Earlier in July, ASML CEO Christophe Fouquet noted that though China’s progress on cutting-edge chips is ten years behind the U.S., the world is in need of the legacy chips it manufactured. Now it seems that in order to become “the world’s factory,” China has to turn itself into “the world’s market” first.

And it has already been doing so. Over 40% of major semiconductor equipment manufacturers’ revenue in the second quarter of 2024, including that of Applied Materials, ASML and Tokyo Electron, came from China. In addition, another report by Maeli Business Newspaper highlights that Samsung Electronics and SK hynix also saw their sales in China double in the first half of this year.

Samsung’s Revenue from China Doubled in 1H24, Mainly Boosted by Semiconductors

Citing comments from Analysts, the report attributes China’s strong demand for Korean semiconductors to the country’s aggressive economic stimulus measures and the surge in AI, coinciding with the semiconductor upturn.

Citing Samsung’s semi-annual report on the 22nd, the report notes that its sales in China soared to KRW 32.3452 trillion (around USD 24.2 billion) in the first half of 2024, doubling from KRW 17.808 trillion in the first half of last year. According to Samsung’s website, China accounted for 17% of its revenue in the second quarter of 2024, rising from 11% in 2Q23.

The sales figures for China reported by Samsung encompass not only its flagship semiconductor products but also others like smartphones and home appliances. However, it is worth noting that unlike the situation in the U.S. and Europe, where the revenue structure is more diversified, semiconductors are believed to constitute the majority of sales in China, the report suggests.

HBM May Be a Major Contributor of South Korean Memory Giants’ Soaring Revenue in China

The soaring revenue in China echoes with the rumor that the U.S. is reportedly mulling new measures to limit China’s access to AI memory, an arena South Korean memory giants excel at. A previous report by Reuters noted that as the restrictions might be imposed as early as late August, Chinese tech giants like Huawei and Baidu, along with other startups, are said to be stockpiling high bandwidth memory (HBM) semiconductors from Samsung Electronics.

Citing a source from the semiconductor industry, Maeli states that the rapid growth of HBM is driving a significant shift in China’s DRAM market. The surging demand, derived from the need for server and enterprise PC upgrades as well as the launch of new AI-equipped PCs, appears to have boosted sales in China, benefiting South Korean memory giants.

The current HBM market leader, SK hynix, currently operates a DRAM plant in Wuxi, a packaging facility in Chongqing, and a NAND plant acquired from Intel in Dalian. Its sales in China in 1H24, according to the report, is estimated to amount to KRW 8.6061 trillion (around USD 6.4 billion), more than doubling its sales from the same period last year (KRW 3.8821 trillion).

The report, citing SK hynix’s semi-annual report, notes that the sales and net profit of SK hynix Semiconductor China in 1H24 were KRW 2.6624 trillion and KRW 119.4 billion, respectively. In the same period last year, it reported a loss of KRW 165.6 billion.

Read more

• [News] ASML Claims the World Counts on China for Legacy Chips; So Do Chip Equipment Giants
• [News] Chinese Tech Giants Reportedly Stockpile Samsung’s HBM ahead of Potential U.S. Restrictions

(Photo credit: Samsung)

According to a report from TechNews, after Innolux shut down its 5.5-generation plant last year, it initially planned to sell the facility to memory giant Micron. However, TSMC successfully acquired Innolux’s 4th Plant in Tainan and its associated facilities, with a transaction value of NTD 17.14 billion.

Despite this, industry sources cited by TechNews have hinted that Micron is still moving forward with plans to establish a facility in Tainan. They are reportedly negotiating with Innolux regarding the Tainan site and have begun subsequent planning.

Reportedly, it is known that Micron had previously approached AUO to inquire about the Tainan color filter fab, but this is still considered to be in the site-selection phase, with Longtan also mentioned as a possible location.

Given the high demand for Micron’s HBM products and persistent rumors about expanding in Taiwan, new facility construction seems necessary to accelerate HBM market penetration.

