As artificial intelligence (AI) technology enjoys rapid advances, the demand for AI chips is skyrocketing, driving continuous improvements in advanced packaging and HBM (High Bandwidth Memory) technology, which is expected to benefit the silicon wafer industry.

Recently, Doris Hsu, the Chairperson of GlobalWafers, revealed that HBM memory chips required by AI, such as HBM3 and the upcoming HBM4, need to be stacked on dies, with the number of layers increasing from 12 to 16. Additionally, a layer of base wafer is required underneath the structure, which adds to the consumption of silicon wafers.

Previously, it’s reported that there is a severe global shortage of HBM amid the AI boom, and original manufacturers’ HBM production capacity for this year and next already sold out. They are continuously revving up capital investment and expanding HBM production. According to industry insiders, compared to memory technologies of the same capacity and process like DDR5, the size of wafer for HBM chip has increased by 35-45%. Meanwhile, the complexity of HBM manufacturing processes leads to a yield rate that is 20-30% lower than DDR5, while lower yield rate means that fewer qualified chips can be produced from the same wafer area. These two factors imply that more silicon wafers are needed to meet HBM production demands.

Apart from memory, innovations in advanced packaging technology also conduces to silicon wafer. Hsu mentioned that more polished wafers are required for advanced packaging than before in that packaging has become three-dimensional, and the structure and processes have also changed, which means that some packaging may require twice as many wafers as before. With the releasing of  advanced packaging capacity next year, the number of wafers needed will be even more significant.

As an advanced packaging technology, CoWoS (Chip on Wafer on Substrate) is in vogue currently, with demand overbalancing supply.

As per TrendForce’s survey, NVIDIA’s B series, including GB200, B100, and B200, will consume more CoWoS capacity. TSMC is also increasing its annual CoWoS capacity for 2024, with monthly capacity expected to approach 40k by the end of this year, an over 150% increase compared to 2023. The planned total capacity for 2025 could nearly double, and the demand from NVIDIA is expected to account for more than half.

Industry insiders pointed out that with the development of advanced semiconductor processes in the past, die size reduced and brought down the consumption of wafer. Now, driven by AI, the three-dimensionality of packaging leads to an increase in wafer usage, thereby facilitating the development of the silicon wafer industry. However, it is important to note that while silicon wafer is experiencing a boon, the development of HBM and advanced packaging technologies imposes higher requirements on the quality, flatness, and purity. This will also prompt silicon wafer manufacturers to make corresponding adjustments to cope with the AI trend.

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• HBM3e Production Surge Expected to Make Up 35% of Advanced Process Wafer Input by End of 2024, Says TrendForce

The chip war between the U.S. and China keeps escalating, as China’s new regulation would reportedly take effect soon. This time it has a new target – rare-earth materials. According to the reports from Nikkei and Tom’s Hardware, the new regulation would be effective on October 1, asserting state ownership over its rare-earth materials critical for semiconductor production.

This measure aims to protect national and industrial interests, though it is seen internationally as a strategy in the ongoing trade dispute with the U.S., the reports noted. By prohibiting unauthorized access to or disruption of rare-earth resources by any individual or organization, the regulation signifies the state ownership over crucial rare earth metals like gallium and germanium.

The regulation, with its large scope, encompasses the entire rare-earth element supply chain, including mining, smelting, processing, distribution, and export.

Starting from October, 2022, the U.S. has launched a series of export controls, targeting to limit China’s access to advanced semiconductor technologies, while tech giants including Intel, Qualcomm and NVIDIA are not allowed to ship some of their most cutting-edge chips to China. Now a new development seems to emerge, as the White House is said to consider additional restrictions on China’s access to gate-all-around (GAA) transistor technology as well as high-bandwidth memory (HBM), according to reports from Bloomberg and Tom’s hardware.

China’s latest move may be a reaction to U.S. export regulations on advanced wafer fabrication equipment, the reports stated.

It is worth noting that as of 2023, China accounted for approximately 70% of global rare-earth element production, according to the reports. Particularly in the case of gallium, which is essential for power ICs, China dominates around 94% of global supply.

While the production of high-performance components such as CPUs, GPUs, and memory may not be severely affected, restrictions on gallium nitride (GaN) and gallium arsenide (GaAs) could notably affect power chips, radio frequency amplifiers, LEDs, and other critical applications, the reports said.

On the other hand, China’s upcoming regulation on rare earth metals may have other impacts. The reports noted that gallium and germanium, being not scarce, has been maintained at low price levels in China, which makes mining them elsewhere relatively unprofitable. The new restrictions, therefore, have influenced the prices of these metals, prompting companies in other countries to initiate extraction projects, potentially reducing China’s market dominance in the long run.

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• [News] US Reportedly Mulls to Further Limit China’s Access to GAA Chip Technology and HBM
• [News] Escalating US China Tech War! China Reportedly Tightens Grip on Intel and AMD, Impacting TSMC

On July 1st, according to a report from Reuters, the South Korea’s Ministry of Trade, Industry and Energy has announced that exports had grown for the ninth consecutive month in June. The sustained and even increasing demand for chips overseas led to a record high in chip export value for June. This export growth also propelled South Korea’s Manufacturing Purchasing Managers’ Index (PMI) to its highest level in over two years.

In June, South Korea’s exports grew by 5.1% year-on-year to USD 57 billion, while imports decreased by 7.5% to USD 49 billion. This resulted in a trade surplus of USD 8 billion, surpassing market expectations of USD 5.24 billion and marking the largest surplus since September 2020, as well as a 13 consecutive month of surplus.

