U.S. Commerce Secretary Gina Raimondo recently stated that chips used by the Chinese company Huawei in their earlier Mate 60 Pro smartphone are not as advanced as those produced in the United States.

According to a report from Reuters, Huawei has been under trade restrictions since 2019, surprised the global industry and the U.S. government in August 2023 by unveiling a new smartphone featuring advanced chips. Despite Washington’s ongoing efforts to weaken China’s capabilities in advanced semiconductor research and production, the Huawei Mate 60 Pro is still regarded as a symbol of technological breakthrough in China.

Following the release of the chips used in the Mate 60 Pro, many believed that Gina Raimondo’s efforts to restrict Chinese semiconductors were futile. However, Gina Raimondo recently refuted this viewpoint. She pointed out that the new chips introduced by Huawei are not as capable and lag behind U.S. chips by several years in performance, indicating that U.S. export controls on China are effective.

The same report indicates that Washington has been striving for years to weaken China’s capabilities in advanced chip production and the manufacture of equipment required for these chips. The concern is that these chips could be used to enhance China’s military capabilities, with Huawei being a key player.

Therefore, after Huawei was placed on the U.S. government’s Entity List for export control in 2019, related U.S. suppliers struggled to obtain licenses to ship goods to Huawei. Notably, the sources cited in the report cited by Reuters on March 12th once stated that Intel’s competitor, AMD, had applied for a similar license to sell comparable chips in early 2021 but did not receive approval from the US Department of Commerce.

Nevertheless, Intel has been granted licenses worth billions of dollars to continue selling products to Huawei. Additionally, Huawei has also launched its first artificial intelligence notebook featuring Intel chips this month, leading to further controversies. Moreover, as per reports from The Register, Intel is reportedly preparing to follow in NVIDIA’s footsteps by developing “special edition” versions of its AI acceleration chips, Gaudi 3, for the Chinese market.

When asked if the White House’s stance on business with China is tough enough, Gina Raimondo emphasized the need for accountability from companies and everyone alike. She acknowledged that it wasn’t popular with suppliers when she told them they couldn’t sell semiconductor products to China, but ultimately she made that decision.

The emergence of the new generation of Huawei smartphones has also prompted the US administration to conduct dismantling reviews and gain insights into the technology details behind the chips, which are the most advanced semiconductors produced by China to date. However, few details about the related review have been disclosed.

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According to a report by the South China Morning Post on April 18th, encouraged by official support and continuous industry investment in expansion, China’s total chip production in the first quarter of 2024 reportedly surged by 40% to reach 98.1 billion units. This further highlights China’s shift towards ramping up mature processes in semiconductor development, especially amidst the export restrictions. Additionally, chip production capacity is rapidly expanding.

Recent data released by China’s National Bureau of Statistics shows that chip production grew by 28.4% in March alone, reaching a record high of 36.2 billion units.

Reportedly, the substantial growth in chip production in China is partly attributed to strong demand from downstream industries such as new energy vehicles. Data shows that in the full year of 2023, China’s production of new energy vehicles reached 9.587 million units, a year-on-year increase of 35.8%. In the first quarter of this year, the production of new energy vehicles increased by 29.2% to 2.08 million units. Additionally, in the first quarter of this year, China’s smartphone production increased by 16.7%.

In recent years, with semiconductor plants emerging across various regions, China’s chip production capacity has been continuously expanding. The chip production volume in the first three months of this year is nearly double that of the same period in 2019.

The International Semiconductor Industry Association (SEMI) released a global fab forecast report at the end of last year, indicating that China’s share of global semiconductor capacity will continue to expand, attributed to local government funding injections and other incentive measures. Chinese chip manufacturers may add 18 new fabs in 2024, with wafer annual capacity rising from 7.6 million units in 2023 to 8.6 million units this year.

A report from the American think tank, the Center for Strategic and International Studies (CSIS), also noted that due to U.S. restrictions on advanced chip technology and equipment to China, new investment projects in China’s semiconductor production are focusing on mature process chips.

Data from TrendForce indicates that China’s fabs hits 77, mainly targeting on the mature process.

Researchers cited in the report suggest that the unintended consequence of U.S. export controls on advanced chip technology to China may result in a wave of state-supported investments, leading to overproduction and potentially allowing China to dominate global traditional chip production.

The same reports also indicate that despite China’s strong push for chip self-sufficiency, the country still heavily relies on chip imports. Data from the General Administration of Customs of China shows that in the first quarter of this year, chip imports to China increased by 12.7% year-on-year, reaching 121.5 billion units, while chip exports grew modestly by 3% to 62.4 billion units. Chips remained China’s largest imported commodity in 2023, surpassing crude oil.

However, it’s important to note that a significant portion of the chips imported into China are designed by Chinese chip design firms but manufactured by overseas foundries.

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According to a report from WeChat account “Chip_Inside,” Allen Wu (Wu Xiong’ang), the former CEO of Arm China, has returned to the chip industry and set his sights on the “archrival” of his former employer’s technology – RISC-V. Sources familiar with the matter indicated that many former Arm employees have joined his new company.

