After the U.S. authorities strengthens export restrictions on high-end processors, reports have emerged that Chinese companies are actively changing the purpose of PC gaming chips and utilizing them for the development of AI tools.

According to a report from the Financial Times on January 10, factory managers and chip buyers familiar with the details disclosed that every month, thousands of NVIDIA gaming cards are being disassembled in factories and workstations. The core components are then installed onto new circuit boards.

A factory manager further indicated that in December 2023 alone, their workers disassembled over 4,000 NVIDIA gaming cards, more than four times the quantity of November.

These modified components are primarily supplied to listed companies and small AI laboratories. They are rushing to accumulate a sufficient supply of NVIDIA server chips before the export controls take effect in the United States.

Industry sources have reportedly warned that modifying NVIDIA products would violate the company’s intellectual property rights, and certain gaming cards could be subject to bans at any time.

NVIDIA’s most powerful gaming card, the “GeForce RTX 4090,” is a popular choice for modification, but it is now prohibited from being sold in China. In December 2023, NVIDIA released a throttled-down version for China, the “GeForce RTX 4090 D,” which is 5% slower than versions available in other regions.

A factory manager has indicated a “significant” performance difference between the 4090 D and the regular 4090, suggesting that the downgraded version may not be suitable for training large language models (LLMs).

Although NVIDIA has developed three versions of AI chips specifically designed for China (expected to be launched in March), they face reluctance from Chinese customers due to weaker performance compared to the previously available versions in China, coupled with pricing that is almost similar to the more powerful but banned versions.

The recent report from The Wall Street Journal also addressed the lack of interest in NVIDIA’s downgraded models by Chinese customers. According to the data from TrendForce, currently, around 80% of the high-end AI chips used by Chinese cloud computing companies are sourced from NVIDIA. However, in the next five years, this proportion may decrease to 50% to 60%.

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• [News] Cooling Response to NVIDIA’s Exclusive Chips for China, Lack of Interest in Downgraded Models by Customers
• [News] NVIDIA’s China-exclusive Chip H20 to Begin Production in Q2 by Wistron

(Photo credit: NVIDIA)

Pei-Ing Lee, the General Manager of Nanya Technology, a major DRAM manufacturer, mentioned on January 10th that this year has seen an upward trend in DRAM prices

According to Economic Daily News citnig from Nanya Technology’s earnings call for 23Q4,  this trend is attributed to the resurgence of the smartphone market, increased demand fueled by AI, and the three major memory manufacturers pivoting towards DDR5 production. This shift is advantageous for depleting DDR4 inventory and could potentially result in a supply shortage.

Having endured over a year of downturn in the memory market, Lee expressed an optimistic outlook by stating that “there is a possibility of future supply shortages,” revealing an overall positive trajectory for the DRAM market.

Lee acknowledged that the DRAM market faced challenges last year, resulting in stagnant bit sales for Nanya Technology. However, he anticipates a better scenario this year, noting the upward trend in DDR4 pricing. The timing for DDR3 price increases is expected to follow but at a slower pace. Lee further stated that DDR3 constituted about 40% of Nanya Technology’s revenue  in the past, but it is expected to decrease, with DDR4’s share rising.

Due to major international players focusing on High-Bandwidth Memory (HBM) and DDR5, he anticipates a potential supply shortage for DDR4 this year.

Lee pointed out that the growth in AI demand is positively impacting the DRAM market. The shift from high-end HBM and DDR4 to DDR5 is influencing demand, showing improvement quarter by quarter.

Regarding pricing trends, he confirmed a rebound in prices in the fourth quarter of 2023 and expressed optimism for a gradual upward trend in 2024. However, Lee cautioned that external variables such as geopolitical tensions, the war in Europe, and the U.S.-China trade dispute could still impact the market’s recovery momentum.

In terms of demand, Lee highlighted four key points. Firstly, server demand is driven by AI servers, with a focus on observing IT spending by U.S. cloud companies. Secondly, the introduction of new smartphones, leading to an increase in average DRAM capacity, especially in AI smartphones boosting the high-end smartphone market. Presently, improving smartphone sales in China are observed, and the recovery momentum of the Chinese economy is crucial.

In the PC application sector, Lee mentioned that inventory is gradually returning to normal levels, and AI PCs will simultaneously boost the high-end PC market. As for consumer electronic terminal products, demand for IP cameras, networking, industrial control, and automotive applications is relatively healthy, with consumer electronic products expected to show stable growth in 2024.

In terms of technological advancements, Nanya Technology aims to begin small-scale production of DDR5 products at the end of the third quarter of this year. Initially applied in servers and partly in PCs, the first product is expected to achieve a bandwidth of 5600MHz, while the second product is currently in the design phase, with an estimated bandwidth of 6400MHz.

Lee explained that their second DDR5 product will utilize third-generation processes, aiming to further improve cost structures, increase speed, achieve a target of 6400 MHz, and possess the capability for high density and 3D IC technology.

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• [News] Nanya Tech Expects Continued Conservative Spending to Balance DRAM Supply-Demand in 2024
• [News] After Memory Price Hike, Shortages Emerge in Some Products?

(Photo credit: Nanya Technology)

Recent reports have suggested that UMC’s new facility in Singapore is set to be completed by mid-2024, with initial production expected to commence in early 2025.

UMC has announced that, in response to the demand for capacity expansion, the board of directors has approved a capital expenditure execution plan of USD 39.8 million. The first phase of the new facility is planned to have a monthly production capacity of 30,000 wafers, offering 22/28nm processes, with a total investment of USD 5 billion.

Semiconductor Companies Target Singapore

Influenced by complex international situations and other factors, the global semiconductor supply chain is undergoing a shift, with high expectations placed on the Southeast Asian region, particularly Singapore.

