According to a report from global media outlet Financial Times citing sources, Chinese authorities plan to implement mandatory reviews of large AI models. Reportedly, Chinese government officials are testing the large language models of AI companies to ensure that the systems embody core socialist values.

The Cyberspace Administration of China is said to have required major tech companies such as ByteDance, Alibaba, Moonshot, and 01.AI, as well as AI startups, to participate in these mandatory reviews.

Sources indicate that this effort involves testing a range of responses from the large AI  models, including those on politically sensitive topics in China and related to Chinese President Xi Jinping. Officials from the Cyberspace Administration of China’s local branches are conducting the reviews, examining the models’ training data and other security processes.

A Hangzhou-based AI company reported that the Cyberspace Administration has dedicated teams for this task, who visit offices to conduct audits. The company mentioned that their first review did not pass, and after months of adjustments and communication with peers, they passed the second review.

Regarding the aforementioned matter, the Cyberspace Administration, ByteDance, Alibaba, Moonshot, Baidu, and 01.AI have not yet responded.

(Photo credit: Alibaba)

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Recently, China’s National Integrated Circuit Industry Investment Fund Phase II (referred to as the ““Big Fund” Phase II”) has made frequent investment, successively acquiring stakes in the wafer manufacturing company Chongqing Xinlian Microelectronics Co., Ltd. (referred to as “XLMEC”) and the new silicon wafer enterprise Taiyuan Jinke Silicon Material Technology Co., Ltd. (referred to as “Jinke Silicon Material”).

“Big Fund” Phase II give priority to investing in semiconductor equipment and materials industries, with an emphasis on the upstream industrial chain covering film equipment, testing equipment, as well as materials like photoresists and masks.

According to statistics from Wechat Account Global Semiconductor, the “Big Fund” Phase II has initiated several investment over the past half year, involving companies such as IC design company Joywell Semi, EDA tool development startup Amedac, semiconductor equipment company SMIF, ceramic material developer Genori, EDA tool company Nine Cube, IP supplier KNL, JCET Auto Electronics (Shanghai) and CMOS millimeter-wave radar SoC chip company Calterah.

• “Big Fund” Phase II Invested Fab XLMEC with CNY 2.1 Billion

Recently, according to the latest information from QCC, Chongqing XLMEC has undergone several industrial and commercial changes. Notably, “Big Fund” Phase II has been added as a new shareholder, with a committed investment amounting to CNY 2.155 billion, representing a stake of 24.77% in XLMEC.

XLMEC’s business scope includes integrated circuit design, integrated circuit manufacturing, integrated circuit chip and product manufacturing, integrated circuit chip design and services, and semiconductor device-specific equipment manufacturing.

The company is positioned as a leading specialty process wafer fabrication plant in the western region of China, with the goal of becoming an advanced automotive-grade chip manufacturing company. As a fully state-owned company, it undertakes a project of building a 12-inch advanced specialty integrated circuit process line.

The first phase of the project plans for a capacity of 20,000 wafers, dedicated to becoming a significant strategic backup for the national integrated circuit industry in the west of China, ensuring the security of the integrated circuit supply chain.

Located in the Xiyong Microelectronics Industrial Park in Chongqing, XLMEC is counted as a focal project jointly developed by the Chongqing and High-tech Zone governments as part of the “33618” modern manufacturing cluster system and a key project for the transformation and upgrading of Chongqing’s high-end manufacturing and integrated circuit industries.

As a major project initiated by the Chongqing Municipal Government, it has a total investment exceeding several billion yuan, focusing on the R&D and production of 55-28nm technology nodes, with a planned total capacity of 40,000 wafers per month, of which the first phase capacity is 20,000 wafers per month.

• “Big Fund” Phase II Jointly Established a Silicon Material Company in Taiyuan Shanxi

As per Tianyancha, Jinke Silicon Material was established on July 15 with a registered capital of CNY 5.5 billion. It is jointly held by “Big Fund” Phase II, Taiyuan Jinke Semiconductor Technology Co., Ltd. (referred to as “Taiyuan Jinke Semiconductor”), and Taiyuan Fenshui Capital Management Co., Ltd, with a business scope including the manufacturing of semiconductor discrete devices, electronic special materials, other electronic devices, and integrated circuits.