Reportedly, chips are the most significant driver of export growth, with a 50.9% year-on-year growth in June to USD 13.4 billion, marking eight consecutive months of year-on-year growth.

The Trade Ministry believes that the robust demand for high-performance memory chips, such as DRAM for AI servers, has driven the recovery in exports.

As per another report from The Korea Times, South Korea’s exports of IT products such as displays, computers, and wireless communication devices have been growing consecutively for four months. In June, these three categories saw year-on-year export increases of 26.1%, 58.8%, and 3.9%, respectively.

In terms of export markets, South Korea’s exports to the United States in June rose by 14.7% year-on-year to USD 11 billion, reaching a new high for the same month in historical records. This marks continuous monthly export highs to the U.S. since August last year. Meanwhile, exports to mainland China increased by 1.8% year-on-year to USD 10.7 billion, marking four consecutive months of growth.

For the first half of the year, South Korea’s total exports amounted to USD 334.8 billion, a 9.1% increase from the same period last year. Imports, on the other hand, decreased by 6.5% year-on-year to USD 311.7 billion, resulting in a trade surplus of USD 23.1 billion, the highest for the same period since 2018.

(Photo credit: Samsung)

On July 1st, according to a report from Reuters, the French antitrust authority plans to file charges against NVIDIA, accusing the company of engaging in anti-competitive practices, making France the first country to take such action against NVIDIA.

The French competition regulator had raided NVIDIA’s local offices in September last year. At the time, they did not disclose the details of the investigation or the company involved, only stating it was related to the graphics card sector.

However, as per a previous report from Bloomberg, NVIDIA claimed that the French agency collected information from them regarding their business and competition in the graphics card and cloud service provider market as part of an ongoing inquiry into competition in those markets.

Sources cited by Reuters’ report indicated that last year’s raid was part of a broader investigation into cloud computing. With the surge in global chip demand following the advent of ChatGPT, NVIDIA, as the world’s largest manufacturer of AI and computer graphics cards, has naturally attracted close scrutiny from antitrust authorities in Europe and the United States.

NVIDIA previously disclosed in regulatory filings that both EU and French regulators had requested information about its graphics card products. The French antitrust authority has been actively investigating to understand NVIDIA’s key role in AI processors, its pricing policies, chip shortages, and the impact on prices.

Last Friday, the French authorities released a report on competition in generative AI, highlighting the risk of chip suppliers abusing their power. The report pointed out concerns about the chip industry’s heavy reliance on NVIDIA’s CUDA software for chip programming. Additionally, NVIDIA’s focus on investing in AI cloud service provider CoreWeave has also raised significant concerns among the authorities.

Reportedly, it is understood that companies violating French antitrust rules could face fines of up to 10% of their global annual revenue, though they can choose to make concessions to avoid penalties.

Moreover, the European Commission is currently gathering informal feedback to determine if NVIDIA has breached its antitrust rules, although it has not yet launched a formal investigation into anti-competitive behavior.

On the other hand, the New York Times reported on June 5th that the U.S. Department of Justice and the Federal Trade Commission (FTC) have reached an agreement, led by senior officials of both agencies, over the past week. The DOJ will investigate whether NVIDIA has violated antitrust laws, while the FTC will examine the conducts of OpenAI and Microsoft.

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• [News] NVIDIA’s H200 Order Delivered from Q3, Boosting Server Supply Chain with Strong Demand
• [News] US Government Reportedly Investigating Microsoft, NVIDIA, and OpenAI for AI Industry Monopolization

(Photo credit: NVIDIA)

In late March, NVIDIA CEO Jensen Huang personally delivered the first high-end DGX H200 AI server to customer OpenAI. According to a report from Commercial Times, following this, the upstream chips for the H200 AI-GPU entered mass production in late Q2, with large-scale deliveries expected from Q3 onwards.

Downstream companies, including Inventec, Quanta (QCT), Hewlett Packard Enterprise (HPE), Supermicro, and Lenovo, have reportedly listed the H200 products as ready for shipment, with deliveries anticipated to begin in the second half of the year.

The same report, citing sources, indicates that current pending orders are still largely focused on the H100 in the HGX architecture, with the H200’s share remaining limited. The H200 shipments expected in Q3 will primarily be NVIDIA’s DGX H200. As for the B100, there is already some visibility, with shipments expected in the first half of next year.

Despite the CoWoS production capacity catching up and a significant easing in the supply of AI GPUs, due to the allocation system, the delivery time for the main H100 GPU shipments from various end-system partners can still reach up to 20 weeks.

However, major Taiwanese manufacturers such as Quanta, Inventec, Wistron, Gigabyte, and ASUS have seen a substantial boost in their overall server operations, driven by AI server business in the first half of the year. They are reportedly optimistic about AI server shipments in the second half of the year, expecting strong demand to continue, making the server business effectively free from any off-season throughout the year.

Among them, Wistron holds a significant advantage in the production and supply of H100 series substrates and the subsequent B100 series GPU modules and substrates. Starting from the second quarter, Wistron’s AI server-related business has shown high visibility, providing strong support for its overall operations.

On the other hand, the H20 series, an AI chip tailored for China due to U.S. chip restrictions, has also seen demand in the Chinese market. As NVIDIA recently secured a rush order for the H20 series, Taiwanese companies, including Wistron and Inventec, are expected to benefit.

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• [News] Taiwanese AI Server Supply Chain to Benefit from Apple’s Potential Collaboration with Baidu and Alibaba
• [News] Rumored Sharp Drop in H100 Server Black Market Prices in China Raises Concerns Over Market Stability

(Photo credit: NVIDIA)