Luxshare, a crucial player in the Chinese Apple supply chain, is facing challenges in its Indian expansion plans due to the strained relations between China and India. Several Indian media outlets reported that Luxshare has revised its initial investment plan of $330 million, opting to forgo establishing manufacturing facilities in India, stating, “This decision is a setback for India.”

Following these reports, Luxshare clarified on the evening of the 20th that the mentioned reports are inaccurate, emphasizing that Luxshare has not made any $330 million investment decisions in India.

Akin to Taiwanese companies, Chinese companies have been establishing manufacturing facilities in India in recent years as Apple gradually diversifies its supply chain to Vietnam, India, and other locations, reported by ET Telecom. Earlier this year, the Indian government tentatively approved approximately 14 Apple suppliers from China, including Luxshare and Sunny Optical.

However, the condition for approval required these Chinese companies to form joint ventures with local businesses, becoming a hindrance for Chinese investments in India. As a result, some companies are exploring alternative locations. On November 9th, the Bac Giang Industrial Zones Authority in Vietnam announced that Luxshare would make an additional investment of $330 million to construct new production facilities in the province. Indian media interpreted this change in plans by Chinese companies as “India’s loss and Vietnam’s gain.”

In June of this year, Luxshare shareholders expressed concerns about the company’s recent challenges in India. However, Luxshare’s top management emphasized the necessity of comprehensive guarantees in investment, politics, customer relations, and other aspects before contemplating the establishment of manufacturing facilities in India. Currently, Luxshare remains focused on consumer electronics in Vietnam, while maintaining automotive and communication production lines in Mexico.

Chinese media also highlighted that, amid the current tensions in Sino-Indian relations, another major Apple supplier in China, BYD, is facing a similar situation. Previously, BYD planned to expand its presence in India and attempted to establish an iPad assembly line in February 2021. However, BYD announced that this investment had shifted to Vietnam in May, with plans to invest USD 184 million in the production of electronic components.

(Image: Luxshare)

According to ChinaTimes’ report, Big Fund II is once again making strategic moves, this time targeting a stake in Tsing Micro Technology, a company specializing in reconfigurable computing chips.

Reconfigurable architecture chips possess extensive general computing capabilities, making them essential for addressing high computing power demands. Big Fund II’s investment is a proactive step to position itself in the upcoming computing power market, avoiding potential “bottleneck” crises.

Amidst the pressure of technology restrictions from the United States, Big Fund II, tasked with supporting the development of domestic semiconductor companies in China, has been active in recent investment initiatives.

At the end of October this year, Big Fund II invested CNY 14.5 billion, participating in the capital increase of the memory production project at ChangXin XinQiao.

ChinaFund News reports that Tsing Micro Technology’s main business focuses on innovative research and development, as well as industrial applications of reconfigurable computing chips.

Tsing Micro Technology recently underwent a business change, with the addition of ten institutional shareholders, including National Integrated Circuit Industry Investment Fund Phase II (Big Fund II), GigaDevice, CMB International, and Beijing Zhongguancun Science City Technology Growth Investment Partnership, among others. The registered capital of the company increased from approximately CNY 33.18 million to around CNY 38.9 million, with Big Fund II holding a 5.8824% stake.

The report highlights that Tsing Micro Technology’s technical team originates from the reconfigurable computing team at Beijing Tsinghua University’s Institute of Microelectronics. The team has been selected for three consecutive years (since 2021) in EETimes’s “Silicon 100: Startups Worth Watching” list.

Tsing Micro Technology’s Co-founder and CTO, Peng Ouyang, stated in November 2022 that faced with the explosive growth in the demand for computing power due to artificial intelligence, mainstream GPU chips require significant investment and cannot meet the “computing power black hole” brought about by the development of large models. He emphasized that reconfigurable computing chips are a solution to this challenge.

Since 2019, Tsing Micro Technology has undergone multiple rounds of financing. In January 2019, angel investors included Baidu and Focus Media. Subsequent Series A funding involved investments from SK Hynix in South Korea, Green Pine Capital Partners, and SenseTime, among others. Series B financing was led by CDB RW Funds, with participation from SenseTime and Legend Capital.

Read more

• [News] China’s Big Fund Drive Changxin Xinqiao towards 3-Year Memory Chip Mass Production
• [News] With two October Investments, Big Fund Phase II Commits Nearly 19 Billion RMB

(Photo credit: Tsing Micro Tech)

According to the article written by Tony Chen, Head of Investment Research at UBS Asset Management, the European Commission initiated an investigation in October into Chinese electric car manufacturers suspected of receiving national subsidies. The EU believes that Chinese state subsidies will create an “unfair trade competition environment” for EU electric car manufacturers.

