Chinese media reported on the 22nd that China’s regulatory authorities are conducting investigations into Foxconn’s factories in Guangdong, Jiangsu, Henan, and Hubei. This comes at a time when Apple’s iPhone 15 series is in full production and seeing high shipment volumes. The investigation may potentially impact the production capacity of the iPhone 15. Market rumors suggest that Apple is considering gradually shifting orders to competitors, which could benefit companies like Luxshare Precision and Pegatron.

According to Taiwan’s Commercial Times, in response to the recent tax inspection, Foxconn emphasized on the 22nd that it would actively cooperate with relevant agencies in their operations. Major suppliers for iPhone 15 lenses, Largan Precision and Genius Electronic Optical, declined to comment on the situation with individual clients but emphasized that their current shipments are not affected.

Influenced by strong competition from Chinese smartphones, including Huawei, and concerns about overheating issues, the appeal of the iPhone 15 has waned, and the highly anticipated iPhone 15 Pro Max’s popularity has declined. In the Asian market, waiting times for the sought-after titanium alloy casing iPhone have been substantially reduced. Shipping times have decreased to approximately two weeks, while in-store pickup can be as fast as three days. Signs of cooling demand are also appearing in Europe and the United States.

Tech industry insiders note that even though demand for the iPhone 15 has decreased, Apple is still considering expanding its supply chain to be prepared for unforeseen circumstances.

In addition, samples of iPhone 16 components and designs are in the sampling stage, with plans to finalize them by January of next year. The recent tax inspection controversy involving Foxconn, combined with the fact that its competitor, Luxshare, has obtained the assembly NPI (New Product Introduction) for the 2024 iPhone 16 Pro Max, further strengthens Luxshare’s presence in the iPhone business. Its share of manufacturing is expected to increase significantly next year.

Furthermore, Luxshare has already become the primary assembly factory for Apple Watch and AirPods, and in 2020, it acquired two iPhone production lines from Wistron. Luxshare is also a major producer for Vision Pro, representing Apple’s accelerated localization efforts and a move away from its dependency on Foxconn.

Read more

• [News] China’s Tax Authorities and Natural Resource Departments Conduct Inspections on Key Foxconn Enterprises
• [News] Luxshare Doubles Business with 3 iPhone 15 Orders, Breaking Foxconn’s High-End Supply Dominance
• [News] Chinese Firms Rise in iPhone Supply Chain, Enter New Optical Component Line

(Photo credit: Apple)

China’s media, Global Times, reported yesterday that China’s tax authorities recently conducted tax inspections on key enterprises of Foxconn in Guangdong and Jiangsu. Meanwhile, the natural resources department conducted on-site investigations into the land usage of Foxconn’s key enterprises in Henan and Hubei.

The Chinese authorities’ actions in auditing taxes and land usage for Foxconn have raised significant concerns in Taiwan’s business community and the tech industry.

Foxconn Group released an official statement yesterday, emphasizing their commitment to legal and compliant practices as fundamental principles in all of their global operations. They also stated their active cooperation with relevant agencies’ operations. Taiwan’s Ministry of Economic Affairs has already been in contact with Foxconn and has offered assistance as necessary.

The Chinese authorities released information regarding their investigation into multiple Foxconn enterprises across China through state media but did not specify the reasons behind these tax and land usage inspections. The investigation results have also not been made public.

(Photo credit: Foxconn’s Stream)

Following the US’s recent expansion of chip control measures targeting China on October 17th, the American chip maker, Advanced Micro Devices (AMD) is reportedly planning workforce reductions of approximately 10% to 15% at its Shanghai research center. Additionally, there are rumors of impending layoffs in the Chinese subsidiary of Synopsys, a leading Electronic Design Automation (EDA) giant from the US.

As reported by the tech media ICsmart, recent leaks on a Chinese social community have hinted at AMD’s workforce cuts in China, which are expected to affect around 10% to 15% of their employees, encompassing roughly 300 to 450 individuals. Notably, the Radeon Technologies Group (RTG) department is anticipated to be significantly affected.

Insiders within AMD revealed that on October 25th, all meeting rooms at the Shanghai research center were pre-booked by the Human Resources department, strongly suggesting that layoffs are on the horizon.

Established in 2006, AMD’s Shanghai research center stands as their largest facility outside of the United States, employing around 3,000 professionals. The center plays a crucial role in designing, developing, and testing products like Central Processing Units (CPUs), Graphics Processing Units (GPUs), and Accelerated Processing Units (APUs). It has been instrumental in introducing innovative products to AMD’s portfolio, such as the Ryzen series processors and Radeon series graphics cards. The RTG department at AMD is responsible for advancing Radeon series graphics card technologies.

AMD’s financial report for the second quarter of this year reveals a total revenue of $5.4 billion, a decline of 18% compared to the previous year. Significantly, the net profit was only $27 million, marking a substantial 94% drop from the same period last year.

China represents AMD’s most substantial overseas market, with sales reaching $5.27 billion in 2022, contributing to 22% of their total revenue.

Reports indicate that the US introduced new bans on Chinese chips on October 7th last year, particularly affecting high-performance chips used for AI computations. On October 17th, the US further tightened these restrictions, leading to the inclusion of more NVIDIA and AMD GPU products, directly impacting AMD’s research and development efforts in mainland China. Given this context, news of AMD layoffs in China doesn’t come as a surprise.

