On October 17, 2023, the U.S. government once again expanded its restrictions on the export of semiconductor devices and products to China. The newly added control conditions now encompass NVIDIA’s L40S, A100, H100H800, as well as general-purpose AI server GPUs tailored for the Chinese market, such as A800 and H800. Additionally, AMD’s MI200 series, MI300 series GPUs, and Intel’s Habana Labs’ Gaudi 2, Gaudi 3 GPUs fall under the regulatory framework.

Recalling the U.S. government’s export restrictions on AI chips issued to IC design firms in September 2022, at that time, only A100, H100, and MI200 series were subjected to control, and the U.S. Department of Commerce granted NVIDIA and AMD a one-year buffer period.

In contrast, the recent regulations not only cover all mainstream AI server GPUs but also eliminate the buffer period for these chip companies. In essence, companies or institutions in countries not permitted for export can only acquire AI server chips with performance potentially inferior to NVIDIA L40S or AMD MI200 series for the next few years.

Furthermore, stricter control thresholds for lithography equipment have led to the inclusion of ASML’s DUV, the 1980Di, in the control list. This equipment is primarily used in the 28 ~ 7nm process. Previously controlled products were focused on the EUV 3000 series for 7nm and below processes and the DUV 2000 series for 16/14 ~ 5nm processes.

This move indicates that the U.S. government’s desire to control semiconductor process technology has officially extended to mature processes of 28nm.

The expanded U.S. controls on AI chips and semiconductor manufacturing devices not only target China but also countries that might collaborate with Chinese institutions and businesses in AI development.

In this scenario, China is left with only two viable options to establish efficient AI computing resources: (1) designing and mass-producing AI server chips itself or (2) utilizing the computing resources of cloud service providers.

As the U.S. is also discussing the potential inclusion of cloud service providers in semiconductor control policies and currently formulating relevant countermeasures, this path remains unreliable for China. Therefore, the only dependable option is to independently design and manufacture AI server chips.

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• [News] Nvidia says US speeded up new export restrictions on AI chips
• [News] Chinese Chip Equipment Rises Amid U.S. Restrictions

On November 7th, Intel held its “Intel Innovation Taipei 2023 Technology Forum”, with CEO Pat Gelsinger highlighting the healthy state of PC inventory. He also expressed optimism about the injection of several more years of innovative applications and evolution in PCs through AI. 

Intel Aims to Ship over One Hundred Million AI PC within the Next Two Years

Gelsinger expressed that the PC inventory has reached a healthy level, and he is optimistic about the future growth of AI PCs, which are equipped with AI processors or possess AI computing capabilities. He anticipates that AI will be a crucial turning point for the PC industry.

Additionally, Gelsinger stated that the server industry may have seemed uneventful in recent years, but with the accelerated development of AI, it has become more exciting. AI is becoming ubiquitous, transitioning from the training phase to the deployment phase, and various platforms will revolve around AI.

Gelsinger expressed his strong confidence in Intel’s position in the AI PC market, expecting to ship over one hundred million units within two years.

Intel’s Ambitious Expansion in Semiconductor Foundry Landscape

Intel is actively promoting its IDM 2.0 strategy, with expectations from the industry that the company, beyond its brand business, has advanced packaging capabilities to support semiconductor foundry operations. In the future, Intel is poised to compete with rivals such as TSMC and Samsung.

Gelsinger noted that some have viewed Intel’s plan of achieving five technical nodes in four years as “an ambitious endeavor.” However, he emphasized that Intel remains committed to its original goal of advancing five process nodes within four years.

The company’s foundry business has received positive responses from numerous potential customers, and while it may take three to four years for significant expansion, the advanced packaging aspect may only require two to three quarters to get on track.

This transformation marks a significant shift for the company, setting new standards in the industry. Intel is making steady progress in its four-year plan to advance five nodes, and Moore’s Law will continue to extend. The construction of Intel’s new factories is also ongoing.

According to Intel’s roadmap, Intel 7 and Intel 4 are already completed, Intel 3 is set for mass production in the latter half of this year, and Intel 20A and 18A are expected to enter mass production in the first and second halves of next year, respectively.

Regarding this roadmap, according to NIKKEI Asia’s report, Gelsinger also mentioned at the forum that for the 18A process, they currently have many test wafers in production. Additionally, the development of 18A has been completed, and it is progressing rapidly towards the production phase.

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• [News] Intense Competition in Advancing Processes at the 2nm by Samsung, Intel, and TSMC

(Photo credit: Intel Newsroom)

According to TechNews’ report, Gitae Jeong, Vice President of Samsung Electronics, recently revealed in an interview that the company is set to introduce the SF1.4 (1.4nm) process, expected to enter mass production in 2027.

This announcement intensifies the competition in advanced semiconductor manufacturing, particularly in the development of 2.5D/3D integrated heterogeneous structure packaging among the three major semiconductor foundry giants.

