The US Department of Commerce has added leading Chinese solution provider Sitonholy, who primarily sells processors from Intel and NVIDIA, to its Entity List. This inclusion on the Entity List undoubtedly impacts Sitonholy but also has significant implications for American companies like Intel and NVIDIA.

According to reports from the South China Morning Post and Reuters, Sitonholy sells hardware based on Intel and NVIDIA technologies and also provides cloud services. As a result, US companies engaging in business with Sitonholy require export licenses from the Department of Commerce, but these license applications are presumed to be denied during the review process.

This development is a significant blow to Sitonholy and American companies alike. Kevin Kurland, a US export enforcement official, stated during a hearing of the US Senate subcommittee that the US government has placed four Chinese companies on an export blacklist for assisting the Chinese military in obtaining AI chips. The four Chinese companies are Linkzol Technology, Xi’an Like Innovative Information Technology, Beijing Anwise Technology, and Sitonholy.

A Chinese Foreign Ministry spokesperson criticized the United States for unfairly targeting Chinese companies through export controls and demanded that the US stop politicizing trade and technology issues.

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According to a report from Nikkei News, under the decisive leadership of late Chairman Lee Kun-hee, South Korean company Samsung Electronics had continuously grown and expanded. However, as per the same report, with current leadership showing reluctance to take risks, Samsung has fallen behind competitors like Apple and TSMC.

Under the leadership of late Chairman Lee Kun-hee, Samsung consistently adjusted its product portfolio and reorganized its businesses, becoming a global leader in areas such as TVs, chips, displays, and mobile phones during the 2000s. However, in the decade, Samsung’s revenue and operating profit have remained largely flat, highlighting internal structural issues and a lack of reform.

Reportedly, a Samsung researcher proposed a plan to enhance chip production yield but was told by the supervisor that the proposal cannot be approved without prior examples.

The researcher explained that the reason pursuing this idea specifically is because there were no precedents to follow. Additionally, despite receiving top compensation at Samsung, the same researcher has claimed to be unable to pursue its desired work in recent years.

Most senior managers at Samsung are hired on an annual basis, and those who fail to produce results quickly will not be renewed. In this cutthroat environment, managers urge subordinates to deliver results quickly, leaving engineers with little time to dedicate to research and development projects.

A South Korean engineer who transitioned from Samsung to SK Hynix expressed that compared to Samsung’s elite culture that does not tolerate failure, SK Hynix’s corporate culture encourages employees on the front lines to face new challenges. They emphasized that SK Hynix can’t compete with Samsung without actively adopting new ideas.

Reportedly, this organizational culture at SK Hynix has yielded results in the high-bandwidth memory (HBM) market, with close ties to NVIDIA, surpassing Samsung’s advantages. Samsung has held the top spot in the global DRAM market for over 30 years but faced setbacks due to misjudging the prospects of AI.

Per TrendForce’s data, the three major HBM manufacturers held market shares are as follows: In 2023, SK Hynix and Samsung each held around 47.5%, while Micron’s share was roughly 5%. Still, forecasts indicate that SK Hynix’s market share in 2024 will increase to 52.5%, while Samsung’s will decrease to 42.4%.

Samsung’s declining competitiveness extends beyond memory. The company’s smartphone shipments led globally for over a decade but were surpassed by Apple last year. The reduction in Samsung’s smartphone shipments has also affected the sales of Samsung products used in phones, such as chips and displays.

On the other hand, Samsung set a goal in 2019 to become a global leader in system chips by 2030, but it has consistently lagged behind TSMC. Additionally, with the U.S. government seeking to bring chip manufacturing back to American soil, Intel is also entering the foundry business, putting Samsung under pressure from both TSMC and Intel.

According to TrendForce’s previous report on the fourth quarter of 2023, global semiconductor foundry revenue rankings showed that Intel Foundry Services (IFS), which ranked ninth globally in the third quarter of 2023, was pushed out of the top ten by PSMC and Nexchip due to factors such as the transition between old and new CPU generations and lackluster inventory momentum. At the same time, the top three semiconductor foundries globally were TSMC, Samsung, and GlobalFoundries.

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(Photo credit: Samsung)

Amid escalating tensions in the US-China tech war, rumors cited in reports from The Wall Street Journal and CNBC suggest that China has instructed major local telecom companies to gradually replace foreign chips by 2027, with Intel and AMD as the primary targets.

Sources cited in the same reports reveal that China’s Ministry of Industry and Information Technology (MIIT) has instructed several major local telecom operators to phase out foreign chips used in core telecommunications infrastructure by 2027. This move is expected to impact both Intel and AMD. Regarding this matter, CNBC reports that Intel declined to comment on the report, AMD didn’t respond to a request for comment, either.

It has been reported that Chinese authorities have ordered state-owned telecom operators to inspect their networks for extensive use of non-Chinese manufactured chips and to replace them before the deadline.

