Last week, Chinese stocks declined as the absence of new fiscal stimulus measures weighed on the market, with the CSI 300 Index dropping by 3.3%. In contrast, the U.S. S&P 500 Index continued to hit new highs, buoyed by gains across various sectors. In the bond market, easing concerns about the economy pushed the U.S 10-year Treasury yield back above 4%, while the spread between 10-year and 2-year Treasury yields widened to around 13 basis points. The U.S. Dollar Index also edged up slightly to approximately 103.

Key Economic Data Review for Last Week:

U.S. CPI:
The September CPI rose 2.4% year-over-year (previously 2.5%), slightly above market expectations of 2.3%, but still the lowest level since February 2021. This increase primarily reflected higher prices for apparel, medical services, and transportation services.

Meanwhile, rent inflation, which is closely watched by the Federal Reserve, rose 4.8% year-over-year (previously 5.0%), while owners’ equivalent rent increased 5.2% (previously 5.4%), both continuing their gradual decline.

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U.S. Michigan Consumer Sentiment Index:
The preliminary reading for the October University of Michigan Consumer Sentiment Index came in at 68.9, down 1.2 from September. The report showed that consumer optimism about the current economic situation was up 8% compared to the same period last year, although dissatisfaction with high prices remains.

Optimism about business prospects reached its highest level in six months, but confidence in personal finances, both current and future, showed slight declines. With the presidential election approaching, some consumers are finding it difficult to make long-term economic forecasts.

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Key Economic Data Review for This Week:

U.S. Retail Sales (10/17):
September employment data showed that the labor market remains balanced, while services PMI continued to expand, reflecting the resilience of the service sector in supporting U.S. consumption and employment. The market currently expects September retail sales to show a year-over-year decline to 1.8% (previously 2.1%) due to last year’s high base, but strong consumer resilience is likely to support a monthly increase of 0.3% (previously 0.1%).

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Eurozone Monetary Policy Meetings (10/17):
For the first time, the Eurozone’s September Harmonised Index of Consumer Prices (HICP) fell below the 2% target range. With the region’s economy weakening and several central bank officials expressing support for a rate cut, the market expects the European Central Bank to lower rates by 25 basis points in October, with a further 25 basis point cut anticipated in December.

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China GDP (10/18):
Recent monthly data for China’s industrial output, retail sales, and fixed asset investment have all continued to decline. The market expects China’s third-quarter GDP to grow by 4.6% (previously 4.7%) due to weak demand, making the 5% annual growth target increasingly challenging to achieve.

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Over the past few years, major companies around the world have been investing in 8-inch SiC production lines, and these investments are now gradually becoming operational.

Global Layout: 14 New 8-Inch SiC Factories

In the global SiC market, companies such as STMicroelectronics (ST), Onsemi, Infineon, Wolfspeed, ROHM, BOSCH, Fuji Electric, Mitsubishi Electric, Vanguard International Semiconductor (VIS) and EPISIL, Silan Microelectronics, and UNT have all announced plans to build their own 8-inch SiC chip factories, as shown in the image. Many of these companies are also making strides in upstream substrate and epitaxial material segments.

STMicroelectronics (ST): ST announced on May 31 this year the construction of a new 8-inch SiC plant in Catania, Italy, consolidating all aspects of the SiC production process. The new plant is expected to start production in 2026 and reach full capacity by 2033, with a maximum capacity of 15,000 wafers per week and an estimated total investment of around 5 billion EUR.

The 8-inch silicon carbide (SiC) manufacturing plant in Chongqing, China, jointly established by ST and China’s Sanan Optoelectronics, will become ST’s third SiC production center. The project was announced on June 7, 2023, and is expected to begin production in the fourth quarter of 2025, with full completion anticipated by 2028.

Onsemi: Onsemi’s SiC wafer plant in Bucheon, South Korea, completed its expansion in 2023 and plans to transition to 8-inch production by 2025 after completing technology verification. By then, capacity will be expanded to 10 times the current scale.

Infineon: Announced on August 8, 2024, that the first phase of its 8-inch SiC power semiconductor wafer plant in Kulim, Malaysia, has officially started operations, with large-scale production expected by 2025.

