Dutch semiconductor equipment leader ASML Holding N.V. has announced that export licenses for certain equipment have been partially revoked by the Dutch government.

In a press release issued on January 1st, 2024, ASML stated, “A license for the shipment of NXT:2050i and NXT:2100i lithography systems in 2023 has recently been partially revoked by the Dutch government, impacting a small number of customers in China. We do not expect the current revocation of our export license or the latest U.S. export control restrictions to have a material impact on our financial outlook for 2023.”

The press release further stated, “In recent discussions with the US government, ASML has obtained further clarification of the scope and impact of the US export control regulations. The latest US export rules (published October 17, 2023) impose restrictions on certain mid critical DUV immersion lithography systems for a limited number of advanced production facilities.”

Bloomberg reported earlier on January 1^st, 2024, citing unnamed sources, that several weeks before the implementation of export controls on advanced semiconductor equipment in the Netherlands, the U.S. government had requested ASML to cancel the export of certain machines destined for China.

Previously, ASML’s CEO, Peter Wennink, stated that these limitations would exclude the vast majority of Chinese customers in response to the U.S. restrictions. This exclusion is due to the fact that these customers are involved in mature nodes, specifically in the production of semiconductors at 28nm and above.

In addition, last week, the South China Morning Post has cited data, indicating that in November 2023, China had imported critical semiconductor manufacturing lithography equipment from the Netherlands, experiencing a significant surge of 1050% in import value.

In an interview with the South China Morning Post, Jan-Peter Kleinhans, Senior Researcher and Head of Technology and Geopolitics Projects at the Berlin-based think tank “Stiftung Neue Verantwortung” (New Responsibility Foundation), mentioned that the impact on sales would not be immediate following the new U.S. restrictions.

Reportedly, this is because ASML has a lead time of approximately 18 months. This implies that the equipment shipped in the fourth quarter of 2023 would have been ordered in the second or third quarter of 2022, and ASML would apply for export licenses at some point thereafter.

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(Photo credit: ASML)

In November 2023, China witnessed a remarkable 1050% surge in the import value of crucial chip manufacturing lithography equipment from the Netherlands, the primary exporter of photolithography equipment, according to the South China Morning Post.

This surge, measured in terms of value, indicates that Chinese semiconductor companies have managed to maintain a channel for ordering advanced equipment despite the tightened export restrictions imposed by the United States

Lithography equipment holds a paramount position among the ten types of equipment essential in the manufacturing process of integrated circuits (ICs).

Reportedly, despite substantial financial investments, China has been acknowledged to lag behind in this technology for many years. Despite allocating significant funds, the country has still struggled to narrow the gap with leading enterprises in this crucial aspect of IC manufacturing.

Meanwhile, in October, the U.S. Department of Commerce expanded its export control regulations on China, with the new provisions taking effect from November 2023.

These regulations specifically restrict the Dutch company ASML from selling certain immersion Deep Ultraviolet (DUV) lithography equipment to Chinese facilities engaged in advanced semiconductor manufacturing. Consequently, China’s import of equipment has seen a consecutive surge for nearly two months.

In November, China imported 16 lithography equipment units from the Netherlands, valued at USD 762.7 Million, marking a tenfold year-on-year increase. By comparison, in October, China imported 21 lithography equipment units valued at USD 672.5 million, with an average price difference of 46% per unit.

In November of this year, China imported a total of 42 lithography equipment, valued at USD 816.8 million, including 15 units from Japan. When combined, the imports from the Netherlands and Japan accounted for almost the entire amount spent by China on lithography equipment in November.

In response to the U.S. restrictions, ASML’s CEO, Peter Wennink, previously stated that these limitations would exclude the vast majority of Chinese customers. This exclusion is due to the fact that these customers are involved in mature or traditional semiconductor manufacturing, specifically in the production of semiconductors at 28nm and above.

Jan-Peter Kleinhans, Senior Researcher and Head of Technology and Geopolitics Projects at the Berlin-based think tank “Stiftung Neue Verantwortung” (New Responsibility Foundation), mentioned that the impact on sales would not be immediate following the new U.S. restrictions.

As per the report from South China Morning Post, this is because ASML has a lead time of approximately 18 months. This implies that the equipment shipped in the fourth quarter of 2023 would have been ordered in the second or third quarter of 2022, and ASML would apply for export licenses at some point thereafter.

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(Photo credit: ASML)

In response to export restrictions on AI chips by the U.S. Department of Commerce, NVIDIA has previously introduced a China-Exclusive version of its graphics card, featuring the AD102-250 GPU and named GeForce RTX 4090 D.

According to ICsmart’s report, industry insiders has revealed that NVIDIA is rumored to officially unveil GeForce RTX 4090 D on December 28 at 10:00 PM (GMT+8), with the suggested retail price remaining at CNY 12,999.

Due to the impact of the new U.S. export restrictions on semiconductor to China in October this year, NVIDIA’s high-end gaming graphics card, GeForce RTX 4090, faced restrictions in sales in China.

In order to address this issue, NVIDIA decided to develop the customized GeForce RTX 4090 D specifically for the Chinese market. By adjusting certain specifications to comply with U.S. export control requirements, they aim to continue sales in the Chinese market.