In terms of equity structure, “Big Fund” Phase II holds 27.27%, Taiyuan Jinke Semiconductor 50.91%, and Taiyuan Fenshui Capital Management 21.82%. It is understood that Taiyuan Jinke Semiconductor is a wholly-owned subsidiary of Shanghai ZINGSEMI, which is itself wholly owned by National Silicon Industry Group (NSIG).

On June 11, NSIG announced its plan to invest in the capacity upgrade project for 300mm silicon wafers used in integrated circuits, with a total expected investment of about CNY 13.2 billion. It is learned that this investment will be implemented in two parts: the Taiyuan project and the Shanghai project, with the former expected to involve a total investment of about CNY 9.1 billion.

The implementing entity for the Taiyuan project is Jinke Silicon Material, which was co-founded by three parties: ZINGSEMI or its subsidiary (intended investment of CNY 2.8 billion), the “Big Fund” Phase II (intended investment of CNY 1.5 billion), and Taiyuan Fenshui Capital Management or its subsidiary (intended investment of CNY 1.2 billion), with a total joint investment of CNY 5.5 billion.

Upon its establishment, Jinke Silicon Material will primarily engage in the 300mm semiconductor silicon wafer business, implementing the capacity upgrade Taiyuan project for 300mm silicon wafers used in integrated circuits.

This project is scheduled to achieve a total capacity of 600,000 wafers per month for crystal pulling (including heavily doped wafers) and 200,000 wafers per month for slicing, grinding, and polishing (including heavily doped wafers). It will also promote the continuous upgrade and iteration of 300mm silicon wafer technology to meet the process requirements of various technical nodes in Chinese market.

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(Photo credit: XLMEC)

According to a report from TechNews citing industry sources, the US is considering expanding sanctions, with the next focus on China’s mature semiconductor processes. In addition to imposing tariffs, the determination of the chip’s origin will be strictly enforced. The standard, which previously considered the final packaging point, will now trace back to the front-end manufacturing and photomask origin.

Reportedly, it is believed that the US will significantly escalate the trade war after the presidential election, intensifying export restrictions on China. Currently, new tariffs of over 10% are being imposed on products from countries other than the US, and there are plans to impose tariffs of 60% or higher on Chinese goods.

It is noteworthy that the US government previously announced the imposition or increase of tariffs on Chinese electric vehicles, semiconductors, lithium batteries, and other products, with the semiconductor tariff rate set to rise from 25% to 50% by 2025.

The sources cited by the report believe that tariffs do indeed reduce imports and encourage the production of industries such as semiconductors, computer equipment, and steel in US factories. However, the cost is very high, potentially offsetting any overall benefits. Research indicates that tariffs lead to higher prices for US consumers and factories that rely on foreign inputs, and reduce exports of certain US goods that face retaliatory measures.

Meanwhile, for the future direction of the US, it can be inferred that chips manufactured in Taiwan and South Korea may also face tariffs.

Due to the intensification of the US-China tech war, the US is considering expanding export restrictions, targeting the mature processes that China is starting to shift towards. There have been continuous reports of China expanding its mature processes, raising global concerns about overcapacity in mature processes. The US government may in the future use tariff barriers to prevent products containing chips made with Chinese mature processes from being sold overseas at low prices.

The sources cited by TechNews further report that the determination standard will change from the final packaging location to whether the origin of the chip and photomask is manufactured in China.

In addition, Bloomberg also reports that the US administration is considering using the “Foreign Direct Product Rule” (FDPR). Under this rule, if a product uses any US technology, the US can implement controls. The US government has also notified companies such as Tokyo Electron and ASML that if they continue to supply advanced chip technology to China, the US will consider imposing the strictest trade control measures.

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• [News] Taiwanese Foundries and Networking Companies to Benefit amid Escalating US-China Tech War
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(Photo credit: iStock)

Following the launch of Eight Measures for Deepening the Reform of the STAR Market to Serve Technological Innovation and New Qualitative Productivity (Hereinafter referred to as “The Eight Measures”) by China Securities Regulatory Commission (CSRC) in June, China’s semiconductor industry has embraced new opportunities for merger, acquisition and re-organization.

• Two M&A Deals Occurred in China’s Semiconductor Industry

On the heels of UNT and Novosense, two more mergers and acquisitions have recently took place in China’s semiconductor industry.

Semiconductor component manufacturer Fortune-Semi intends to acquire 100% equity of Yesemi Precision Semiconductor for no more than CNY 800 million, while power management chip and signal chain chip manufacturer Halo Micro plans to acquire a 30.91% stake in Korean chip design company Zinitix.