The report also suggests that, while this isn’t something China welcomes, from another perspective, these layoffs might channel more talent towards local GPU manufacturers. Many key figures in Chinese GPU startups have their roots in AMD.

Furthermore, there are rumors that Synopsys recently convened an all-hands meeting, indicating the possibility of impending layoffs.

As a global leader EDA, Synopsys established its presence in China back in 1995 and has since established offices in various cities. The company boasts a workforce of over 1,500 people and has a robust system for technical research and talent development.

The report mentions that the impact of the US restrictions on Synopsys mainly stems from its inability to supply to Chinese chip design companies already included on the US Entity List, such as Huawei’s Hisilicon. While it has negatively impacted its business, the growing trend of Chinese firms pursuing self-developed chip production mitigates the overall impact.

(Image: AMD)

China’s Ministry of Commerce and General Administration of Customs announced on Friday that it is optimizing and adjusting the temporary export control measures for graphite materials, officially incorporating three high-sensitivity graphite items, previously under temporary control, into the dual-use export control list.

According to an announcement on the Ministry of Commerce’s website, China’s export control regulations have been modified to safeguard national security and interests. This move, approved by the State Council of China, aims to optimize and adjust the scope of items as per Announcement No. 50 of 2006, titled “Decision on the Implementation of Temporary Export Control Measures on Graphite-related Products by China’s Ministry of Commerce, National Defense Science and Technology Commission, and General Administration of Customs.” Consequently, export controls are imposed on some items.

Specifically, artificial graphite materials and their products with high purity (purity >99.9%), high strength (flexural strength >30Mpa), and high density (density >1.73g per cubic centimeter), as well as natural flake graphite and its products (including spherical graphite and expanded graphite), will require permits and cannot be exported without permission.

Simultaneously, temporary controls have been removed for five low-sensitivity graphite items mainly used in the national economic base industries, such as steel, metallurgy, and chemicals.

Graphite is used in the production of electric vehicle batteries. According to data from the U.S. Geological Survey, China is the world’s largest producer of graphite, accounting for 67% of the global supply of natural graphite.

A spokesperson for China’s Ministry of Commerce responded to inquiries about the export control policy regarding graphite materials, stating that this policy will officially take effect on December 1st. Prior notifications have been sent to concerned countries and regions.

The spokesperson emphasized that implementing export controls on specific graphite items is a common international practice. As the world’s largest producer and exporter of graphite, China has consistently fulfilled international obligations, including non-proliferation. In line with the need to safeguard national security and interests, China has lawfully imposed export controls on specific graphite items, including temporary measures on some graphite items.

In recent times, based on the Export Control Law, the Chinese government has conducted a comprehensive assessment of temporary control measures for graphite items and has made optimized adjustments to reflect a coordinated development and security control concept. This is advantageous for better adherence to international obligations, ensuring the stability and security of global supply chains, and safeguarding national security and interests. China’s export control adjustments are not targeted at any specific country or region, and items that comply with relevant regulations will be permitted for export.

（Photo credit: BYD）

Amid increased U.S. restrictions on China’s semiconductor industry, Chinese chip equipment manufacturers are witnessing a notable uptick in domestic orders. Over the first eight months of this year, Chinese chip equipment managed to capture nearly half of all orders. This serves as a compelling sign that the fears expressed by companies such as NVIDIA, AMD, and Intel about losing ground to domestic rivals in the Chinese market are materializing.

On October 17th, the Biden administration tightened chip export rules, barring American companies, including NVIDIA, from selling AI chips to China. At the same time, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) placed 13 Chinese GPU firms on its Entity List, further unsettling global semiconductor and AI supply chains. Ironically, these moves could expedite China’s domestic AI chip industry’s advancement amid the pressure.

Huatai Securities’ analysis reveals that Chinese chip foundries have been winning an increasing number of bids for machinery equipment this year. In the first eight months of this year, they secured 47.25% of these bids, with the percentage soaring to 62% in August. In comparison, during March and April, the rate was only 36.3%. This trend reflects a turning point for China’s chip equipment industry and showcases its rapid transition towards self-sufficiency.

As per Reuters, insiders disclosed that prior to the U.S. export bans, China’s advanced chip foundries rarely utilized domestic equipment, reserving it for expanding production. Yet, in reaction to the ongoing restrictions, they’ve proactively started testing homegrown equipment on all foreign devices and plan to fully replace foreign gear with domestic alternatives. This transition has greatly boosted local firms such as AMEC and NAURA.

Analysts observe that China’s local equipment makers have notably enhanced their production capacity, especially in wet etching and cleaning, positioning them for global competition with U.S. counterparts. What’s more, the quality of Chinese-made equipment has surpassed expectations, often advancing by up to two years. The substantial revenue growth in the sector attests to China’s remarkable progress in the semiconductor equipment industry.

Nonetheless, photolithography equipment remains a field where China’s domestic equipment struggles to break through due to its demanding requirements for optical and process precision. China has faced challenges in procuring extreme ultraviolet (EUV) lithography machines crucial for manufacturing cutting-edge chips. The situation is further complicated by the joint efforts of the United States, the Netherlands, Japan, and other allies to restrict the export of advanced deep ultraviolet (DUV) lithography machines to China.
(Image: AMEC)