Despite Western chip equipment export bans, China reportedly has imported 32 lithography systems from the Netherlands in Jan-Feb 2024, marking a 256.1% YoY growth.

According to China Customs data, Jan-Feb 2024 imports from the Netherlands totaled USD 1.057 billion, up 256.1% YoY, but down 44.8% QoQ, with 32 systems imported. January saw USD 666 million imports, up 522% YoY, down 41% QoQ, with 20 systems; February recorded USD 390 million imports, up 105.9% YoY, down 41.4% QoQ, with 12 systems.

From the data, it’s evident that in 2024, China’s imports of lithography systems from the Netherlands saw significant growth compared to the same period last year, but a noticeable decline from the previous quarter. In the first two months, China’s imports of exposure machines from the Netherlands decreased by 44.8% compared to December last year.

Per a report from IJIWEI, the average price of lithography systems imported from the Netherlands to China has increased from USD 10 million per unit since May last year to USD 30 million per unit. As of the first two months of 2024, the average price remains above USD 30 million.

According to a report by China’s Media outlet ICsmart, in terms of imports based on domestic registration locations, from January to February 2024, a total of 9 provinces and cities imported lithography systems. The top 5 importers were Shanghai (USD 303 million), Beijing (USD 145 million), Shandong (USD 131 million), Sichuan (USD 131 million), and Guangdong (USD 117 million), accounting for 28.7%, 13.8%, 12.4%, 12.4%, and 11.1% respectively, totaling 78.4%.

In June 2023, the Netherlands announced restrictions on the export of chip manufacturing equipment. According to relevant export regulations, it became difficult for Chinese companies to obtain export licenses starting from January 1, 2024.

Thus, since the second half of 2023, there has been explosive growth in the amount of exposure machines imported from the Netherlands. As per a previous report from South China Morning Post, in November 2023, China witnessed a remarkable 1050% surge in the import value of crucial chip manufacturing lithography equipment from the Netherlands.

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(Photo credit: ASML)

In an interview with Chinese media Sina, Lisa Su, CEO of AMD, emphasized that AI is the most revolutionary technology in the past 50 years. She believes that AI-powered PCs will play a crucial role in driving the growth of the PC market this year.

Su led AMD’s AI PC Innovation Summit in Beijing last week, showcasing the development momentum within China’s AI PC ecosystem. She shared these insights during interviews with Sina, which was then published on March 26th.

Lisa Su asserts that AI is propelling a revolution, marking the most transformative technology in nearly 50 years, swiftly reshaping all facets of the tech industry. From data centers to AI-powered PCs and edge computing, AMD is excited about the opportunities presented by this new era of computing.

Su emphasizes that PCs serve as the daily tools for users to interact with AI through personalized experiences. Leveraging Ryzen AI’s leading edge and extensive ecosystem partnerships, AMD aims to deliver seamless AI experiences from the cloud to the PC.

Lisa Su acknowledges that the global PC market saw a decline post-pandemic, but anticipates some level of growth this year, driven by AI-powered PCs prompting consumers to upgrade their devices.

She believes that while most AI PCs currently target the high-end segment, over time, they are expected to penetrate every price range.

Regarding the applications of AI PCs, Su finds communication, productivity, and creativity particularly exciting. Many applications are still in their early stages, but she expects to see more developments in the coming years.

Lisa Su also mentioned a compelling incentive for people to upgrade to AI PCs: increased efficiency. She posed a question to the media, asking if users would be willing to purchase an AI PC if it could save them 5 hours of work per week. In her view, “everyone’s answer would be YES.”

AMD is strategically positioning itself in the AI market. In December last year, it announced that its accelerated processing unit (APU) MI300A had entered mass production, while the AI accelerator GPU MI300X had begun shipping. Meanwhile, its new Ryzen 8040 series laptop processors have also hit the market, aiming to capture the AI PC market.

