As per a report from Reuters, US Commerce Secretary Raimondo stated on May 8th that the need for the government to take the threat posed by China-produced connected cars more seriously, suggesting potential “extreme action” to restrict or prohibit the import of such vehicles to prevent the leakage of data belonging to US citizens.

Regarding the national security risk investigation launched by Washington earlier this year into Chinese automobiles, Raimondo expressed concerns that Chinese connected vehicles could collect a vast amount of data about Americans, including who they are, what they say in their car, where they go to, as well as their patterns of driving.

Per Reuters, the US administration initiated a review in February this year on whether the import of Chinese automobiles poses a national security risk. Raimondo stated on May 8th that the Department of Commerce is reviewing the public’s comments on this review submitted before April 30th.

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• [News] U.S. Imposes Further Sanctions, Revoking Intel and Qualcomm’s License to Supply Chips to Huawei
• [News] US Considers Sanctioning Huawei-Linked Chinese Chip Network, Huawei-Related Enterprises Blacklisted

(Photo credit: Pixabay)

According to sources cited in a report from Bloomberg, the US administration is expected to announce its decisions on tariffs for imported goods from China as early as next week. The tariff decision is anticipated to target key strategic industries, including electric cars, The tariff decision is anticipated to target key strategic industries, such as electric cars, and will reject the across-the-board hikes sought by previous policies.

Bloomberg further indicates that the latest tariff decision is the culmination of a review of the final outcome of the so-called Section 301 tariffs, which were initially implemented during the previous US administration starting in 2018.

The US government is now preparing to impose targeted new tariffs on key industries such as electric cars, batteries, and solar cells. The full decision statement is expected to largely maintain existing tariffs.

Two sources cited by the report stated that the US government plans to announce this tariff policy next Tuesday. The full details are currently unclear.

Regarding this matter, the White House has declined to comment.

Besides the rumored new tariffs, per an announcement of the US government, it indicated that the US government would triple the tariff rate on steel and aluminum imports from China. The US believes it is necessary to strengthen countermeasures against products overcapacity and non-market investments from the Chinese government.

The punitive tariff rate was previously at 15%. In 2020, during the administration of the previous government, it decreased to 7.5% after the US-China trade negotiations reached an agreement. If the rate triples, it will approach the highest level of punitive tariffs, nearly 25%.

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• [News] US Government Considers Adding ChangXin Memory Technologies to Entity List, Imposing Further Sanctions on Chinese Firms
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• DRAM Industry Sees Nearly 30% Revenue Growth in 4Q23 Due to Rising Prices and Volume, Says TrendForce

(Photo credit: iStock)

On May 9th, China’s leading semiconductor foundry, SMIC International, announced its financial report for the first quarter of this year. It revealed a revenue of USD 1.75 billion, a year-on-year increase of 19.7%, and a net profit of USD 71.8 million, marking a significant 68.9% decrease compared to the same period last year, falling below market expectations of USD 76.8 million.

According to its financial data, SMIC’s gross profit margin for the first quarter of this year was 13.7%, not only lower than the 16.4% in the fourth quarter of 2023 but also significantly lower than the 20.8% in the first quarter of 2023.

Per a report from Economic Daily News, SMIC’s management stated that global customer’s willingness for restocking had increased in the first quarter, with the company shipping 1.79 million 8-inch equivalent wafers, a 7% increase from the previous quarter. The capacity utilization rate reached 80.8%, up 4 percentage points from the previous quarter.

For the second quarter of this year, SMIC estimates that the early pull-in demand from some customers is still ongoing, with the company giving revenue guidance of a 5% to 7% increase from the previous quarter. With the expansion of production capacity, depreciation is increasing each quarter, the gross margin guidance is between 9% and 11%.

SMIC further indicated that, assuming no significant changes in the external environment for the full year, the company’s goal is for sales revenue growth to exceed the industry average.

In addition, China’s second-largest semiconductor foundry, Hua Hong, also released its first-quarter financial report, with revenue of CNY 3.297 billion, a year-on-year decrease of 24.62%, and a net profit of CNY 220 million, a year-on-year decrease of 78.76%.

Hua Hong estimates that its main business for the second quarter of 2024 will be between USD 470 million and 500 million, with a gross margin of approximately 6% to 10% for its main business.

Regarding the development of China’s foundry industry, TrendForce previously reported that from 2023 to 2027, propelled by policies and incentives promoting local production and IC development, China’s mature process capacity is anticipated to grow from 29% this year to 33% by 2027. Leading the charge are giants like SMIC, HuaHong Group, and Nexchip. Globally, the ratio of mature (>28nm) to advanced (<16nm) processes is projected to hover around 7:3.