If the EU’s investigation uncovers “subsidy evidence,” it will result in the calculation of corresponding “average anti-subsidy taxes,” which will apply to all electric vehicles imported from China, including prominent models produced in China such as Volkswagen, Tesla, BMW, and others.

The UBS research team suggests that, in the worst-case scenario, the EU may impose additional tariffs on Chinese electric cars imported into the EU.

What led to the trade conflict between China and the EU in electric vehicles? Firstly, the disparity in tariffs plays a crucial role.

Currently, Chinese cars entering the European market face a 10% import tariff, while in China, the situation is reversed, with a 15% tariff imposed on cars imported from Europe. This significant gap indicates potential room for negotiation.

Additionally, a report from the European Commission reveals that China’s market share for electric vehicles in Europe has risen to 8%, with expectations to reach 15% by 2025.

However, this figure includes cars manufactured in China for international brands, not exclusively domestically produced Chinese electric vehicles. According to JATO, an automotive industry research organization, the market share of “pure” Chinese brand electric vehicles in Europe was still below 1% as of the first half of this year. Nevertheless, overall, it underscores the strong presence of Chinese-manufactured electric vehicles in Europe.

From a practical standpoint, initiating a trade war in the electric vehicle sector involves consideration of various complex background factors. China is not only a primary supplier of raw materials to Europe but also a crucial market for European brands. In fact, China is already the world’s largest sales market for electric vehicles.

Chinese Electric Cars Enjoy High Margins, Positioned for Price Wars

The research team at UBS believes that, given the potential to boost sales through lower pricing, the competitive pricing of electric vehicles between Chinese and European brands will be crucial. Taking Tesla as an example, the company has adopted an aggressive pricing strategy for its EVs. In April, Tesla lowered the selling prices in the European region, with the retail price for the popular Model Y around €46,000. According to JATO, the Model Y is currently the best-selling EV in the European Union this year, showcasing the positive impact of a competitive pricing strategy on sales.

Following this argument, another set of data from JATO reveals that the selling prices of Chinese brand EVs in Europe range from €50,000 to €60,000, approximately in line with the European average.

In comparison, the average selling price of Chinese EVs domestically in China is only around €30,000. This indicates that Chinese EV manufacturers exporting to the European market enjoy relatively higher margins, providing them with the capability to engage in price wars. One major reason for the cost advantage of Chinese electric cars lies in battery manufacturing.

According to a previous report by TrendForce, Chinese battery manufacturers command a global market share exceeding 60%, allowing them to cover the entire battery production chain, share production costs, and continually advance new technologies. Since batteries represent approximately 40% of the total vehicle cost, Chinese electric cars offer superior cost-effectiveness.

On the other hand, the space for European car manufacturers to gain a competitive advantage through subsidies has gradually diminished. As the EV market expands, government subsidies in Europe are losing momentum. Germany has already reduced EV subsidies from €5,000 per vehicle to €3,000 this year.

Similarly, subsidies in the Netherlands, of a similar scale, are subject to quota limitations and were even exhausted by mid-2022. This implies that entering a price war could place European EVs at a relative disadvantage.

Overall, the EV market exhibits high price sensitivity, and European automakers face challenges in terms of cost competitiveness. In contrast, Chinese EV manufacturers have a cost advantage. Consequently, there is a growing possibility of a trade conflict in the European electric vehicle market.

(Photo credit: Pixabay)

In the previous articles (China Strives to Break Through U.S. Restrictions in Mature Processes, Aiming for Over 30% Global Share by 2027 and China’s Wafer Fabs Hits 44 with Future Expansion 32, Mainly Targeting on The Mature Process) we explored the overall layout of Chinese wafer fab and developments in 12-inch and 8-inch wafer foundries. This article shifts to navigating the challenges of preventing oversupply while strategically pushing forward in the realm of mature processes.

Due to the counterattack of international giants in mature processes leads to fierce competition for orders, the recent surge in mature processes over the past two years in fact has brought pressure to Chinese wafer fabs. From the perspective of the industry chain, it may also cause industry overcapacity.

The popularity of mature processes can be traced back to its extensive application market, research and development of advanced processes approaching the limit of Moore’s Law.

No need to say it also reflects the regular operation of market dynamics. In the current economic downturn, the demand for automotive electronics and industrial control systems(ICS) is booming, with 80% of their demand falling under mature processes. As the AI trend rises, many high-end AI and computing chips in China cannot adopt advanced processes, prompting a reconsideration of design changes to use multiple mature process chips instead of a single high-end process chip. This not only ensures shipments but also indirectly increases the synchronous multiplier of mature process chips.

Can Specialty Processes Become a Blue Ocean for China?

