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)

Though being capable of running AI features may be the primary focus for global smartphones this year, due to restrictions on AI products’ usage in China, the Wall Street Journal reports that the upcoming new iPhone, expected at the end of the year, will not be able to use ChatGPT in China. Apple has reportedly been in discussions with companies like Baidu for potential partnerships, but no progress has been made yet.

China is Apple’s largest market for iPhones outside the United States. While smartphones from various brands will integrate AI this year at full throttle, incorporating apps like OpenAI’s ChatGPT, these apps from Western countries are not permitted for use in the Chinese market. According to the Wall Street Journal, industry insiders indicate that Apple is still searching for a Chinese AI partner. However, with the new iPhone set to launch in a few months, no progress has been made.

Notably, as per a report from TrendForce, in the first quarter, Apple faced a decline in sales in the Chinese market, resulting in a  drop in annual production to 47.9 million units.

In China, companies must obtain government approval to release AI devices. As of March this year, the Office of the Central Cyberspace Affairs Commission has approved 117 generative AI products, none of which are from brands outside of China.

The Wall Street Journal, citing industry sources, reported that Apple had tentatively inquired with Chinese authorities earlier this year about the possibility of allowing foreign language AI models on their smartphones. While believing approval to be unlikely, Apple has reportedly sought partnerships with local companies instead.

One of Apple’s main competitors, Samsung, has already launched the Galaxy S24 this year, featuring real-time translation and AI-enhanced photo editing and search capabilities. Samsung’s phone includes its own generative AI and also collaborates with Google. However, since Google’s AI tool Gemini is not permitted for use in China, Samsung has shifted to partnering with Baidu and Meitu AI.

It is not new for global tech companies to adjust their product and service offerings to cater to the Chinese market. For example, Apple uses state-owned enterprise servers for iCloud in China, and the recently launched Vision Pro cannot stream Apple TV+ in the country.

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• Q1 Smartphone Production Increases Due to Low Base Last Year, Expected to Decline 5–10% in Q2, Says TrendForce
• [News] Continued Slump in iPhone Demand in China – February Shipments Reportedly Plunge by 33%

(Photo credit: Apple)

According to a report from Reuters on June 19, to further restrict China’s semiconductor industry and prevent the use of semiconductor manufacturing equipment in military applications, Alan Estevez, the U.S. Commerce Department’s Under Secretary for Industry and Security, will visit the Netherlands and Japan.

Reportedly, Estevez will visit the Netherlands and Japan, with the primary objective of further limiting China’s ability to manufacture advanced semiconductors and preventing China from using chip manufacturing equipment to enhance its military capabilities. Additionally, the U.S. may add another 11 Chinese chip companies to the restricted list.

Sources cited by the report indicate that this move includes limiting the activities of equipment suppliers such as ASML and Japan’s Tokyo Electron in the Chinese market. Special attention will be given to Chinese chip manufacturers developing high-bandwidth memory (HBM) chips.

The report from also states that in July 2023, to align with U.S. government policies aimed at curbing China’s technological advancements, Japan, home to several chip equipment manufacturers like Nikon and Tokyo Electron, imposed restrictions on the export of 23 types of machinery to China. These machines range from those used for depositing thin films on silicon wafers to etching micro-integrated circuits. Similarly, the U.S. has imposed related restrictions on American companies such as Applied Materials and Lam Research.

Following Japan, the Dutch government also restricted ASML from exporting deep ultraviolet (DUV) lithography machines to China. The U.S. has not allowed some Chinese foundries to purchase additional advanced DUV machines. Prior to this, ASML had already ceased the export of even more advanced extreme ultraviolet (EUV) lithography machines to China.

With the Netherlands imposing new restrictions on the export of advanced chip manufacturing equipment effective from January, ASML previously announced that starting from 2024, they would not be able to ship NXT:2000i and higher DUV lithography equipment to China.

Equipment below NXT:2000i, including NXT:1970i and NXT:1980i, would also be restricted from shipment to advanced process fabs in China. ASML’s Chief Financial Officer, Roger Dassen, anticipated that this will impact 10% to 15% of sales in the Chinese market in 2024.

On the other hand, it has been reported that the U.S. government is in discussions with its allies about adding another 11 Chinese chip manufacturers to the blacklist. During a visit to the Netherlands in April this year, U.S. officials attempted to prevent ASML from continuing to provide maintenance services for equipment used in China. However, since ASML’s service contracts with Chinese customers are still valid and the Dutch government lacks the extraterritorial authority to terminate these contracts, this effort faced significant challenges.

