the competition landscape between the US and China in semiconductors and AI. 

According to TechNews’ report citing the author Matthew Reynolds’ notes in the article, unlike electronics, photonics uses photons instead of electrons to transmit information. When combined with electronic technology, photonics has the potential to create large-scale computing systems with higher bandwidth and energy efficiency, surpassing the physical limitations of traditional electronic chips.

However, the Chinese government has recently shown interest in photonics, seeing it as one way to bypass Western technological controls. Photonics technology is mentioned in China’s Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and Vision 2035.

Yao Yang, the director of the National Development Institute at Beijing University, believes that US semiconductor restrictions are a “shooting themselves in the foot” because photonic chips will eventually make electronic chips obsolete.

He also sees this as an opportunity for China to overtake, asserting that China has the capability to take the lead in this emerging technology, as mentioned in his recent article.

However, Matthew Reynolds believes that it’s unlikely for photon chips to replace electronic chips, at least not in the near future. Photonics and electronics are more likely to coexist, forming a symbiotic relationship.

What is certain, though, is that silicon photonics technology holds the potential to become a breakthrough for China in advancing to the forefront of semiconductor manufacturing.

Reportedly, the most direct application of silicon photonics technology is in optical interconnects, replacing the copper wiring in circuits with photonics to speed the transmission of information between processors and/or memory, reducing the input/output bottlenecks currently plaguing AI computing.

In addition to optical interconnects, another application area for silicon photonics is in the emerging field of optical computing. Photon processors utilize light instead of electrons for computation. While their range of computational types is limited, they show significant promise in performing matrix multiplication operations, a crucial component, especially in large-scale language models, constituting over 90% of inference computations.

Chinese economist Chen Wenling from the China Center for International Economic Exchanges (CCIEE) stated in an article addressing the anti-American blockade that silicon photonics is the technology that China can use to overtake.

“China is preparing to build a photonic chip production line, which is expected to be completed in 2023, which means that China will be at the forefront of the world in terms of photonic chips, and even completely change the chip technology route. Photonic chips have many technical advantages. Its calculation speed is faster and its information capacity is larger, which will be more than 1,000 times higher than the current silicon-based chips.” Chen expressed.

Lightelligence, a U.S.-based optical computing company, previously received funding from the Chinese government and has recently launched the AI accelerator “Hummingbird.” Hummingbird utilizes optical interconnect components, connecting to chips manufactured by TSMC using 28-nanometer process.

Although this process may not be at the forefront of current technology, it aligns with China’s semiconductor manufacturing capabilities. Lightelligence even claims that its latency and efficiency metrics surpass those of competitors in certain AI tasks.

Additionally, Lightelligence has introduced the “Photonic Arithmetic Computing Engine” (PACE), an optical computing system. PACE integrates photonic and electronic components on a single chip and, in certain compute-intensive applications, boasts processing speeds 25-100 times faster than Nvidia’s high-end GPUs.

China’s SinTone Microelectronics is in the process of establishing a silicon photonics chip production line. Sui Jun, the president of SinTone Microelectronics, indicated that China has the capability to produce photon chips domestically because the manufacturing process does not require the use of extreme ultraviolet (EUV) lithography machines, which are subject to U.S. sanctions. 

Simultaneously, a research team at Tsinghua University in China announced a breakthrough in overcoming the traditional physical limitations of chips, presenting a new computational framework that integrates optics and electronics. They successfully developed the world’s first all-simulated optoelectronic intelligent computing chip (ACCEL).

In terms of computational power for smart visual target recognition tasks, ACCEL exceeds current high-performance commercial chips by over 3,000 times. In the realms of smart visual target recognition tasks and computations for unmanned system scenarios, its energy efficiency surpasses existing high-performance chips by more than 4 million times.

While the commercialization timeline for ACCEL remains uncertain, researchers believe it holds the potential for applications in unmanned systems, industrial inspection, and AI large-scale models in the future.