Additionally, Micron’s Taiwan Chairman, Donghui Lu, has publicly stated that Taiwan is a crucial part of Micron’s global advanced process and packaging strategy. Besides expanding in Taiwan and Japan, Micron is also considering further expansion in the United States.

Regarding inquiries about Micron, Innolux has stated that it does not comment on market rumors.

Industry source cited by TechNews have anticipated that Innolux’s continued reduction in capacity is expected, though the timeline for shutting down facilities remains undecided.

On August 15th, TSMC officially announced the acquisition of Innolux’s 5.5G manufacturing facility in Tainan, Taiwan, for NTD 17.14 billion.

Read more

• [News] TSMC Acquires Innolux’s Plant in Southern Taiwan to Expand Advanced Packaging Capacity
• [News] Innolux Targets to Begin FOPLP Mass Production by Year-End

(Photo credit: Micron)

As per a report from Kyodo News on August 21st, that the Japan-based chip manufacturer Rapidus is expected to begin mass production of 2nm chips by 2027. To secure the necessary funds for semiconductor production, Rapidus is reportedly seeking JPY 100 billion in financing from banks.

Reportedly, Rapidus has requested financing from Japan’s three major banks—Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corporation, and Mizuho Bank—as well as from the Development Bank of Japan.

Additionally, Rapidus has asked existing shareholders, including Toyota, for additional investment. The response of these shareholders is now a key point of interest.

Rapidus, established in August 2022, is a joint venture funded by eight Japanese companies: Toyota, Sony, NTT, NEC, SoftBank, Denso, NAND Flash maker Kioxia, and Mitsubishi UFJ.

The report further indicates that Rapidus currently relies mainly on government subsidies to advance its projects. To achieve its goal of mass-producing 2nm chips by 2027, a total investment of approximately JPY 5 trillion from both public and private sectors is expected.

If Rapidus secures the requested 100 billion yen in financing, it would mark the first major funding from financial institutions, representing a significant step forward for the company.

Per an earlier report from Nikkei, the Japanese government has so far decided to provide JPY 920 billion in subsidies to Rapidus. Additionally, the eight private Japanese companies, including Toyota, have invested JPY 7.3 billion in the venture.

However, there remains a funding gap of about JPY 4 trillion. Establishing production technology and acquiring customers are challenging tasks, and some banks are cautious about providing financing, which may pose obstacles to meeting the funding requirements.

Nikkei’s report on August 10 also pointed out that Rapidus, which began construction on its 2nm wafer fab in Hokkaido last September, plans to start mass production of 2nm chips by 2027.

The external construction of the facility is expected to be completed in October this year, with the installation of Japan’s first extreme ultraviolet (EUV) lithography equipment scheduled for December. The plan includes introducing several additional EUV machines in the future.

Koike expressed confidence in achieving the 2027 mass production goal and emphasized that Rapidus aims to produce semiconductors at least twice as fast as its competitors, with potential speed increases for smaller batches.

He also addressed that the company will collaborate with Japan’s top material and equipment suppliers to lower costs and produce globally competitive products.

Read more

• [News] Rapidus to Fully Automate 2nm Fab, Claiming Chip Delivery Times at One-Third of Its Competitors
• [News] Japanese Government Reportedly Plans to Offer Guaranteed Loans to Chip Startup Rapidus

(Photo credit: Rapidus)

As per a report from Business Insider, Taiwanese AI server giant Wiwynn has filed a lawsuit against Elon Musk’s social platform X (formerly Twitter), claiming it refused to pay USD 120 million for parts. However, this may not be the first time a major Taiwanese server manufacturer has encountered payment disputes with X.

According to a report from Economic Daily News, in the fourth quarter of 2022, MiTAC also faced issues when Musk took over Twitter, potentially leading to unpaid server bills.