In the past, China has attempted to reduce its reliance on foreign chips but has faced obstacles due to a lack of high-quality locally produced chips. However, telecom operators now have more local alternatives for procurement, suggesting that the quality of Chinese-made chips may have become more stable and reliable.

Sources cited in the same reports indicate that this move will have the most significant impact on Intel and AMD, as most of the core processors used in Chinese and global networking equipment come from these two tech giants. However, the exact extent of the impact is still unknown.

On the other hand, a previous report from the Financial Times also indicated that, to refrain from using PCs and servers equipped with microprocessors from Intel and AMD, China implemented new regulations in December of last year requiring government agencies at the county level and above.

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Under pressure from US restrictions, Intel is reportedly preparing to follow in NVIDIA’s footsteps by developing “special edition” versions of its AI acceleration chips, Gaudi 3, for the Chinese market. These two related products are rumored to be launched at the end of June and the end of September.

According to reports from The Register, Intel recently unveiled its new generation AI acceleration chip, Gaudi 3. Intel stated in the Gaudi 3 white paper that it is preparing to launch a special edition Gaudi 3 tailored for the Chinese market. This would include two hardware variants: the HL-328 OAM-compatible Mezzanine Card and the HL-388 PCIe Accelerator Card. The HL-328 is said to be scheduled for release on June 24, while the HL-388 follow suit on September 24.

In regard of the specifications, the made-for-China edition and the original version share the same features, including 96MB of on-chip SRAM memory, 128GB of HBM2e high-bandwidth memory with a bandwidth of 3.7TB per second, PCIe 5.0X16 interface, and decoding standards.

However, due to US export restrictions on AI chips, the comprehensive computing performance (TPP) of high-performance AI needs to be below 4,800 to export to China. This means the Chinese special edition’s 16-bit performance cannot exceed 150 TFLOPS (trillion floating-point operations per second).

For comparison, the original Gaudi 3 achieves 1,835 TFLOPS in FP16/BF16. This contrasts with NVIDIA’s H100, which is approximately 40% faster in large model training and 50% more efficient in inference tasks.

Therefore, the made-for-China edition will need to significantly reduce the number of cores (the original version has 8 Matrix Multiplication Engines [MME] and 64 Tensor Processor Core [TPC] engines) and operating frequency. Ultimately, this could result in reducing its AI performance by approximately 92% to comply with US export control requirements.

Analyses cited in the same report further suggest that Intel’s launch of the made-for-China edition for AI performance will be comparable to NVIDIA’s AI accelerator card H20 tailored for the Chinese market.

The made-for-China edition of Intel’s Gaudi 3 boasts a performance of 148 TFLOPS in FP16/BF16, slightly below the 150 TFLOPS limit. However, in terms of high-bandwidth memory (HBM) capacity and bandwidth, the Chinese special edition Gaudi 3 will be lower than NVIDIA’s H20, potentially putting it at a competitive disadvantage against the H20. Still, pricing will also be a key factor in determining whether it holds any competitive advantage.

As per a previous report from Reuters, the prices of the chips were said to be comparable to those of its competitor Huawei’s products. Reportedly, NVIDIA priced orders from Chinese H20 distributors between USD 12,000 and 15,000 per unit.

TrendForce believes Chinese companies will continue to buy existing AI chips in the short term. NVIDIA’s GPU AI accelerator chips remain a top priority—including H20, L20, and L2—designed specifically for the Chinese market following the ban.

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Meta Platform, parent company of Facebook, has announced its latest generation AI chip of its Training and Inference Accelerator (MTIA) on April 10th, fabricated using TSMC’s 5nm process. According to a report from Commercial Times, this move is expected to reduce Meta’s reliance on NVIDIA’s chips and enhance computational power for AI services.

In its shift towards AI services, Meta requires greater computational capabilities. Thus, last year, Meta introduced its AI models to compete with OpenAI’s ChatGPT. The latest AI chip, Artemis, is an upgraded version of MTIA introduced last year, assisting platforms like Facebook and Instagram with content ranking and recommendations.

Meta’s new generation AI chip will be produced by TSMC using the 5nm process. Meta reveals that Artemis offers triple the performance of the first-generation MTIA.

In October last year, Meta announced plans to invest USD 35 billion to establish infrastructure supporting AI, including data centers and hardware. CEO Mark Zuckerberg told investors, “In terms of investment priorities, AI will be our biggest investment area in 2024 for both engineering and compute resources.”

Meta’s proprietary AI chips are deployed in data centers to power AI applications. Meta has several ongoing projects aimed at expanding MTIA’s application scope, including supporting generative AI workloads.

The trend of tech giants developing their own AI chips is evident, with Meta joining competitors like Amazon, Microsoft, and Google in internal AI chip development to reduce reliance on NVIDIA. Google recently unveiled its latest data center AI chip, TPU v5p, on the 9th. Meanwhile, Intel is targeting NVIDIA’s H100 with its new AI chip, Gaudi 3.

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(Photo credit: Meta)