Silicon Photonics Poised to Transform the US-China Tech War and AI Landscape

Matthew Reynolds believes that silicon photonics is the foundation and driving force behind advancements in optical interconnects and optical computing, reshaping the competitive landscape in the semiconductor and AI industries between the US and China.

While US export measures aim to sever China’s capabilities in advanced chip manufacturing, silicon photonics appears to be a new opportunity for China to take a different path.

However, Matthew Reynolds notes that despite the promotion of photon processor performance, its current applicability remains relatively narrow, contrasting sharply with the universality of electronic processors.

Additionally, the application of silicon photonics technology still faces numerous technical challenges, requiring software development in operating systems and applications to enhance performance in optical computing.

Therefore, achieving optical computing may still require several years, or even decades. Given the current pace of AI development, any delays could have serious consequences. Leading semiconductor companies in the United States and allied nations are also investing heavily in silicon photonics. It remains uncertain whether China can secure a leadership position.

Matthew Reynolds points out that regardless, new technologies and architectures are likely to redefine the components of advanced chips. They may weaken the impact of existing control measures or reshape the competitive landscape.

The US export controls may inadvertently stimulate China to allocate more resources to emerging technologies, positioning itself as a key player in the next generation of semiconductors, especially as Moore’s Law approaches its limits and demand for AI computing continues to grow.

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The U.S. Department of Commerce has initiated the “National Advanced Packaging Manufacturing Program (NAPMP) ,” with materials and substrates being the first subsidized areas. Due to the close collaboration between IC testing and IC substrates, it is not ruled out that the IC substrate industry could be the next recipient of subsidies under the U.S. chip legislation.

However, according to Commercial Times’ report, there is a lack of interest among Taiwanese PCB manufacturers in establishing facilities in the U.S., and there are three main reasons for this. 

Firstly, the PCB industry thrives on economies of scale, and the production costs in the U.S. are too high. Taiwanese manufacturers have recently responded to the China Plus One Strategy by establishing facilities in Southeast Asia, making it unlikely for them to set up operations in the U.S.

Secondly, the U.S. is not particularly welcoming to polluting industries, making pure substrate manufacturers more likely candidates. 

Thirdly, domestic PCB manufacturers in the U.S. are also relocating their production lines. If seeking a partnership is necessary, Japanese manufacturers may present a more viable option.

As for potential subsidy recipients, industry experts speculate that one of the more likely beneficiaries could be TTM Technologies, a major PCB manufacturer in the United States. TTM announced in 2023 the establishment of a new facility in the state of New York dedicated to producing HDI PCBs, primarily for military applications in line with U.S. strategic requirements.

The United States plans to invest USD 3 billion in three main areas: an advanced packaging piloting facility, workforce training programs, and funding for projects. The funding is derived from the CHIPS and Science Act, and detailed information on the subsidy program is expected to be announced in early 2024.

In response to this news, the Taiwan Printed Circuit Association pointed out that the conditions for subsidies under the CHIPS and Science Act are stringent. In the past year, the semiconductor supply chain-related companies, led by foundry outsourcing, have started to establish a production presence in the U.S. This includes not only foundries such as TSMC, Samsung, and Intel but also packaging and testing facilities like Amkor and ASE Group.

The association highlighted that IC substrates are part of the semiconductor supply chain, but the more immediate impact is on packaging and testing facilities. If global packaging and testing facilities also take concrete actions to establish operations in the U.S. following the “whole chip” production mindset, the pressure on IC substrate manufacturing will undoubtedly increase. It is not ruled out that the IC substrate industry could be the next focus of the U.S. government’s attention.

While the production scale of IC substrates (or the overall PCB) in the U.S. may not be significant, once categorized as a strategic material, even small-scale production becomes meaningful.

In other words, establishing operations in the U.S. is not solely about scale but rather about companies having the “capability” to produce locally. Reportedly, the industry should pay attention to the future developments in U.S. policy in this regard.