In the wafer manufacturing sector, IDM companies like Micron, Infineon, NXP Semiconductors, STMicroelectronics, and others, along with foundry enterprises like GlobalFoundries, UMC, and Vanguard International Semiconductor(VIS) are investing in building facilities in Singapore.

In 2010, GlobalFoundries acquired Singapore’s Chartered Semiconductor Manufacturing Company and took over its fab. In September 2023, GlobalFoundries announced the official launch of its USD 4 billion investment in expanding the manufacturing plant in Singapore, further expanding its global production capacity.

The expanded fab is projected to produce an additional 450,000 300mm wafers annually, raising GlobalFoundries’ total production capacity in Singapore to approximately 1.5 million 300mm wafers per year.

UMC has been operating its 12-inch fab in Singapore for over 20 years. In February 2022, UMC announced that its board of directors approved plans to expand a new advanced fab in the Fab12i campus in Singapore.

At that time, UMC anticipated that the new facility would commence production at the end of 2024. The latest updates indicate that the new facility is expected to begin production in early 2025.

VIS currently operates an 8-inch fab in Singapore. In October 2023, media reports indicated that VIS plans to establish its first 12-inch fab in Singapore. This facility is primarily intended to meet the demand for automotive chips. The investment for this project is estimated to be at least USD 2 billion, and it is anticipated to produce 28nm chips.

Continuous Expansion in Foundry Capacity

Despite the sluggish demand in the consumer electronics market, the pace of expansion for foundries remains unaffected.

Covering 2022 to 2024, the World Fab Forecast report has shown that the global semiconductor industry plans to begin operation of 82 new volume fabs, including 11 projects in 2023 and 42 projects in 2024 spanning wafer sizes ranging from 300mm to 100mm.

Among the newly added capacity, China is expected to experience rapid growth, securing the top position, followed by Taiwan, maintaining the second position. Subsequently, the rankings include South Korea, Japan, the Americas, Europe, and Southeast Asia.

According to TrendForce‘s statistics, the number of foundries in China has reached 44 and is expected to increase by 32 in the future, mainly focusing on mature nodes.

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• [News] UMC, VIS, PSMC Cut Prices for Mature Process Wafers to Boost Production

(Photo credit: UMC)

On January 8th, leading U.S. microcontroller (MCU) and analog IC manufacturer Microchip raised concerns, stating that the revenue for the last quarter would experience a more significant decline than previously estimated, falling short of overall expectations.

The market perceives Microchip’s financial report as an alarm, revealing the continued sluggishness in sectors such as automotive and consumer electronics. These areas heavily rely on mature process production for related products, impacting mature process-focused foundries like UMC (United Microelectronics Corporation) and Vanguard International Semiconductor (VIS).

Industry sources analyze that Microchip’s warning of poor financial results indicates that, amid the unstable overall economic situation, further observation might be necessary for evaluating this year’s semiconductor market conditions.

Microchip is the global leader in the 8-bit microcontroller market, with a wide range of chip applications that virtually span across all industries. Its customer base exceeds 125,000 in industrial, automotive, consumer, defense, communication, and computer markets. Due to its diverse coverage and extensive customer base, Microchip is regarded as a crucial indicator for observing the semiconductor market.

Market expectations were initially optimistic that, after last year’s industry inventory adjustments, the overall semiconductor market conditions would gradually recover this year. Additionally, the anticipation of new trends such as AI smartphones and AI PCs was expected to drive mid-to-long-term demand in the industry.

However, Microchip’s concern seems to introduce more uncertainty into the market. According to Microchip’s latest projections, the revenue for the third quarter of the fiscal year ending in December is expected to decrease by approximately 22%, surpassing the earlier estimated range of 15% to 20% and significantly exceeding Wall Street’s forecast of 17%.

Microchip’s CEO, Ganesh Moorthy, mentioned in a press release: “The weakening economic environment that our customers and distributors faced during the December 2023 quarter resulted in many of them wanting to receive a lower level of shipments as they took actions to further de-risk their inventory positions.”

Moorthy pointed out that many customers, in their ongoing management of operational activities at the end of the last quarter, extended the closure time of facilities.

He stated, ” The impact of these and related factors was that certain backlog that we had planned to ship when we provided our guidance on November 2, 2023 did not ship to customers before the end of the December quarter. ”

Microchip will release its complete financial report for the last quarter on February 1st.

Read more

• [News] Resolution of Labor Dispute Paves the Way for Accelerated Equipment Installation at TSMC’s US Fab

(Photo credit: Microchip)

Based on TrendForce’s weekly memory spot price trends released every Wednesday, due to the year-end holiday period, the spot market for DRAM and NAND Flash experiences light trading, and prices remain relatively stable. For details, please refer to the information below:

DRAM Spot Market:

Due to the year-end holiday period, the spot market has been quiet recently and showed no notable price fluctuations. The spot market is also relatively unaffected by smartphone brands’ restocking activities, so the overall sentiment is fairly conservative. Some spot sellers have begun to raise quotes for DRAM chips since January 2, but the demand quantities are insufficient to push up transaction prices. The average spot price of mainstream chips (i.e., DDR4 1Gx8 2666MT/s) rose by 2.54% from US$1.773 last week to US$1.818 this week.

NAND Flash Spot Market:

Transactions have been rather sluggish from the spot market amidst the holiday period, with no apparent price fluctuations. The spot market is not as affected by the recent stock-up demand for smartphones and SSD, and has been relatively conservative in general sentiment, where the lack of demand is insufficient in pulling up concluded prices even with the aggressive ramp up of wafer quotations among several sellers since the beginning of the year. 512Gb TLC wafer has dropped by 0.29% in spot prices, arriving at US$3.117.