Last week, Chinese equities continued to reflect the positive effects of easing policies, with the CSI 300 Index surging nearly 9%.In contrast, the U.S. S&P 500 Index saw a modest increase of only 0.22% due to uneven gains across sectors. In the bond market, the yield on the 10-year and 2-year Treasury note rose as expectations for rate cuts receded, narrowing the 10-year to 2-year yield spread to approximately 5 basis points. Meanwhile, the U.S. dollar index climbed to around the 102 level.

Key Economic Data Review for Last Week:

China PMI: China’s manufacturing PMI for September stood at 49.8 (previous: 49.5), marking the fifth consecutive month of contraction. Among the sub-indices, only the production index returned to expansion territory, while the other indices remained in contraction, indicating that China’s overall manufacturing sector continues to face challenges. Meanwhile, the non-manufacturing PMI came in at 50 (previous: 50.3), ending a two-month rebound. All major indices declined in September, reflecting weak consumer demand, which remained subdued even after a brief summer boost.

Read more at Datatrack

U.S. ISM PMI: The U.S. manufacturing PMI for September was 47.2 (previous: 47.4), remaining in contraction for the sixth consecutive month. While the new orders index and production index improved slightly to 46.1 (previous: 44.6) and 49.8 (unchanged), they remained in contraction, reflecting restrictive financial conditions and uncertainty around the upcoming presidential election, which continued to dampen business investment. In contrast, the services PMI increased to 54.9 (previous: 51.5), reaching its highest level since February 2023. Key sub-indices, such as the business activity index and new orders index, rose to 59.9 (previous: 53.3) and 59.4 (previous: 53.0), respectively, marking the third consecutive month of expansion, with both indices showing gains of more than 6%, highlighting strong demand for U.S. services.

Read more at Datatrack

U.S. Employment Situation: The U.S. unemployment rate for September fell to 4.1%,  better than the previous month and the market expectation of 4.2%. Nonfarm payrolls increased by 254,000 (previous: 159,000), significantly surpassing market expectations of 142,000. Employment growth in September was mainly driven by the leisure and hospitality sector, which added 78,000 jobs, and the education and healthcare sectors, which added 81,000 jobs. Additionally, initial jobless claims have shown a downward trend recently, indicating some improvement in the labor market slowdown.

Read more at Datatrack

Key Economic Data Review for This Week:

U.S. CPI (October 10): The annual growth rate of the August CPI was 2.5% (previous: 2.9%), with a monthly growth rate of 0.2% (unchanged). Core CPI, excluding food and energy, remained stable at an annual growth rate of 3.2% (unchanged), with a monthly growth of 0.3% (previous: 0.2%). Both CPI and core CPI growth rates were the lowest since February 2021. According to the Cleveland Fed, September’s CPI is expected to decrease to 2.25% (August: 2.56%), and core CPI is projected to fall to 3.11% (August: 3.21%).

Read more at Datatrack

FOMC Minutes from September Meeting (October 10): Recent data indicate that inflationary pressures have gradually eased, while the labor market shows no significant signs of deterioration. The focus of the minutes will be on the Federal Reserve’s outlook on the labor market and the economy following the recent 50-basis point rate cut.

University of Michigan Consumer Sentiment Index (October 11): The final reading of the University of Michigan’s consumer sentiment index for September was 70.1, up 2.2 points from August, marking a five-month high. The report highlighted growing consumer optimism about the future, with more consumers expecting a Harris victory in the upcoming election. Inflation expectations for one year ahead fell to 2.7% (previous: 2.8%), while the five-year inflation expectation edged up to 3.1% (previous: 3.0%). The market expects the consumer sentiment index to remain around the 70 level in October.

Read more at Datatrack

To turn adversity around, Intel launched its latest AI accelerator, Gaudi 3, in late September. However, a report by the Economic Daily News indicates that the struggling giant has significantly slashed the chip’s shipment targets by over 30% for next year, which may severely impact orders for its Taiwanese supply chain.

According to the report, the move could be attributed to the Intel’s internal strategy adjustments and the fluctuation of customer demand, which prompts it to cut orders on Taiwanese companies such as TSMC, ASE Technology, and ASIC firm Alchip.

