According to sources cited in a report from Reuters, NVIDIA is said to be planning to design a new flagship AI chip tailored for the Chinese market, which will still comply with current U.S. export control regulations.

NVIDIA, the global AI chip giant, unveiled its Blackwell chip series in March this year, with mass production expected to start later this year. The B200 chip in this series boasts powerful performance, capable of completing chatbot response tasks at speeds up to 30 times faster than the previous generation.

The sources cited by Reuters further point out that NVIDIA will collaborate with China’s Inspur to launch and sell this chip, tentatively codenamed B20. Inspur is one of NVIDIA’s primary distribution partners in China.

Currently, NVIDIA’s spokesperson has declined to comment on this news, and Inspur has also not issued any statements.

The U.S. government, citing national security concerns, began strictly tightening controls on the export of advanced semiconductors to China in 2023. Since then, NVIDIA has released three chips specifically for the Chinese market.

Per a previous report from TechNews citing industry sources, it is also believed that the US will significantly escalate the trade war after the presidential election, intensifying export restrictions on China.

It is noteworthy that the US government previously announced the imposition or increase of tariffs on Chinese electric vehicles, semiconductors, lithium batteries, and other products, with the semiconductor tariff rate set to rise from 25% to 50% by 2025.  Meanwhile, for the future direction of the US, it can be inferred that chips manufactured in Taiwan and South Korea may also face tariffs.

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• [News] U.S. Reportedly Enhancing Chip Export Restrictions to China, while NVIDIA’s H20 Might Get Banned
• [News] China’s Third Big Fund Reportedly Set to Inject USD 27 Billion to Counter US Chip Restrictions

(Photo credit: NVIDIA)

According to a report from Tom’s Hardware, the U.S. is considering implementing new trade sanctions on China, looking to limit China’s access to advanced AI chip technology. This could result in a ban on NVIDIA’s HGX-H20 AI GPUs to China. If implemented, NVIDIA could potentially lose roughly USD 12 billion in revenue.

To comply with U.S. export regulations, NVIDIA introduced the HGX H20 GPU specifically for the Chinese market. Although it has reduced performance, it still offers powerful AI capabilities.

As per the report, the HGX H20 GPU features 296 INT8 TOPS/FP8 TFLOPS computational performance, 96 GB of HBM3 memory, and 4.0 TB/s memory bandwidth, making it competitive with the current entry-level AI chips on the market. Despite its downgraded performance, the HGX H20 outperforms Huawei’s self-developed Ascend 920 series AI chips in practical applications due to its better memory performance.

However, during the U.S. semiconductor export policy review in October, NVIDIA’s HGX H20 GPU might face a sales ban. The anticipated restrictions could take various forms, including product-specific bans, reduced computational power, or limited memory capacity.

Most Chinese AI companies have built their application ecosystems on NVIDIA’s CUDA computing platform, which makes switching to other platforms, like Huawei’s Ascend chips, both costly and time-consuming. Although the HGX H20 GPU’s computational performance is significantly lower than the H100, its full compatibility with NVIDIA’s CUDA computing platform makes it the preferred choice for many Chinese companies and applications, the report noted.

However, it is worth noting that despite the current export controls on China, Chinese companies still manage to acquire advanced NVIDIA GPU computing power for AI and high-performance computing through intermediaries and by renting cloud service servers from companies like Google and Microsoft. This is a primary reason which prompts the U.S. to tighten restrictions.

Additionally, the U.S. might extend export restrictions to other Asian countries, such as Malaysia, Indonesia, Thailand, and potentially overseas Chinese companies. However, due to the complexity of these measures, effective implementation poses significant challenges, according to the report.

TrendForce notes in April that the extension of export controls now includes not only the previously restricted AI chips from NVIDIA and AMD, such as the NVIDIA A100/H100, AMD MI250/300 series, NVIDIA A800, H800, L40, L40S, and RTX4090, but also their next-generation successors like NVIDIA’s H200, B100, B200, GB200, and AMD’s MI350 series.

In response, HPC manufacturers have quickly developed products that comply with the new TPP and PD standards, such as NVIDIA’s adjusted H20/L20/L2, which remain eligible for export.

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• [News] NVIDIA Reportedly Facing Price Cut Pressure of H20 Chip in China Amid Competition with Huawei
• [News] NVIDIA’s China-Exclusive H20 to Begin Pre-sales Next Month

(Photo credit: NVIDIA)

As geopolitical tensions rise, a significant increase in orders from China for TSMC was seen last quarter. According to a report from Economic Daily News, as the U.S. presidential election countdown continues, both party candidates agree on expanding semiconductor export controls to China. Consequently, Chinese companies are stockpiling chips, causing a surge in rush orders for TSMC.

Regarding concerns that Chinese customers seem to be increasing their orders in response to potential future export controls or tax issues, TSMC did not elaborate much during its previous earnings call. They only mentioned that the increase in orders from Chinese customers was mainly due to high-performance computing (HPC) applications.

Concerning U.S. export control issues, TSMC’s management reiterated throughout 2023 earnings calls that the company will comply with all rules and regulations while serving all customers.

