Due to restrictions on AI products’ usage in China, Apple is actively seeking Chinese partners to advance in the local AI application market. According to the latest report by the Economic Daily News, the tech giant has been engaged with Chinese firms such as Baidu, Alibaba, and Baichuan Intelligence to push AI efforts. While the move helps to boost these firms’ investment in AI server infrastructure, it may further benefit Taiwan’s AI server supply chain.

The report noted that the industry is optimistic about Baidu’s potential cooperation with Apple, while Alibaba is also a strong competitor. Taiwanese contract electronics manufacturer Inventec, a contract manufacturing partner for both Baidu and Alibaba’s servers, thus reportedly positions itself as a major winner in Apple’s bid to capture the Chinese AI application market.

It is worth noting that Inventec has formed strong partnership with Baidu, as the company has been providing customized server manufacturing services for the Chinese search engine leader for 13 years, according to the report. Inventec has been a key partner since the second generation of Baidu’s super AI computing platform, X-MAN 2.0, which addresses cooling challenges with cold plate liquid cooling technology.

Inventec’s clients include the four major North American cloud service providers (CSPs) as well as Chinese CSP giants such as Baidu, Alibaba, Tencent, and ByteDance.

Based on the information disclosed on its official website, Inventec not only builds edge computing products for brand-name server customers, but also focuses on customizing designs to meet cloud clients’ demands for deep learning, training, and machine learning by maximizing the synergies between CPU and GPU.

The pressure Apple has been facing in the Chinese market, on the other hand, is escalating in the AI arena. As China is Apple’s largest market for iPhones outside the United States, in order to bring AI functions into its devices, Apple is still searching for a Chinese AI partner to support its new iPhone launch in a few months.

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• [News] Apple’s AI Push on iPhone 16 in China Faces Obstacles in Finding Local Partners

(Photo credit: Inventec)

On June 21, ASE Group announced that ASE Semiconductor will collaborate with Hung Ching Construction to build a K28 plant in Kaohsiung. The project is expected to be completed in the fourth quarter of 2026 and will focus on end testing of advanced packaging processes, and high-performance computing for artificial intelligence (AI) chip.

ASE’s CFO Dong Hongsi introduced that for the K28 plant construction project, ASE Semiconductor will provide the land it held in Kaohsiung while Hung Ching Construction will provide fund support. The plant will have one basement level and seven above-ground floors. As to the rights and value distribution between the two parties, ASE Semiconductor and Hung Ching Construction will respectively hold a share of 22.24% and 77.76%. Upon completion, ASE Semiconductor or its subsidiaries will have the first purchase rights for Hung Ching Construction’s property ownership.

It was reported previously that as an important part of the company’s operational plans, ASE’s Kaohsiung plant had purchased land in Tashe for phased development in a bid to  address the demands for end testing of advanced packaging processes, AI chip high-performance computing, and heat dissipation needs. Phase one, the K27 plant, was completed in 2023, primarily setting up Flip Chip and IC testing production lines.

At a financial result briefing in February this year, ASE stated that to expand advanced packaging capacity, this year’s overall capital expenditure will increase by 40% to 50%, reaching a historical high. Of this, 65% will be allocated to packaging, especially advanced packaging projects, with over 60% used for packaging testing and 30% for electronic manufacturing services.

Moreover, ASE is optimistic about the potential of AI technology and expects AI revenue contributions to double to USD 500 million by the end of 2024 compared to 2023. AI-related revenue is expected to account for a single-digit percentage of the total ATM (Packaging and test) business this year, surpassing last year’s low single digit. And the industry anticipates that next year’s proportion could reach a high single-digit percentage.

Advanced packaging industry has been in high gear in recent years, and ASE has made significant investment in this area over the past two years. In February this year, Infineon and ASE announced that ASE would invest approximately TWD 2.1 billion to acquire Infineon’s two backend assembly and test plants in Philippines and South Korea. This acquisition aims to expand ASE’s  power chip module packaging & test and lead frame packaging for automotive and industrial automation applications, with the transaction expected to be completed by the end of 2Q24.

On January 19, ASE announced that its Malaysian subsidiary would invest MYR 69.696 million to acquire land use right in the Gardenia Tech Park in Penang, Malaysia to meet operational needs. Industry analysts believed this investment was primarily for expanding advanced packaging capacity. It was reported that ASE Semiconductor has been actively expanding its packaging and test capacity in Malaysia. In November 2022, its new factories 4 and 5 in Penang broke ground, with construction expected to be completed by 2025.

Additionally, in late December 2023, ASE Semiconductor announced that it had leased the 7th floors of both K21 and K22 buildings from ASE TEST in Kaohsiung’s Nanzi district to expand its packaging capacity. The industry believed that the intention was to increase its advanced packaging capacity for AI chip.

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• [News] ASE Sets Up New Facility in Kaohsiung for Advanced Packaging, Targeting Completion in 2026
• [News] ASE Expands Production at Kaohsiung Plant, Focusing on Advanced Packaging for AI Chips

According to a report from Reuters, it’s rumored that ByteDance, the parent company of TikTok, is collaborating with American chip designer Broadcom to develop an advanced AI processor, which could provide ByteDance with a steady supply of high-end chips.

On June 24th, Reuters’ report cited sources, stating that the 5nm Application-Specific Integrated Circuit (ASIC) being developed by the two companies will comply with U.S. export control regulations and will be manufactured by TSMC.