According to industrial sources cited by the report, Intel originally projected to ship 300K to 350K units of Gaudi 3 in 2025. However, the target has now been revised to 200K to 250K units, marking a reduction of more than 30%.

According to the report, after acquiring Israel-based AI chip company Habana Labs in 2019, Intel seems to be relatively conservative about their co-development of the next-gen AI accelerators. Intel’s cautious attitude is evident from its recent moves, such as expediting the conclusion of previous projects like Gaudi 2, as well as lowering the shipment target for Gaudi 3 next year.

Intel declined to comment on the matter, the report notes.

According to industrial sources cited by the report, the adjustment will pose limited impact to TSMC, which manufactures Intel’s Gaudi 3 with its 5nm node. While the demand for the foundry leader’s advanced nodes remains robust, other customers are expected to quickly fill the gap left by Intel.

In terms of IC packaging and testing services provider ASE and its subsidiary SPIL, as they also have a diversified client portfolio, with major tech companies placing orders, the capacity can be swiftly reallocated to minimize the impact, the report suggests.

Nevertheless, for those with smaller scales and a higher client concentration, the impact may be more significant. Taiwanese ASIC firm Alchip, which provides ASIC design services for Intel’s Gaudi 2 and Gaudi 3, therefore, may be more vulnerable to Intel’s potential shipment reduction, according to the report.

Unimicron, which serves as the primary supplier of substrates for Intel’s chips, may also be impacted by the fluctuation of Intel’s orders, the report notes. However, when asked about the potential impact, the company reaffirms its optimistic outlook regarding the second half of 2024, as it expects the demand for AI accelerators and optical modules to be stronger than the first half.

Currently, NVIDIA still holds the throne in the global AI chip market, with rivals such as AMD and Intel eagerly trying to catch up.

Intel’s latest effort, Gaudi 3, boasts 64 Tensor processor cores (TPCs) and eight matrix multiplication engines (MMEs) to accelerate deep neural network computations, and is specifically optimized for large-scale generative AI, according to its press release. It even claims to offer double the performance at the same cost compared to NVIDIA’s H100, the report says.

Read more

• [News] Intel’s Turnaround Hinges on This? Its First 18A Chip in High-volume Makes Official Debut
• [News] A Quick Roundup of Intel’s Five Core Businesses: Key Moves to Watch Next

(Photo credit: Intel)

South Korea’s two major memory chip manufacturers, Samsung Electronics and SK Hynix, are set to release their Q3 earnings reports (July to September) at the end of the month, with Samsung Electronics also announcing its financial forecast on October 8.

According to The Korea Times, the market expects SK Hynix to see a significant surge in operating profit driven by strong demand for high-bandwidth memory (HBM), potentially outperforming Samsung’s semiconductor division.

The Korea Times reports that SK Hynix’s Q3 operating profit is forecast to hit 6.76 trillion won (around $5 billion), with total revenue projected at 17.99 trillion won. If these estimates hold, SK Hynix may set a new record for quarterly operating profit, despite the broader challenges facing the global memory chip market.

On the other hand, Samsung Electronics does not break down individual business units in its earnings forecasts. However, the company’s Device Solutions (DS) division, which handles the memory chip business, is expected to contribute more than half of Samsung’s overall operating profit.

The market anticipates that Samsung Electronics will report an overall Q3 operating profit of 10.77 trillion won, with its DS division’s profit ranging between 5.2 trillion and 6.3 trillion won.

The Korea Times points out that SK Hynix could potentially surpass Samsung in operating profit by 400 billion to 1.5 trillion won, dealing a blow to Samsung’s long-standing dominance as the world’s top memory chipmaker.

There is growing speculation that SK Hynix may overtake Samsung in annual operating profit.

According to Business Korea, SK Hynix has begun mass production of the world’s first 12-layer HBM3E, following its earlier shipment of 8-layer HBM3E to Nvidia, the leading semiconductor company. The company plans to start supplying the 12-layer HBM3E within this year, further strengthening its market position.

TrendForce forecasts that by next year, HBM will account for 10% of total DRAM bit production and contribute more than 30% of DRAM market revenue. Moreover, HBM3E is expected to make up over 80% of the total HBM demand.

(Photo credit: SK Hynix)

Samsung Electronics announced that it has begun mass producing PM9E1, a PCle 5.0 SSD with the industry’s highest performance and largest capacity.