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• [News] Sales Decline Leads to Sharp Profit Drop for SMIC in 2023
• [News] SMIC’s Net Profit Halved Last Year, Faces Further Reductions This Year

(Photo credit: SMIC)

According to a report from Bloomberg, Intel, the chip giant, expects its revenue for the current quarter to be impacted after the US government revoked chip sales licenses to Huawei. Intel estimates that its revenue for the second quarter of this year will be below USD 13 billion, though still within the previously projected range of USD 12.5 billion to 13.5 billion. The company’s full-year financial forecast remains unchanged, with both revenue and profits expected to grow.

The U.S. government has reportedly revoked the licenses of Intel and Qualcomm to supply semiconductor chips used in laptops and handsets to Huawei. According to Reuters citing sources, some companies received notices on May 7th, and the revocation of the licenses took immediate effect.

Huawei unveiled its first AI notebook last month, which is powered by Intel chips. This has sparked dissatisfaction among some US lawmakers, who have called for the revocation of related export licenses.

In 2019, the US government added Huawei to the “Entity List,” prohibiting suppliers from providing goods to Huawei without an export license. However, US suppliers such as Intel and Qualcomm were granted permission to continue supplying certain chips to Huawei, including central processors for laptops and 4G smartphone chips.

Amid the escalating US-China tech war, these export licenses have allowed some companies to maintain stable revenue from the Chinese market.

Huawei has become the epicenter of the US-China trade conflict, with the US restricting Huawei’s access to Qualcomm’s latest 5G chips and implementing comprehensive controls on NVIDIA’s AI chips, limiting Huawei’s business growth. On the other hand, China has initiated countermeasures, demanding the telecom industry to cease using foreign chips by 2027.

The US Republican Representative Elise Stefanik believes that revoking the licenses will strengthen U.S. national security, protect U.S. intellectual property rights, and thus weaken the technological advancement capabilities of communist China.

Akash Palkhiwala, Qualcomm’s CFO, stated in early May that as the Chinese telecom industry shifts towards 5G development and stops procuring Qualcomm’s approved 4G chips, the company anticipates earning no revenue from Huawei by 2025.

Read more

• [News] U.S. Imposes Further Sanctions, Revoking Intel and Qualcomm’s License to Supply Chips to Huawei
• [News] U.S. Department of Commerce Claims Huawei Chips Not as Advanced, Lag Behind U.S. Chips by Several Years

(Photo credit: iStock)

SK Hynix has reportedly decided to sell the subsidiary equipment of its Chinese manufacturing plant to an investment company owned by the Wuxi Municipal Government, leading to speculation that SK Hynix may be withdrawing from its Chinese manufacturing business.

According to reports from The Korea Economy Daily and Reuters, industry sources have revealed that SK Hynix’s subsidiary, SK Hynix System IC, which operates 8-inch wafer manufacturing, recently held a board meeting and decided to sell a 21.3% stake in SK Hynix System IC (Wuxi) for KRW 205.4 billion (roughly USD 150.8 million) to Wuxi Industry Development Group.

Additionally, as per the Reuter’s report, SK Hynix System IC said it will also sell its intangible assets, including process technology to its Wuxi unit for KRW 123.8 billion.

The sources cited by The Korea Economy Daily‘s report have revealed that Wuxi Industry Development Group has additionally issued new shares to acquire a 28.6% stake, indicating that SK hynix is highly likely to sell nearly 50% of its shares.

Just in March, per a report from Chosun Daily, SK Hynix planned the closure of its Shanghai-based company established in 2006, shifting its focus to Wuxi, where its semiconductor manufacturing plant is located, making it the new business hub in China. However, this recent withdrawal suggests that SK hynix may be considering a complete exit from the Chinese semiconductor foundry market.

SK Hynix’s decision to downsize its Chinese foundry business comes amid a worsening semiconductor market, compounded by aggressive capacity expansions by domestic companies, making it difficult to maintain competitiveness. Additionally, China is actively expanding its 8-inch wafer plants to counter US export restrictions and is heavily investing in nurturing leading domestic foundry enterprises such as SMIC and Hua Hong Semiconductor.

As per data from the National Bureau of Statistics of China, semiconductor capacity in China surged by 40% in the first quarter, with SMIC’s overall capacity increasing by over 12%, despite a slowdown in foundry demand.

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• [News] Three-way Contest for HBM Dominance, Uncertainties Surrounding China’s Supply Chain Involvement
• [News] Increasing HBM Capacity to Sustain Market Share, SK Hynix Rumored to Upgrade Wuxi Plant

(Photo credit: SK Hynix)