Since the introduction of advanced chip export controls by Washington in 2022, no public announcements have been made regarding the development of 5nm or more advanced chips in collaboration between Chinese and American companies.

The sources cited by the same report indicate that ByteDance’s collaboration with existing partner Broadcom can help reduce procurement costs and ensure a stable supply of high-end chips. However, TSMC will not start manufacturing this new chip this year. According to Reuters citing other sources, although the two companies have already begun the design process, they have yet reached the tape-out stage, which signifies the completion of the design phase and readiness for manufacturing.

Securing a reliable source of AI chips is crucial for ByteDance’s algorithms. In addition to TikTok, the company operates numerous popular apps, including “Doubao,” an AI chatbot service similar to ChatGPT. The report further suggests that ByteDance stockpiled a significant number of NVIDIA chips, including A100, H100, A800, and H800, ahead of the initial round of U.S. sanctions. In 2023, ByteDance allocated USD 2 billion for purchasing NVIDIA chips.

Per another previous report from Reuters, it indicated that in response to U.S. sanctions, some Chinese AI chip manufacturers decided to downgrade their self-designed processors to avoid being cut off from TSMC’s foundry services. Reportedly, MetaX and Enflame entrusted downgraded chip design schematics to TSMC late last year to comply with U.S. regulations. These two leading Chinese AI chipmakers had previously claimed that their chips could rival NVIDIA’s GPUs in performance.

The downgraded AI chips designed by NVIDIA specifically for the Chinese market, including the most advanced model “H20,” reportedly received a lackluster initial market response. Due to abundant supply and forced price reductions, currently, the H20 is reportedly cheaper than competing chips from Huawei. The chip is reportedly to be sold at approximately 100,000 yuan per unit, while Huawei 910B sold at over 120,000 yuan per unit.

A previous report by The Information also indicated that major tech companies such as Alibaba, Baidu, ByteDance, and Tencent have been instructed to reduce their spending on foreign-made chips like NVIDIA’s.

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• [News] NVIDIA Reportedly Facing Price Cut Pressure of H20 Chip in China Amid Competition with Huawei

(Photo credit: Broadcom)

According to a report by Korean media outlet Business Korea, SK Hynix recently shared its latest breakthrough on its 3D DRAM at VLSI 2024 last week, announcing that the manufacturing yield of its 5-layer stacked 3D DRAM has reached 56.1%.

This means that out of roughly 1,000 3D DRAM units manufactured on a single test wafer, about 561 functional devices were successfully manufactured, the report further explains. The experimental 3D DRAM exhibits characteristics similar to the currently used 2D DRAM, marking the first time SK Hynix has disclosed specific numbers and characteristics of its 3D DRAM development.

However, SK Hynix also noted that while 3D DRAM holds great potential, a significant amount of development is still required before it can be commercialized. The memory giant also reportedly pointed out that unlike the stable operation of 2D DRAM, 3D DRAM exhibits unstable performance characteristics, and stacking 32 to 192 layers of memory cells is necessary for widespread use.

3D DRAM is also a key development area for other major memory manufacturers like Samsung Electronics and Micron. Samsung Electronics has successfully stacked 3D DRAM up to 16 layers and plans to mass-produce 3D DRAM around 2030. Micron currently holds 30 patents related to 3D DRAM, and if there are breakthroughs in 3D DRAM technology, it could produce better DRAM products than existing ones without the need for EUV equipment.

The DRAM market remains highly concentrated, currently dominated by key players such as Samsung Electronics, SK Hynix, and Micron Technology, collectively holding over 96% of the entire market share.

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• [News] Samsung and SK hynix to Implement Hybrid Bonding with 3D DRAM
• [News] The Quiet Beginning of the 3D DRAM Market Share Battle

(Photo credit: SK Hynix)

According to a report from Korean media outlet ZDNet Korea, the yield rate for Samsung Electronics’ latest Exynos 2500 processor has improved to slightly below 20% from single digits in the first quarter. However, the current yield rate is still said to be falling short of mass production standards. It remains uncertain whether it can be used in the flagship Galaxy S25 series smartphones in the future.

The report further indicates that this yield rate is still insufficient for mass production, which typically requires yields to be increased to over 60%. Therefore, Samsung Electronics’ System LSI department reportedly plans to work on improving the yield rate of the Exynos 2500 processor in the second half of this year.

The report states that it is still uncertain whether the Exynos 2500 processor can be used in the future Galaxy S25 series flagship smartphones. Since there is still considerable time before the official launch of the Galaxy S25 series, Samsung hopes to improve the yield rate of the Exynos 2500 processor to 60% by October this year.

On the other hand, TSMC is overwhelmed with 3nm orders, with major companies like Apple, NVIDIA, AMD, Qualcomm, Intel, and MediaTek all utilizing TSMC’s 3nm process. Per a report from TechNews, during TSMC’s technology forum on May 23, the 3nm production capacity this year has more than tripled compared to last year, but this is actually still not enough, so efforts are still being made to meet customer demand.

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• [News] Major Clients Reportedly Fully Allocate TSMC’s Production Capacity Until 2026, 3nm Process in High Demand
• [News] Samsung Reportedly to Challenge Apple/TSMC with 3nm Exynos W1000

(Photo credit: Samsung)