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• [News] Strengthening Controls on Semiconductor Equipment Exports to China, Japan Reportedly Tightens Export Control Measures Further
• [News] ASML Reports Partial Revocation of Export Licenses for DUV Equipment

(Photo credit: iStock)

Recently, global chip giant Intel announced to acquire a stake in Dongguan Luxshare Technology Co., Ltd. (Referred to as “Dongguan Luxshare Technology”), a subsidiary of Luxshare Precision.

According to a report from WeChat account DRAMeXchange citing sources, it has shown that on June 12, Dongguan Luxshare Technology’s registered capital increased from around CNY 571 million to around CNY 589 million, an increase of about 3.1%, with Intel (China) Co., Ltd. as a new shareholder. It is reported that Intel China has invested CNY 17.662 million in the company.

Luxshare Precision primarily provides products for industries including consumer electronics, communications and data centers, automotive electronics, and medical sectors. As its subsidiary, Dongguan Luxshare Technology specializes in the production of communications equipment such as base station antennas, filters, and RRU, as well as interconnect products like connectors, cables, optical modules, and AOC, which have been widely used in applications like wireless communication base stations, data centers, servers, switches, and routers.

As a global leader in the semiconductor industry and computing innovation, Intel achieved a revenue of USD 63 billion in 2022. In the computing sector, statistics showed that in 4Q23, Intel shipped as many as 50 million PC processors, representing a year-on-year increase of 3% and a market share of 78%.

In the semiconductor field, Intel is developing foundry business at full throttle. According to its official website, to meet the growing global semiconductor demand and promote its IDM 2.0 strategy, Intel is ramping up its production capacity by investing about USD 20 billion in building fabs in Arizona and New Mexico, and over USD 20 billion in Ohio for the acquisition of Tower Semiconductor. It plans to pour up to EUR 80 billion to the EU in the entire semiconductor value chain over the next decade.

As per another report from the Securities Times, a source revealed that this cooperation does not involve the consumer electronics field but mainly the communications field. That means future products of Luxshare Precision in this field will be deeply integrated with Intel chips. For instance, both parties will engage in deep collaboration from the product development stage.

Furthermore, industry sources cited by the same report further explained that the transmission rate and bandwidth of communication-related products are fundamentally related to the chips they use. Therefore, Intel’s investment in Luxshare Precision’s subsidiary will enhance the competitiveness of Luxshare Precision’s products in the communications and data center sectors, contributing to the rapid development of this business.

As stated in Luxshare Precision’s annual report, the communications industry embraced new development opportunities amidst the wave of global digital transformation in 2023. Copper connectivity, optical connectivity, thermal modules, servers, and communication RF fields that Luxshare’s business has involved also saw significant growth, which became important drivers for the industry development.

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• [News] Intel CEO Gelsinger Indicates US Chip Restriction Could Force China to Accelerate Development
• [News] Luxshare Reportedly Enters NVIDIA’s Chain, Eyeing at AI Chip Business

(Photo credit: Intel)

Due to the EU’s announcement of increased tariffs on Chinese-made electric vehicles, Tesla has announced that it will raise the price of the Model 3 in the European market starting in July, though the extent of the price increase has not been specified.

According to a report from CNBC, Tesla CEO Elon Musk stated on June 13th that the Model 3 price in the European market will be adjusted starting July 1st due to the EU tariffs, without revealing the specific increase.

Per a report from Reuters, the European Commission has announced that, starting July 4th, it will impose tariffs ranging from 17.4% to 38.1% on electric vehicles imported from China. The tariff rates will vary depending on the extent of government subsidies received by each automaker. This measure aims to prevent Chinese manufacturers benefiting from government subsidies from undercutting the market with cheap electric vehicles, thereby harming the EU automotive industry.

It is unclear how much of a tariff will be imposed on Tesla’s Chinese-made electric vehicles. The European Commission stated that Tesla will be subject to an individually calculated tariff rate. Whether Tesla cooperates with the EU authorities’ anti-subsidy investigation will also influence the final tariff rate applied.

Although the EU has decided to impose high tariffs on Chinese electric vehicles, there are still differing opinions among various parties. The German government and automotive industry have reacted most strongly, fearing it could ignite a China-EU trade war.

Per a report from Xinhua citing sources, Tesla’s Shanghai plant is the U.S. car manufacturer’s first gigafactory outside the US, delivered 947,000 vehicles in 2023.

As per a previous report from Barron’s, German Transport Minister Volker Wissing stated that, “The European Commission’s punitive tariffs hit German companies and their top products. Cars must become cheaper through more competition, open markets and significantly better business conditions in the EU, not through trade war and market isolation.”

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• [News] EU Plans to Impose Tariffs as High as 38.1% on Chinese Electric Vehicles Amid Trade War
• [News] TSMC Reportedly Commences Production of Tesla’s Next-Generation Dojo Chips, Anticipates 40x Increase in Computing Power in 3 Years

(Photo credit: Tesla)