It’s learned that Yesemi Precision Semiconductor was founded in 2015 with a registered capital of CNY 143 million. It mainly focuses on customers of mainstream domestic 12-inch fabs, offering non-metallic component consumables based on silicon, silicon carbide, and quartz, metal component consumables based on aluminum and other metal materials, as well as services for the repair, recycling cleaning, and coating regeneration of core components from fabs.

Some of the company’s products have passed the advanced process certification of mainstream domestic 12-inch fab customers and have been produced at scale and delivered.

As per Halo Micro’s announcement, its wholly-owned subsidiary HMI plans to acquire a 30.91% stake in Zinitix for KRW 21.005 billion, becoming the largest shareholder of Zinitix and dominating its board seats.

Founded in 2000 and listed on the KOSDAQ in 2019, Zinitix is an integrated circuit design company providing touch controller chip, autofocus chip, haptic driver chip, DC/DC power management chip, touchpad module, and audio amplifier for applications such as smartphone, smartwatch, and tablet. Currently, Zinitix’s main products have entered the supply chain system of Samsung Electronics, becoming one of its suppliers for consumer electronics products like smartphones.

• China’s Semiconductor Industry Enters a Golden Period for Integration

On June 19, CSRC released the “Eight Measures”, proposing to provide stronger support for M&A, encourage STAR Market-listed companies to engage in M&A activities along the industrial chain, enhance the inclusiveness of M&A valuation, and support STAR Market-listed companies in acquiring high-quality but not yet profitable enterprises boasting cutting-edge technologies. This proposal have received vigorous responses from Chinese IC enterprises.

The “Eight Measures” policy and the active cooperation of IC companies have invigorated China’s semiconductor M&A market recently. Within less than a month, several M&A deals occurred. In addition to the aforementioned two transactions, wafer foundry UNT and chip design company Novosense also disclosed acquisition plans on June 21 and June 23, respectively.

UNT was the first company in the semiconductor field to take action following the release of the “Eight Measures.” The company plans to acquire the remaining 72.33% equity of UNT Yuezhou. As for Novosense, it announced to acquire 79.31% of Magntek’s shares for CNY 793 million. Based on Magntek’s book assets of CNY 148 million, the deal price represents a premium of around 6.78 times.

Industry sources cited by the report believe that the semiconductor industry is at the bottom of its cycle, making it a “golden period” for industry integration.

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(Photo credit: UNT)

According to a report from Commercial Times, with expectations that tensions between the U.S. and China remain unresolved for the time being, and China’s continued production in mature process semiconductor foundries and communication equipment, the trend of decoupling from China is likely to expand.

The U.S.-China trade war has continued for several years, with the U.S. announcing in May an additional tariff on Chinese imports, including a substantial 50% tariff on semiconductor products manufactured in China by 2025. This move has further intensified the trade conflict between the two superpowers.

Thus, as per the same report, as concerns over overcapacity in various industrial products in China heighten this year, coupling with the unresolved U.S.-China relations, Taiwanese foundries including UMC, VIS, Powerchip, and networking companies such as WNC, SERCOM and Arcadyan may be benefited from the potential increased outsourcing orders.

Consequently, despite aggressive pricing competition from Chinese mature process foundries, the average selling price (ASP) and overall operational performance of Taiwan’s major mature process foundries have exceeded expectations in the first half of this year.

TrendForce previously indicated that, the supply chain’s order-shifting has become more proactive with the imposition of US tariffs. Qualcomm, which began cooperation discussions with Vanguard in 2021, has made its production plans more aggressive this year. This has prompted Vanguard to expand the first-phase capacity of its new Fab5 plant by 3Q24 and to complete cross-plant validation for Qualcomm’s PMIC to meet demand. Since 2022, MPS has also started shifting orders, including plans with both Vanguard and PSMC.

In recent years, the limitations on Chinese companies’ expansion in the U.S. have also allowed Taiwanese networking companies to capture significant American infrastructure opportunities. WNC covers optical fiber, 5G FWA, and enterprise networking businesses, with over 60% of its revenue from the Americas. SERCOMM Corporation has penetrated the North American optical fiber broadband upgrade market, securing key North American telecom operators. Meanwhile, Arcadyan Technologys’ optical fiber products have entered top-tier North American telecom operators.

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• [News] China Contributes Over 40% of U.S. Chip Equipment Makers’ Revenue despite Export Controls
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(Photo credit: iStock)