• TSMC: N3P Process Superior to Intel 18A, N2 to Lead Industry’s Advanced Processes

Previously, the semiconductor industry reported challenges with both TSMC and Samsung achieving yields above 60% for their 3nm processes due to undisclosed issues. TSMC’s yield was reported to be only 55%, below the normal yield rate.

However, TSMC’s President, C.C. Wei, expressed optimism, stating that current N3 demand is better than three months ago, contributing to a healthy growth outlook for TSMC in 2024.

Wei also anticipates that TSMC’s 3nm process will contribute a mid-single-digit percentage (4%-6%) to the company’s annual wafer revenue in 2023.

Regarding competition with rival Intel’s 18A process, Wei believes that TSMC’s N3P process offers better performance, power, and area (PPA), alongside improved cost efficiency and technical maturity. Furthermore, TSMC’s upcoming N2 process is expected to be the industry’s most advanced when introduced.

• Intel: Striving for the Fourth Customer for 18A Process Outsourcing Orders

Intel’s CEO, Pat Gelsinger, has revealed that the 18A process has secured orders from three customers and aims to acquire a fourth customer by the end of the year. The advanced 18A process is scheduled to begin production at the end of 2024, with one customer already having made an advance payment. External expectations suggest that the customer could possibly be NVIDIA or Qualcomm.

Intel has stated that Intel 4 and Intel 3 processes are similar, as are Intel 20A and Intel 18A processes. Consequently, Intel’s primary focus will be on offering Intel 3 and Intel 18A to semiconductor foundry customers. Meanwhile, Intel 4 and Intel 20A processes are more likely to be used internally. However, Intel is open to accommodating customer requests if they express interest in adopting these later processes.

• Samsung: Commencing Mass Production of SF2 in 2025, Prioritizing Internal Use

Due to challenges with the three-nanometer (3nm) manufacturing process, there have been reports that Samsung plans to shift directly to the more advanced two-nanometer (2nm) process.

According to Samsung’s Foundry Forum (SFF) plan, they will begin mass production of the 2nm process (SF2) in 2025 for mobile applications, expand to high-performance computing (HPC) applications in 2026, and further extend to the automotive sector and the expected 1.4nm process by 2027.

Similar to Intel, Samsung intends to prioritize the production of its own products using the 2nm process. The 2nm process products will initially be utilized for Samsung’s in-house products rather than external customer products.

• Summary

While TSMC’s N3 series currently enjoys broad support, including N3E, N3X, and N3P process series, the move to 2nm introduces new variables as it adopts a completely new GAAFET architecture. Regardless, whether it’s TSMC’s N2, Intel’s 18A, or Samsung’s SF2, each of them possesses its competitive strengths. The industry is also eagerly anticipating the future developments in advanced semiconductor processes.

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• [News] Progress and Adoption of Advanced Processes by Samsung, Intel, and TSMC

Since October, China’s National Integrated Circuit Industry Investment Fund Phase II (hereafter referred to as “Big Fund Phase II”) has made two significant investments.

First, it invested in JCET Group’s subsidiary, JCET Group Automotive Electronics (Shanghai) Co., Ltd. (hereafter referred to as “JCET Automotive Electronics”). Later, it invested in ChangXin Xinqiao Storage Technology Co., Ltd. (hereafter referred to as “ChangXin Xinqiao”).

Data reveals that since its establishment, Big Fund II has invested in nearly 40 companies, with a total investment exceeding ¥55 billion. Despite the semiconductor industry’s low point this year, Big Fund Phase II has remained active, particularly emphasizing “strengthening the supply chain.” This includes increasing investments in critical areas like semiconductor equipment and materials.

1. Investing in ChangXin Xinqiao, Enhancing Storage Manufacturing

On October 26th, Big Fund II invested ¥14.5 billion to acquire a 33.14% stake in ChangXin Xinqiao.

According to industry sources, Changxin Xinqiao is one of the projects developed as part of the ChangXin Memory Technologies (CXMT), a collaboration between Hefei Municipal Government, CXMT, Overseas Chinese Town Holdings Company, and NAURA Technology Group Co. in 2019.

As per previous public announcements, the total investment in the CXMT Semiconductor Manufacturing Base exceeds 220 billion yuan. The project is situated in the Hefei Airport Economic Demonstration Zone and primarily focuses on the Changxin Memory project, involving the development of the entire upstream and downstream industrial chain.

Among these initiatives, the Changxin 12-inch storage memory wafer manufacturing base stands out with a total investment of 150 billion yuan, making it the largest single industrial project investment in Anhui Province.

Additionally, according to information on Changxin Memory’s official website, their core product is DDR4 memory chips, which belong to the fourth generation of double data rate synchronous dynamic random-access memory (SDRAM).

2. Increasing Investment in JCET Group’s Subsidiary: Automotive Electronics Focus

On October 27th, JCET Group’s subsidiary, JCET Group Automotive Electronics, received a total capital injection of 4.4 billion yuan from a combination of new and existing shareholders, further emphasizing its commitment to the development of in-vehicle technology. This infusion of capital will accelerate the construction of its first-phase project for manufacturing and testing automotive chips.