Industry sources cited in the same report revealed that a company named “Zhongzhi Chip (Shanghai) Technology Co., Ltd.” is actively recruiting RISC-V professionals, and it is being spearheaded behind the scenes by Wu.

Related information indicates, founded on September 11, 2023, the company is a technology innovation company focusing on RISC-V processor IP and computing platform solutions. With a global team led by world-class chip experts, the company possesses top-tier IP technology development and commercialization experiences.

The industry media has not yet obtained accurate information about whether this new company is planning for independent research and development or acting as the Chinese agent for Tenstorrent, the company where Jim Keller serves as CEO. However, given the recruitment information released by the company, the latter situation is more likely to happen, despite no confirmation.

Said to be backed by abundant resources and shareholders with strong competence, the company has partnered with several stellar global RISC-V chip companies in technology, and works closely with numerous domestic industry leaders, which enable it to rapidly achieve scale growth in revenue and market cap.

The company insists on being a neutral IP company to empower the development of domestic technology applications and will make unremitting efforts to become an international benchmark in the processor IP industry.

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The leading Dutch semiconductor equipment company ASML has reportedly predicted continued strong demand from Chinese customers, with approximately 20% of the company’s backlog attributed to them.

According to reports from Reuters and CNBC, ASML CEO Peter Wennink stated during the first-quarter (January-March) earnings call on April 17th that discussions are ongoing between the Dutch and U.S. governments regarding national security concerns.

In October 2023, the U.S. Department of Commerce expanded its export control regulations on China, with the new provisions taking effect from November 2023.

These regulations specifically restrict the Dutch company ASML from selling certain immersion Deep Ultraviolet (DUV) lithography equipment to Chinese facilities engaged in advanced semiconductor manufacturing. Consequently, Chinese customers turned to purchasing mature process equipment in large quantities, leading to nearly 2 consecutive months of surge in China’s equipment import at that time.

As per information disclosed by ASML during its earnings call, it is currently able to continue serving Chinese customers who have already installed its equipment.

ASML’s CFO Roger Dassen further indicated that Chinese customers account for approximately 20% of the company’s backlog orders. He noted that Chinese chip manufacturers are expanding their production for mature processes, with these chips falling outside the export restrictions of the United States and its allies, primarily used in appliances like refrigerators, phones, toys, and automobiles.

Dassen noted that demand from China is robust due to their expansion of production capacity. As a result, China’s global market share is expected to grow larger in the coming years, leading to increased self-sufficiency compared to the present.

Per ASML’s financial report, during Q1, machine revenue from the Taiwan and South Korean markets decreased from the previous quarter’s 13% and 25% to 6% and 19%, respectively. In contrast, machine revenue from the Chinese market increased significantly from 39% to 49%.

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(Photo credit: ASML)

On April 15th, during the Member Representatives Symposium of the World Internet Conference, Jiang Tao, Vice President of Intel, and Mark Murphy, Executive Vice President and CFO of Micron, expressed their respective views on the theme “Interconnection, Mutual Benefit, and Common Prosperity — Building a Community of Shared Future in Cyberspace”, and discussed future development of international organizations and industry hot topics with other member representatives.

• Micron to Continuously Cultivate the Chinese Market and Jointly Shape the Future of the Global Semiconductor Industry

Having been rooted in China for over 20 years, Micron has established close cooperation with its customers.

On March 27, 2024, Micron announced that its new packaging and testing plant in Xi’an had officially broken ground, further strengthening the company’s unwavering commitment to operations, customers, and communities in China. Micron also announced at the groundbreaking ceremony that it will establish its first sustainable Center of Excellence (CoE) for packaging and testing in Xi’an.

In June 2023, Micron announced an additional investment of CNY 4.3 billion in Xi’an, inclusive of the construction of this new plant, introduction of new production lines, and the production of a wider range of product solutions, including but not limited to mobile DRAM, NAND, and SSD, with an aim to expand the existing DRAM packaging and testing capabilities in Xi’an.

Mark Murphy expressed that Micron is deeply rooted in China and has been committed to achieving multi-level development in China for a long time. Micron’s investments in China is a testament of its confidence in the Chinese market, strong semiconductor ecosystem, and high-quality talent. Down the road, it will continue to provide support for its customers and for the innovation in the broader semiconductor ecosystem in China.

• Intel: China Has many Conditions to Attract Global Enterprises

Currently, AI technology enjoys burgeoning growth, empowering various industries.

Intel’s VP Jiang Tao pointed out that China boast a vast market, resilient supply chain, numerous innovative application scenarios, and rich multi-level, high-quality talent resources, which are attractive to all global companies.

He expects that international organizations at the World Internet Conference can play a leading role in promoting AI technology and applications, consolidating industry consensus, and promoting full exchange among government, industry, academia, and relevant professionals in the latest developments and future trends of AI industry.

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(Photo credit: Intel)