Recently, the proportion of TSMC’s orders from China has risen rapidly. The company’s latest financial report shows that in Q2, North America remained the largest market by customer headquarters location, accounting for 65%. The Chinese market, however, surged to 16%, up from 9% in the first quarter and 12% in the same period last year, replacing the Asia-Pacific region as the second-largest regional market. The Asia-Pacific region’s share fell to 9%, Japan remained at 6%, and the remaining share came from the EMEA region.

The sources cited by the report further indicate that as semiconductor export controls to China tighten, many Chinese companies not yet blacklisted under these controls are proactively placing orders and stockpiling goods, especially for advanced processes below 5 nanometers, which are highly valuable.

The sources noted that the current market atmosphere is quite similar to when Huawei’s HiSilicon excessively stocked up before export controls were imposed. This reflects the active development of Chinese companies in the AI field, not only renting computing power from major U.S. companies but also stockpiling chips and equipment on a large scale.

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• [News] US Reportedly Targeting China’s Mature Semiconductor Processes Next
• [News] Taiwanese Foundries and Networking Companies to Benefit amid Escalating US-China Tech War

(Photo credit: iStock)

According to a report from TechNews citing industry sources, the US is considering expanding sanctions, with the next focus on China’s mature semiconductor processes. In addition to imposing tariffs, the determination of the chip’s origin will be strictly enforced. The standard, which previously considered the final packaging point, will now trace back to the front-end manufacturing and photomask origin.

Reportedly, it is believed that the US will significantly escalate the trade war after the presidential election, intensifying export restrictions on China. Currently, new tariffs of over 10% are being imposed on products from countries other than the US, and there are plans to impose tariffs of 60% or higher on Chinese goods.

It is noteworthy that the US government previously announced the imposition or increase of tariffs on Chinese electric vehicles, semiconductors, lithium batteries, and other products, with the semiconductor tariff rate set to rise from 25% to 50% by 2025.

The sources cited by the report believe that tariffs do indeed reduce imports and encourage the production of industries such as semiconductors, computer equipment, and steel in US factories. However, the cost is very high, potentially offsetting any overall benefits. Research indicates that tariffs lead to higher prices for US consumers and factories that rely on foreign inputs, and reduce exports of certain US goods that face retaliatory measures.

Meanwhile, for the future direction of the US, it can be inferred that chips manufactured in Taiwan and South Korea may also face tariffs.

Due to the intensification of the US-China tech war, the US is considering expanding export restrictions, targeting the mature processes that China is starting to shift towards. There have been continuous reports of China expanding its mature processes, raising global concerns about overcapacity in mature processes. The US government may in the future use tariff barriers to prevent products containing chips made with Chinese mature processes from being sold overseas at low prices.

The sources cited by TechNews further report that the determination standard will change from the final packaging location to whether the origin of the chip and photomask is manufactured in China.

In addition, Bloomberg also reports that the US administration is considering using the “Foreign Direct Product Rule” (FDPR). Under this rule, if a product uses any US technology, the US can implement controls. The US government has also notified companies such as Tokyo Electron and ASML that if they continue to supply advanced chip technology to China, the US will consider imposing the strictest trade control measures.

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• [News] Taiwanese Foundries and Networking Companies to Benefit amid Escalating US-China Tech War
• [News] China Contributes Over 40% of U.S. Chip Equipment Makers’ Revenue despite Export Controls

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According to a report from Commercial Times, with expectations that tensions between the U.S. and China remain unresolved for the time being, and China’s continued production in mature process semiconductor foundries and communication equipment, the trend of decoupling from China is likely to expand.

The U.S.-China trade war has continued for several years, with the U.S. announcing in May an additional tariff on Chinese imports, including a substantial 50% tariff on semiconductor products manufactured in China by 2025. This move has further intensified the trade conflict between the two superpowers.

Thus, as per the same report, as concerns over overcapacity in various industrial products in China heighten this year, coupling with the unresolved U.S.-China relations, Taiwanese foundries including UMC, VIS, Powerchip, and networking companies such as WNC, SERCOM and Arcadyan may be benefited from the potential increased outsourcing orders.

Consequently, despite aggressive pricing competition from Chinese mature process foundries, the average selling price (ASP) and overall operational performance of Taiwan’s major mature process foundries have exceeded expectations in the first half of this year.

TrendForce previously indicated that, the supply chain’s order-shifting has become more proactive with the imposition of US tariffs. Qualcomm, which began cooperation discussions with Vanguard in 2021, has made its production plans more aggressive this year. This has prompted Vanguard to expand the first-phase capacity of its new Fab5 plant by 3Q24 and to complete cross-plant validation for Qualcomm’s PMIC to meet demand. Since 2022, MPS has also started shifting orders, including plans with both Vanguard and PSMC.

In recent years, the limitations on Chinese companies’ expansion in the U.S. have also allowed Taiwanese networking companies to capture significant American infrastructure opportunities. WNC covers optical fiber, 5G FWA, and enterprise networking businesses, with over 60% of its revenue from the Americas. SERCOMM Corporation has penetrated the North American optical fiber broadband upgrade market, securing key North American telecom operators. Meanwhile, Arcadyan Technologys’ optical fiber products have entered top-tier North American telecom operators.

Read more

• [News] China Contributes Over 40% of U.S. Chip Equipment Makers’ Revenue despite Export Controls
• [News] China Lists Semiconductor Self-Reliance Challenges, Excluding Lithography Equipment

(Photo credit: iStock)