To deliver AI experience on PCs, AMD utilizes three computing engines: CPU based on Zen architecture, GPU based on RDNA architecture, and the XDNA-based AI engine, also known as the Neural Processing Unit (NPU). Additionally, its Ryzen 8040 series processors offer leading-edge computing and AI experiences. By the end of this year, the company plans to engage over 150 independent software vendors in developing for Ryzen AI.

TrendForce previously issued an analysis in a press release, indicating that the AI PC market is propelled by two key drivers: Firstly, demand for terminal applications, mainly dominated by Microsoft through its Windows OS and Office suite, is a significant factor. Microsoft is poised to integrate Copilot into the next generation of Windows, making Copilot a fundamental requirement for AI PCs.

Secondly, Intel, as a leading CPU manufacturer, is advocating for AI PCs that combine CPU, GPU, and NPU architectures to enable a variety of terminal AI applications.

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(Photo credit: AMD)

Apple is reportedly intensifying its AI efforts, with plans to collaborate with Baidu on the Chinese version of its iPhone 16 series this year, as per a report from Economic Daily News. The devices will feature Baidu’s developed Generative AI technology, thus sparking a new wave of AI server deployment by Baidu.

In China, due to official requirements, providing generative AI services to ordinary consumers requires prior approval and scrutiny from relevant authorities. Only Chinese companies like Baidu and Alibaba have been granted permission. Apple has chosen Baidu as its AI service partner in the Chinese market.

According to the aforementioned reports, Apple and Baidu have entered into negotiations, planning to integrate Baidu’s generative AI services into products such as the iPhone for sale in China. By incorporating a Chinese version of AI, Apple aims to enhance its competitive advantage in the Chinese market.

Inventec, a Taiwanese manufacturer, has had close collaboration with Baidu for 13 years in the field of customized server manufacturing, has jointly developed an AI computing platform. Serving as a key server manufacturing partner for Baidu’s “All in AI” strategy, Inventec plays a major role in Apple’s swift push into the Chinese AI market alongside Baidu.

Inventec has traditionally refrained from commenting on order dynamics and customer relationships, emphasizing instead the robust shipment momentum of AI servers this year. Shipments are expected to more than double compared to last year. With AI server revenue accounting for approximately 5% to 6% last year, it is projected to surpass 10% this year.

Sources cited by the same report from Economic Daily News are optimistic that with Baidu becoming a key partner for Apple in the China’s generative AI landscape, Inventec’s AI server shipment momentum is poised to amplify, benefiting from the opportunities brought by the collaboration between Apple and Baidu.

As per a previous report from TrendForce, Baidu’s foray into AI chips can be traced back to as early as 2011. After seven years of development, Baidu officially unveiled its self-developed AI chip, Kunlun 1, in 2018. Built on a 14nm process and utilizing the self-developed XPU architecture, Kunlun 1 entered mass production in 2020. It is primarily employed in Baidu’s search engine and Xiaodu businesses.

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(Photo credit: Apple)

Weak demand in mature process has triggered another wave of foundries’ price reductions. According to a report from Economic Daily News citing industry sources, some foundries have been continuously adjusting their quotes for mature process downward by single-digit percentages (4% to 6%) this quarter.

With mature process production capacity continuing to expand in China, it is reportedly estimated that prices may decrease further in the second quarter, leading to a cumulative reduction of around 10% for the first half of the year.

Overview of Foundries’ Price Reductions in Mature Process

According to the same report citing sources, IC design companies that previously tape out to Chinese foundries primarily focused on driver ICs. However, recently, some power management IC companies have gradually increased orders to Chinese foundries. Currently, the price difference between foundry services in Taiwan and China can be as high as 20% to 30%.

Regarding this wave of price reductions in mature process, an unnamed sources from the IC design industry cited by the report disclosed that the price reduction for Taiwanese foundries is at least in the low single-digit percentage range (1% to 3%), while for Chinese foundries, it is in the mid-single-digit percentage range (4% to 6%). If the order volume is large, prices can be negotiated even lower, or different discount methods may be available.

Reportedly, as Chinese foundries continue to increase their production capacity for mature process, supported by subsidies from the Chinese government, they maintain considerable flexibility in pricing strategies. As long as customers are willing to provide a certain quantity of orders, prices above the variable costs can be negotiated. Therefore, there is indeed room for further price reductions in the second quarter.