Wolfspeed: Wolfspeed has the world’s first and largest 8-inch SiC plant located in Mohawk Valley, New York, which officially opened in April 2022. As of June this year, the factory has achieved a 20% wafer utilization rate.

In January 2023, Wolfspeed and automotive parts supplier ZF announced plans to build the world’s largest and most advanced 8-inch SiC device manufacturing factory in Saarland, Germany. This project has been delayed and is now expected to start at the earliest in 2025.

ROHM: Built a new SiC plant in Chikugo, Fukuoka Prefecture, Japan, which started mass production in 2022 and plans to transition from 6-inch to 8-inch wafer production by 2025. In July 2023, ROHM announced plans to start producing 8-inch SiC substrates at its second factory in Miyazaki Prefecture, Japan, by the end of 2024.

BOSCH: BOSCH’s factory in Reutlingen, Germany, started 6-inch SiC wafer production in 2021, with 8-inch SiC wafers currently also produced at this factory. The factory in Roseville, USA, is expected to start 8-inch SiC wafer production by 2026.

Mitsubishi Electric: Announced in late May this year that the 8-inch SiC plant in Kumamoto Prefecture, Japan, will be completed by September 2025, with production moved up to November 2025 from April 2026.

Fuji Electric: In January this year, Fuji Electric announced a 200 billion yen investment over the next three years (fiscal years 2024 to 2026) for SiC power semiconductor production, including an 8-inch SiC capacity at its Matsumoto factory in Japan, expected to start production in 2027.

UNT: Built its first 8-inch SiC MOSFET wafer production line in Yuecheng District, Shaoxing, and completed the engineering batch in April this year, with mass production expected next year.

Silan Microelectronics (Silan): Officially launched China’s first 8-inch SiC power device chip manufacturing line project in Xiamen on June 18 this year, with a total investment of 12 billion RMB.

The project will be built in two phases, with an annual production capacity of 720,000 8-inch SiC power device chips. The first phase investment is 7 billion RMB, expected to complete the initial connection by the end of the third quarter of 2025, with trial production in the fourth quarter and an annual yield target of 20,000 wafers. The second phase investment is about 5 billion RMB.

Vanguard International Semiconductor (VIS) & EPISIL: VIS announced on September 10 a plan to invest 2.48 billion NTD to acquire a 13% stake in EPISIL. The two companies will collaborate on the development and production of 8-inch SiC wafer technology, with mass production expected in the second half of 2026.

Thailand’s First SiC Factory: Recently, FT1 Corporation, a joint venture in Thailand, invested 11.5 billion THB (350 million USD) to build Thailand’s first SiC factory using technology transferred from a Korean chip manufacturer to produce 6-inch and 8-inch wafers. The factory is expected to start production in the first quarter of 2027 to meet the growing demand in automotive, data center, and energy storage markets.

Conclusion

From the aforementioned 14 SiC factory (12 under construction), only Wolfspeed’s Mohawk Valley plant can currently provide 8-inch SiC wafers in the short term. Other manufacturers are expected to start supplying 8-inch SiC wafers gradually from next year.

In light of slow revenue growth in the Chinese market, China’s AI startups are seeking to enter the U.S. market in pursuit of overseas growth opportunities, following the successful model of the short video platform TikTok, according to a report by Commercial Times.

According to a report by the Financial Times, despite U.S. restrictions on chip exports to China, the country still maintains a competitive advantage in launching products like chatbots that do not require substantial computing resources.

The report highlights that Chinese AI companies, including MiniMax, TikTok’s parent company ByteDance, and 01.AI, have introduced AI products overseas, particularly targeting the U.S. market, which boasts a larger base of high-end consumer users.

These Chinese app companies have seen significant success. For instance, the report in Commercial Times points out that the majority of MiniMax’s sales stem from its chatbot application “Talkie,” which has gained immense popularity among American teenagers.

Shanghai-based MiniMax has made major breakthroughs in the past year, and the company plans to reach a sales target of USD 70 million in 2024, Commercial Times notes.

The Financial Times report also highlights that Chinese company ByteDance has launched several AI apps internationally. ByteDance’s photo editing application “Hypic,” along with Zuoyebang’s homework assistant “Question AI,” both made it into the top 20 downloads internationally.