According to Samsung’s press release, the PM9E1, which is built on its in-house 5nm-based controller and eighth-generation V-NAND (V8) technology, will provide powerful performance and enhanced power efficiency, making it an optimal solution for on-device AI PCs.

Key attributes in SSDs, including performance, storage capacity, power efficiency and security, have all been improved compared to its predecessor (PM9A1a), Samsung notes.

According to Samsung, thanks to the eight-channel PCIe 5.0 interface, the sequential read and write speeds of the new SSD have more than doubled compared to the previous generation, reaching up to 14.5 gigabytes-per-second (GB/s) and 13GB/s, respectively.

This powerful performance enables faster data transfer even with data-intensive AI applications, allowing a 14GB large language model (LLM) to be transferred from the SSD to DRAM in less than a second, Samsung states.

The PM9E1 offers a range of storage options, including 512GB, 1 terabyte (TB), 2TB and the industry’s largest capacity of 4TB. The 4TB option is especially an optimum solution for PC users in need of high-capacity storage for large-sized files such as AI-generated contents, data-heavy programs and high-resolution videos, as well as tasks that require intensive workloads such as gaming.

Additionally, the significantly improved power efficiency of over 50% allows for longer battery life which is ideal for on-device AI applications, according to Samsung.

For stronger security measures, Samsung has applied Security Protocol and Data Model (SPDM) v1.2 to the product. The SPDM specification provides ‘Secure Channel,’ ‘Device Authentication’ and ‘Firmware Tampering Attestation’ technologies that can help prevent supply chain attacks involving forgery or manipulation of stored data in the product during production or distribution processes.

Starting with PM9E1, Samsung plans to expand its advanced SSD offerings to global PC makers and expects to launch PCIe 5.0-based consumer products in the future to solidify its leadership in the on-device AI market.

(Photo credit: Samsung)

While TSMC is making advancements on its 2nm at full throttle, an unexpected risk may be emerging, which might be more severe than most could imagine: power supply. Citing a report by S&P, a report by Wccftech highlights that compared with 2023, the foundry giant’s electricity consumption could nearly triple by 2030, accounting for about 24% of the island’s total electricity usage.

Another report by the Economic Daily News warns that the slow growth in Taiwan’s power generation may pose challenges to TSMC’s chip production, which requires high energy consumption.

Citing the data compiled by a S&P’s report titled “Power Is Increasingly A Credit Risk for TSMC,” Wccftech notes that in 2023, TSMC’s electricity consumption had reached nearly 250 GW, accounting 8% of Taiwan’s total electricity use and almost 16% of the industrial sector’s demand. However, by 2030, TSMC’s share of electricity consumption could soar significantly, contributing 23.7% of the island’s total power usage.

S&P’s calculation is based on the assumption that the TSMC’s wafer shipments will increase by 90% compared to 2023 levels, leading electricity consumption to soar to 794 GW in 2030, Wccftech notes.

It is worth noting that the S&P report, cited by Wccftech, also highlights that extreme ultraviolet (EUV) lithography systems, which are required for processes below 7nm, consume significantly more power than the older deep ultraviolet lithography systems (DUV).

The scenario would weigh heavily on semiconductor heavyweights as they are eagerly pursuing for more advanced nodes. TSMC’s move to 3nm chip production is fueling S&P’s projections of the company’s skyrocketing electricity consumption, Wccftech says.

To put things in context, the report also cites data from Taiwan’s state-owned electricity provider, TaiPower, to show that the island’s electricity reserve margin continues to fall short of the government’s 15% target. While the household electricity consumption continues to decline, TSMC’s power needs, in contrast, keeps growing.

Moreover, according to the Economic Daily News, which also cites S&P’s report, when the electricity reserve margin drops below 10%, the stability of the power supply can be affected.

Citing S&P’s report, the Economic Daily News states that the growth of Taiwan’s power supply is relatively limited. In addition, Taiwan’s policy of replacing cheaper coal and nuclear energy with natural gas and renewable energy will put more pressure on future electricity prices, which may also influence the stability of power supply.

Read more

• [News] TSMC Took Another Step in Advanced Process Expansion

(Photo credit: TSMC)