Regarding mature process, IC design companies cited in the report mention that the high-demand 28-nanometer process still faces supply shortages and may even see price increases. However, for the 40-nanometer and 55-nanometer processes, where the increase in production capacity outpaces the return of demand, price reductions are essentially the only option.

With China’s significant investment in mature nodes, it is positioned at a time when the global chip industry is poised for recovery. According to a recent TrendForce’s data, China currently has 44 operational fabs, with an additional 22 under construction. By the end of 2024, 32 Chinese fabs will expand their capacity for 28-nanometer and older mature chips.

TrendForce predicts that by 2027, China’s share of mature process capacity in the global market will increase from 31% in 2023 to 39%, with further growth potential if equipment procurement progresses smoothly.

However, compared to the proactive pricing strategies adopted by Chinese foundries, Taiwanese foundries have been relatively firm in their pricing.

For example, TSMC emphasizes that while it has faced significant pricing pressure from counterparts in China recently, the company is not prepared to engage in a price war. Instead, it anticipates seizing opportunities to attract orders from European and American clients. TSMC aims for moderate growth this year.

Regarding IC pricing, IC design companies cited by the report acknowledge that although their IC production costs have decreased, customers also demand price reductions. Caught between customers and foundries, both of which are larger in scale than IC design companies, it is difficult to predict how well operations will perform this year amidst ongoing challenges.

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• [News] China’s ICs Imports Decrease in 2023, Chinese Manufacturers Focus on Mature Processes

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The US-China tech war continues to escalate, as reported by the Financial Times (FT). Beijing has reportedly instructed official institutions in China to refrain from using PCs and servers equipped with microprocessors from Intel and AMD, as well as to reduce procurement of Microsoft Windows operating systems and database software outside of China.

In response to these reports, both Microsoft and Intel have declined to comment, while AMD, China’s Ministry of Finance, Ministry of Industry and Information Technology, and the China Information Security Evaluation Center have not responded to requests for comment from FT reporters.

FT further reveals that Chinese authorities have requested state-owned enterprises to promote localization internally. Intel and AMD are the two major semiconductor giants in the United States, dominating nearly all global market shares of PC processors.

As both Intel and AMD are significant customers of TSMC’s advanced process nodes, this move is expected to influence TSMC’s future order status. Regarding China’s full-scale development of proprietary computer processors, its potential impact on ASIC-related companies in Taiwan remains to be seen.

As per Industry sources cited by the report, they have suggested that this move by Chinese authorities demonstrates their determination to strengthen local semiconductor autonomy and enhance manufacturing and design capabilities. On the manufacturing side, the focus remains on supporting SMIC, while chip design is primarily led by companies such as Huawei and Phytium.

Per the same report, following the release of new guidelines by China’s Ministry of Finance and Ministry of Industry and Information Technology on December 26th last year, officials have begun adhering to the latest standards for PC, laptop, and server procurement this year. They have mandated that government departments at the township level and above, as well as party organizations, must incorporate standards for purchasing “secure and trustworthy” processors and operating systems.

The China Information Technology Security Evaluation Center has published the first list of “safe and reliable” processors and operating systems, all of which are from Chinese enterprises.

Among the 18 approved processors are chips from Huawei and Phytium. Chinese processor manufacturers are utilizing a hybrid architecture combining Intel x86, Arm, and self-developed designs for chip production, while operating systems are sourced from open-source Linux software.

Prior to the speculated tightening of restrictions by China on the United States, a report from Bloomberg citing sources had already signaled that the US government is considering adding Chinese semiconductor companies linked to Huawei to a blacklist.

Currently, companies that have been listed on the entity list by the US Department of Commerce include Huawei, SMIC (Semiconductor Manufacturing International Corporation), and Shanghai Micro Electronics. Additionally, China’s other major memory manufacturer, Yangtze Memory Technology Corp, was added to this restriction list in 2022.

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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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(Photo credit: iStock)