With the emergence of new demands in downstream application scenarios, the variety of semiconductor products continues to increase. Industry insiders state that global foundries are competing to target mature process wafer foundries. In this context, Chinese wafer fabs should focus on creating differentiation.

Therefore, specialty processes are gradually gaining attention in the current development of wafer foundries. In comparison to advanced logic processes, specialty processes particularly emphasize the research, innovation, and application of new materials (SiC and GaN are currently popular), new structures, and new devices. Specialty processes highlight wafer processes with custom capabilities for special IP and diverse technological categories. This is considered an important development branch beyond Moore’s Law, which involves continually reducing the linewidth to enhance chip integration.

Specialty process product categories are extensive and can form a competitive advantage in specific areas. These mainly include embedded/independent non-volatile memory, power devices, analog and power management, sensors, and other process platforms.

Representative enterprises in China’s specialty process industry include SMIC, Huarun Microelectronics, and Huahong Group. These companies attach great importance to the development of specialty processes. To meet the differentiated demands for product functionality and performance in the market, enterprises continually research and innovate wafer manufacturing process technologies, evolving into differentiated manufacturing processes.

For example, Huahong Semiconductor’s specialty processes include power management, radio frequency, power devices, and other platforms, especially in wafer foundry for power devices; Huarun focuses on high-voltage power BCD, high-performance BCD, high-reliability BCD, high-precision analog, MEMS, and six major special power device simulation wafer foundry processes.

Major wafer foundries have always attached great importance to the development of specialty processes. TSMC’s specialty process is leading by far, while GlobalFoundries and UMC are also focusing on mature processes and specialty processes. It is not difficult to predict that there will be fewer and fewer participants chasing advanced processes in the future, and new entrants will compete for the market in specialty processes.
(Image: SMIC)

On August 7th, HuaHong Group officially went public on the Sci-Tech Innovation Board Market, Shanghai Stock Exchange (STAR Market, SSE). Combined with the return of SMIC to A-shares (China’s domestic shares) in the past two years and Nexchip’s listing in May, it brings together the three major players in China’s foundry sector on the STAR Market. Additionally, SMEC, closely linked to SMIC, also went public on the STAR Market without turning a profit. Overall, China’s foundry industry is steadily gaining strength.

As per TrendForce’s latest research, challenges in the economic outlook and ongoing inventory issues this year have led to a slowdown in demand. This is particularly noticeable in the automotive and industrial control, where inventory has been piling up after short-term fulfillment. Fabless and other IDM inventory digestion have faced severe restrictions. IDM foundries, launching new capacities, are consolidating outsourced orders and once again reducing orders to foundries. In 2024, given the expected unfavorable economic environment, the overall recovery of capacity utilization poses challenges.

While Chinese foundries have not been immune to these challenges, the losses have been mitigated thanks to the boost in China’s import substitution policies on semiconductors. According to TrendForce, the global ratio of mature (>28nm) to advanced (<16nm) processes is projected to hover around 7:3 from 2023 to 2027. Propelled by policies and incentives promoting local production and domestic 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.

Exploring China’s Wafer Foundries Landscape

According to TrendForce, excluding 7 temporarily suspended fabs, China currently operates 44 fabs (25 fabs in 12-inch, 4 fabs in 6-inch wafers, and 15 in 8-inch fabs and production lines), additionally, 22 fabs are under construction (15 fabs in 12-inch, and 8 fabs in 8-inch). In the future, SMIC, Nexchip, CXMT, and Silan plan to construct 10 fabs (9 fabs in 12-inch, and 1 fab in 8-inch). Overall, by the end of 2024, China aims to establish 32 large fabs, and all of them are about to focus on mature processes.

Reviewing the distribution of wafer foundries across China, the Yangtze Delta region hosts nearly half of the total, with significant concentrations in provinces like Shanghai, Wuxi, Beijing, Hefei, Chengdu, and Shenzhen.

Nearly 4.14 million wafer capacity in 12-inch will be ongoing per month in China until 2026

In terms of capacity, the statistics showed that China currently operates 31 fabs in 12-inch, including those under construction with fixed capacity for 12-inch. The total monthly capacity is approximately 1.189 million wafer capacity. Compared to the planned monthly capacity of 2.17 million wafer capacity, the capacity utilization of these fabs is close to 54.48%, still a significant room for expansion.

Considering construction and future planning, it is anticipated that China will add 24 fabs in 12-inch in the next five years, with a planned monthly capacity of 2.223 million wafer capacity. Assuming all planned 12-inch wafer foundries achieve full production, by the end of 2026, the total monthly capacity of 12-inch in China will exceed 4.14 million wafer capacity, marking a 248.19% increase compared to the current capacity utilization rate.

Explore more

• TrendForce Foresees China’s Mature Wafer Processes to Expand to 33% by 2027, Japan Secures Advanced Processes