However, according to the Financial Times report, Chinese companies still face certain challenges. Firstly, the opportunities for revenue growth are limited due to the high costs associated with training language models, which can negatively impact the potential of these companies. Additionally, to mitigate external risks, Chinese firms need to take measures such as placing servers outside of China to avoid the potential crisis of TikTok being banned in the United States.

As the AI wave sweeps the globe, the continuous enhancement of computational power and large-scale storage capacity has become a key challenge for national infrastructure and chip companies.

Recently, Chinese chip teams have achieved significant breakthroughs in silicon photonics chips and new high-capacity storage chips, driving advancements in China’s AI and high-performance computing fields.

Chinese Research Team Achieves Breakthrough in Silicon Photonics Chips

According to reports, the Jiufengshan Laboratory (JFS) in Hubei has made milestone progress in the field of silicon photonic integration. They have successfully integrated a laser light source into a silicon-based chip, marking the first time this technology has been achieved in China. This breakthrough addresses the physical bottleneck in large data transmission between chips.

The achievement was made using JFS’s self-developed heterogeneous integration technology, involving complex processes to integrate an indium phosphide laser within an 8-inch SOI wafer. This technology often referred to as “chip light emission,” replaces electrical signals with more efficient optical signals for transmission. Its core purpose is to overcome the physical limitations of electrical signals in chip-to-chip communication.

Currently, the greatest challenge in developing fully integrated silicon photonics platforms lies in the creation and integration of high-efficiency light sources on silicon substrates.

Compared to traditional discrete external optical sources and flip-chip (FC) micro-assembly light sources, JFS’s on-chip light source technology effectively addresses issues such as low coupling efficiency, long alignment time, and insufficient alignment precision in traditional silicon photonics chips. It also overcomes bottlenecks like high production costs, large size, and difficulty in large-scale integration.

China Unveils Its Largest-Capacity Next-Generation Memory Chip

Recently, Wuhan-based company Numemory announced the successful development of China’s first largest-capacity next-generation 3D memory chip, the “NM101.”

This chip employs innovative 3D stacking technology. Based on the principle of resistance changes in new materials, using advanced processes, it integrates billions of non-volatile memory devices on a single chip, achieving a significant breakthrough in memory architecture.

Compared to other large-capacity non-volatile memory products on the market, the “NM101” chip boasts a significant advantage in storage capacity, with a single chip capable of holding up to 64 Gb. It supports random read/write operations, with both read and write speeds exceeding 10 times that of current products, while its lifespan is extended fivefold. These improvements will significantly enhance system solution performance, providing better and more efficient services for applications such as virtualization and databases.

This chip offers new large-capacity, high-density, high-bandwidth, low-latency storage solutions for Chinese data centers and cloud computing providers.

After the People’s Bank of China (PBoC) announced reserve requirement ratio and interest rate cuts on September 24, many economists expected that China would introduce more stimulus measures in the near term. In line with these expectations, the National Development and Reform Commission (NDRC) held a press conference on October 8 to unveil the “Implementation of a Basket of Incremental Policies.”

When questioned by reporters about the implementation and details of the policy, the NDRC largely reiterated previous measures, including increasing government investment, boosting the income of low- and middle-income groups, and providing student-related support programs. However, in terms of future policy details, the only mention was that China would continue issuing ultra-long-term government bonds next year to support major projects and would allocate RMB 100 billion of the 2025 government investment budget to critical areas in advance.

Private consumption and investment were also lacking detailed explanations. In recent years, China’s domestic consumption and investment demand have declined due to the ongoing real estate crisis. According to the latest data, China’s retail sales in August grew by only 2.1%, continuing a downward trend, while financial institution loan balances grew by 8.5% year-on-year, marking the lowest growth in nearly 24 years.

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Overall, compared to the policies announced on September 24, this press conference did not introduce any new major stimulus measures or provide details on policy implementation. Although the NDRC stated that they would release detailed plans soon and expressed confidence in achieving the annual growth target of 5%, the second-quarter GDP growth was only 4.7%, and recent data indicates that domestic demand remains weak, casting doubt on whether the target can be realistically met.

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The market appeared disappointed by the lack of substantive policy announcements. Before the press conference, the CSI 300 Index opened with a 10% gain, but after the event, it gave back approximately 6% of the gains.

Source:  National Development and Reform Commission (NDRC)