According to previous information, the RTX 4090D is still based on TSMC’s 4nm process, featuring the AD102 GPU. However, the core designation changes from AD102-300 to AD102-250, corresponding to a downgrade in specifications. The exact number of CUDA cores is not yet clear, but is expected to be fewer than the 16,384 cores in the RTX 4090.

Additionally, the core base clock will see a slight increase from 2235MHz to 2280MHz, while the boost clock remains at 2520MHz. It is possible that the card will retain 24 GB of GDDR6X memory capacity with over 1 TB/s of bandwidth. The total board power (TBP) is expected to see a slight reduction from 450W to 425W.

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(Photo credit: NVIDIA)

An increasing number of Chinese semiconductor design companies are seeking collaboration with testing and packaging facilities in Malaysia to carry out advanced chip packaging. According to Reuters’ report, this move aims to hedge the risk of potential expanded U.S. restrictions on the Chinese semiconductor industry.

As there is currently only one non-U.S. testing and packaging provider in Malaysia with advanced capabilities, namely ASE Technology Holding Co., a Taiwanese semiconductor packaging and testing firm, industry sources believe that ASE is likely to become the top choice for orders from Chinese enterprises.

Previously, the U.S. has imposed controls on China’s advanced semiconductor manufacturing processes and access to high-performance chips from major companies like NVIDIA. However, advanced packaging has not yet fallen within the restricted scope.

Two anonymous sources reportedly revealed that some of the Chinese businesses are showing interest in advanced chip packaging services. Despite the fact that the chip packaging sector has not yet faced export controls from the U.S., concerns are rising among businesses due to its involvement in sophisticated technology, fearing that it might be targeted for curbs on exports in the future.

Reuters’ report also indicates that due to the relatively affordable investment costs in Malaysia and the availability of experienced workforce and sophisticated equipment, an increasing number of Chinese chip design firms are seeking Malaysian Firms to carry out advanced chip packaging activities, including graphic processing units (GPUs).

Insiders have informed Reuters that the related contracts only involve packaging and do not violate any restrictions imposed by the U.S.. Additionally, they clarified that wafer manufacturing is not included in these contracts.

Two of the sources mentioned that some contracts have already been agreed. However, these insiders prefer not to disclose the names of the involved companies.

Meanwhile, according to a report from Taiwan’s Economic Daily News, when observing the global landscape of advanced packaging, in addition to TSMC, there are integrated device manufacturers (IDMs) like Intel and Samsung, as well as outsourcing semiconductor assembly and test (OSAT) companies like ASE Technology, Amkor, and others that possess advanced packaging capabilities. Among them, only ASE Technology, Amkor, and Intel have production capacity in Malaysia.

Reportedly, industry analysts predict that Chinese companies seeking advanced packaging support in Malaysia, due to geopolitical considerations, are likely to avoid American companies such as Intel and Amkor. Given that ASE is not an American company and can provide high-end packaging services, it is expected to be the preferred choice for Chinese companies.

ASE has previously stated that it will continue to invest in advanced packaging for AI, expecting the performance of advanced packaging to double next year compared to this year.

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(Photo credit: ASE Holdings)

According to a news report from IJIWEI, sources have revealed that NVIDIA has placed urgent orders with TSMC for the production of AI GPU destined for China. These orders fall under the category of “Super Hot Run” (SHR), with plans to commence fulfillment in the first quarter of 2024.

Respond to the United States implementing stricter export controls on the Chinese semiconductor industry, sources stated in the report indicate that NVIDIA plans to provide a new “specialized” AI chip to China by lowering specifications, replacing the export-restricted H800, A800, and L40S series.

Insiders suggest that NVIDIA intends to resume supplying the RTX 4090 chip to China in January of next year but also release a modified version later to comply with U.S. export restrictions. 

On the other hand, NVIDIA continues to increase its orders with TSMC. This move aims to secure TSMC’s manufacturing capacity to meet the demand for the H100. However, due to limitations in CoWoS (Chip-on-Wafer-on-Substrate) production capacity, the H100 GPU is currently facing severe shortages.

It is noted that following NVIDIA, Intel and AMD are also expected to tailor AI chips for China. TSMC, as the primary pure-play foundry partner for these AI chip suppliers, will continue to enjoy a competitive advantage.

According to sources from semiconductor equipment manufacturers, despite TSMC’s efforts to increase CoWoS production capacity, the foundry still cannot meet the growing demand for NVIDIA GPUs. Additionally, the MI300 chip that was recently launched by AMD is also competing for the foundry industry’s production capacity.

Insiders note that TSMC’s ability to expand CoWoS production capacity is limited, with delays in equipment replacement speed, machine installation speed, and labor deployment. The new capacity is expected to be ready by the second quarter of 2024.

Equipment is identified as one of the key variables affecting TSMC’s expansion of CoWoS production capacity. Unexpected impacts on production and delivery times from Japanese equipment supplier Shibaura have delayed the development and installation of new capacity across TSMC’s production lines, including those in Longtan and Zhunan.

TSMC Chairman Mark Liu mentioned in a press conference in September that the shortage of CoWoS packaging capacity at TSMC is temporary, and it will be addressed through capacity expansion within the next year and a half to meet the growing demand.

(Photo credit: TSMC)

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