After Musk took over Twitter, he aggressively implemented cost-cutting strategies, including layoffs and renegotiating orders with suppliers. MiTAC, as one of Twitter’s server suppliers, might also be impacted, recording a NTD 1.4 billion (around USD 44 million) write-down in inventory and bad debt provisions for accounts receivable in the fourth quarter of 2022.

This directly resulted in a NTD 346 million (roughly USD 10.8 million) loss for that quarter, marking only the second time MiTAC has reported a quarterly loss since its public listing.

Still, due to confidentiality, MiTAC has not disclosed the names of clients with delayed payments.

After navigating the downturn in Q4 2022, MiTAC saw a significant rebound in Q2 2023. During the traditionally slow season for servers, the company achieved notable growth in net profit, with a quarterly increase of 367.11% and a year-over-year increase of 34.72%, reaching an EPS of NT$0.59.

It is reported by Economic Daily News that the surge in profits was largely due to partial payments received from X. Additionally, MiTAC managed to either resell the components it previously reserved for X or retrieve them, which contributed to its soaring quarterly profits.

Read more

• [News] Foxconn Confirms Shipment of NVIDIA’s GB200 to Start in Q4 as Planned
• [News] Foxconn Remains Unfazed Despite NVIDIA’s GB200 Delay, with Customers Aim to Secure Their Orders

(Photo credit: MiTAC)

According to a report from Economic Daily News, on the evening of August 21st, Foxconn announced plans to expand its investments, increasing capital in its subsidiaries located in the U.S., Mexico, India, and Europe. The total investment amounts to roughly USD 840 million.

First, Foxconn announced earlier that its subsidiary, Cloud Network Technology USA Inc., has acquired shares of Foxconn Assembly LLC. The transaction is valued at USD 253 million.

Sources cited by the Economic Daily News suggests that this move is looking to boost the production capacity of its plant in Houston, Texas. Foxconn currently manufactures AI servers in three locations across North America: Mexico, Wisconsin, and Texas. This indicates that Texas is gradually becoming a key hub for AI server production.

Secondly, Foxconn announced that its subsidiary, Cloud Network Technology Singapore Pte. Ltd., has acquired shares of FII AMC MEXICO S. DE R.L. DE C.V. The transaction is valued at USD 241 million.

It is speculated by the Economic Daily News that this move is primarily aimed at increasing the production capacity of Foxconn’s subsidiary, FII (Foxconn Industrial Internet), in its Mexico plant.

FII previously stated that the initial production of the GB200 servers would start in Taiwan, with the related capacity already in place.

The first overseas production line for the GB200 servers is reportedly to be set up at the Mexico plant, which is already producing AI servers, with small-scale production of the GB200 expected to begin as early as the third quarter.

Thirdly, Foxconn announced that its subsidiary, Foxconn Interconnect Technology Limited, has acquired 197 million ordinary shares of Foxconn Interconnect Technology Singapore Pte. Ltd., valued at approximately EUR 180 million (roughly USD 200.53 million).

Per Economic Daily News, it is speculated that this move is related to Foxconn’s subsidiary, FIT (Foxconn Interconnect Technology), which previously announced the acquisition of shares in the German Auto-Kabel Group to strengthen its presence in the automotive electrification sector and expand its customer base.

Lastly, Foxconn announced that its subsidiary, Foxconn Singapore Pte Ltd, has acquired 1.203 billion ordinary shares of Foxconn Hon Hai Technology India Mega Development Private Limited, valued at approximately USD 144 million .

Reportedly, it is speculated that this investment aims to boost the capital of Foxconn’s Indian subsidiary.

As Foxconn is preparing for mass production of the iPhone 16 Pro and Pro Max in India, this year marks the first time Apple is integrating AI applications (Apple Intelligence) into the latest iPhone 16 Pro series.

Read more

• [News] Foxconn Confirms Shipment of NVIDIA’s GB200 to Start in Q4 as Planned
• [News] Foxconn Remains Unfazed Despite NVIDIA’s GB200 Delay, with Customers Aim to Secure Their Orders

(Photo credit: Foxconn)