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As companies increased their investments in 2023, the Chinese semiconductor industry actively expanded, leading to a substantial increase in the import volume of China’s chip manufacturing equipment.

According to Bloomberg’s report citing official Chinese customs data, the import value of equipment used in the production of computer chips in China surged by 14% in 2023, reaching nearly USD 40 billion. This marks the second-highest import value recorded since 2015, indicating that Chinese semiconductor companies are rapidly investing in new fabs. This effort is expected to aim at enhancing capabilities and circumventing export controls imposed by the United States and its allies.

In 2023, before the implementation of new export controls, China experienced a sharp increase in the import of semiconductor equipment from the Netherlands.

Due to companies rushing to make purchases before the implementation of restrictive measures in the Netherlands, the import value of photolithography equipment from the country in December 2023, as per IJIWEI’s report, saw an almost 1000% year-on-year increase, reaching USD 1.1 billion.

Even before these restrictions took effect, Dutch company ASML complied with the U.S. government’s request to halt the shipment of certain high-end equipment to China.

In early January 2024, ASML reported that the Dutch government partially revoked previously issued licenses for the shipment of NXT:2050i and NXT:2100i lithography machines in 2023. This is expected to have an impact on specific customers in China.

Despite restrictions on China’s advanced process technology deployment, the main reason for its substantial purchases of semiconductor equipment lies in its efforts to break through in mature manufacturing processes.

According to a recent TrendForce’s data, China currently has 44 operational semiconductor fabs, with an additional 22 under construction. By the end of 2024, 32 Chinese wafer fabs will expand their capacity for 28-nanometer and older mature chips.

TrendForce predicts that by 2027, China’s share of mature process capacity in the global market will increase from 31% in 2023 to 39%, with further growth potential if equipment procurement progresses smoothly.

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(Photo credit: ASML)

NVIDIA CEO Jensen Huang has reportedly gone to Taiwan once again, with reports suggesting a recent visit to China. Industry sources believe NVIDIA is planning to introduce downgraded AI chips to bypass U.S. restrictions on exporting high-end chips to China. Huang’s visit to China is seen as an effort to alleviate concerns among customers about adopting the downgraded versions.

Experts indicate that due to the expanded U.S. semiconductor restriction on China, NVIDIA’s sales in the Chinese market will decline. To counter this, NVIDIA might adjust its product portfolio and expand sales of high-end AI chips outside China.

The export of NVIDIA’s A100 and H100 chips to China and Hong Kong was prohibited in September 2022. Following that, the A800 and H800 chips, which were further designed with downgraded adjustments for the Chinese market, were also prohibited for export to China in October of the previous year.

In November 2023, the NVIDIA’s management acknowledged the significant impact of the U.S. restrictions on China’s revenue for the fourth quarter of 2023 but expressed confidence that revenue from other regions can offset this impact.

CEO Jensen Huang revealed in December in Singapore that NVIDIA was closely collaborating with the U.S. government to ensure compliance with export restrictions on new chips for the Chinese market.

According to reports in Chinese media The Paper, Jensen Huang recently made a low-profile visit to China. The market is closely watching the status of NVIDIA’s AI chip strategy in China and the company’s subsequent development strategies in response to U.S. restrictions. The fate of the newly designed AI chips, H20, L20, and L2, to comply with U.S. export regulations remains uncertain and will be closely observed.

Liu Pei-Chen, a researcher and director at the Taiwan Institute of Economic Research, discussed with CNA’s reporter about NVIDIA’s active planning to introduce a downgraded version of AI chips in China. 

The most urgent task, according to Liu, is to persuade Chinese customers to adopt these downgraded AI chips. Chinese clients believe that there isn’t a significant performance gap between NVIDIA’s downgraded AI chips and domestically designed AI chips.

Liu mentioned that this is likely the reason why Jensen Huang visited China. It serves as an opportunity to promote NVIDIA’s downgraded AI chips and alleviate concerns among Chinese customers. 

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(Photo credit: NVIDIA)