After this capital injection, the subsidiary’s registered capital increased from ¥400 million to ¥4.8 billion, remaining a subsidiary of JCET Group. JCET Group Management’s ownership will be diluted to 55%, while Big Fund Phase II will hold an 18% stake.

JCET Group stated that this capital injection is primarily intended for the construction and operation of the target company, aligning with the company’s strategic plans and business development requirements.It aims to better serve the continuously growing market and customer demands, especially in strengthening the company’s automotive electronics business.

Currently, the company’s financial health is robust, and it believes that this capital infusion will not significantly impact its liquidity.

3. Big Fund Phase II Focuses on “Strengthening and Supplementing the Supply Chain” and Plays a Significant Role in the Down Cycle

The semiconductor industry has experienced significant performance fluctuations due to the ongoing semiconductor down cycle. In response to these challenges, Big Fund Phase II has become more active.

The fund has appeared on the shareholder lists of multiple semiconductor companies striving for initial public offerings (IPOs), including Hua Hong Semiconductor Limited, RYCHIP Semiconductor Inc., Guanggang Gases & Energy Company Limited, and Sinophorus Electronic Materials Co..

Notably, Big Fund Phase II has shown continued interest in Hua Hong Semiconductor Limited.

Hua Hong Semiconductor 

Silan Microelectronics Co.

Silan Microelectronics Co. has also attracted significant attention from Big Fund Phase II. On August 28th, Silan Microelectronics announced its intention to jointly invest 1.2 billion RMB with affiliated company Big Fund Phase II and non-affiliated entity HaiChuang Development Fund to subscribe for newly increased registered capital of 1.19 billion RMB in the affiliated joint-stock company, Xiamen Silan Advanced Compound Semiconductor Co., Ltd.. Silan Microelectronics is set to acquire controlling interest in Xiamen Silan Advanced Compound Semiconductor, while Big Fund Phase II will hold a 14.11% stake.

Publicly available information indicates that Xiamen Silan Advanced Compound Semiconductor revolves around the manufacture of compound semiconductor chips. In July of the previous year, the company initiated the “SiC Power Device Production Line Construction Project.”

This project entails an investment plan of 1.5 billion RMB to construct a 6-inch SiC power device chip production line. Ultimately, it aims to achieve an annual production capacity of 144,000 pieces of 6-inch SiC power device chips, comprising 120,000 pieces/year of SiC-MOSFET chips and 24,000 pieces/year of SiC-SBD chips.

China Resources Microelectronics Limited

On August 15, it was announced that the company’s subsidiary, Runpeng Semiconductor, plans to increase capital and introduce external investors, including Big Fund Phase II. Following the completion of this transaction, Runpeng Semiconductor’s registered capital will increase from 2.4 billion RMB to 15 billion RMB.

The announcement indicates that the external investors that Runpeng Semiconductor intends to introduce include 12 institutions, including Big Fund Phase II. Big Fund Phase II is committed to subscribing to a registered capital of 3.75 billion RMB.

In addition, the upstream semiconductor materials sector has also attracted the attention of Big Fund Phase II. In late March of this year, Jingrui announced that its subsidiary, Hubei Jingrui, plans to introduce strategic investors through capital expansion. Big Fund Phase II, among others, is set to inject 160 million yuan in cash into Hubei Jingrui.

Summary

Overall, Big Fund Phase II’s investments span the entire integrated circuit industry chain. However, it’s worth noting that compared to Big Fund Phase I, Big Fund Phase II places more emphasis on strengthening and supplementing the supply chain.

It has increased investments in critical areas such as upstream semiconductor equipment, materials, and shows optimism towards emerging hot sectors like AI and automotive electronics.

(Photo credit: Pixabay)

According to Economic Daily News, industry insiders said that Vanguard International Semiconductor (VIS) is in talks to acquire land and facilities from AUO’s Singapore plant for its first 12-inch fab. The estimated investment for this project is a substantial US$2 billion. VIS is making a strategic move to specialize in producing advanced chips for the automotive industry.

AUO is scheduled to hold a conference on October 31st, and VIS will follow suit on November 7th. Both companies are currently in a pre-conference quite period and haven’t made any official comments on the recent rumors.

Per reports, AUO has been gradually relocating its equipment from its Singapore plant back to Taiwan. Following a model where AUO sold its L3B fab and related facilities in Hsinchu Science Park, Taiwan, they plan to sell this Singapore plant to VIS. Notably, this Singapore plant is conveniently located just an eight-minute drive away from TSMC’s Singapore plant (SSMC), and the transaction is estimated to be worth over a billion dollars.

The Singapore plant in question was acquired by AUO in 2010, and it specializes in the production of 4.5th generation low-temperature polycrystalline silicon (LTPS) display panels and also has some capacity for AMOLED displays. However, the land use contract for this plant expired during the pandemic. AUO then redirected the plant’s focus towards supporting display production. However, with a decrease in post-pandemic notebook demand, AUO’s strategy in Singapore shifted from manufacturing to establishing itself as a regional service center.

Recent developments show that AUO has begun a significant production line adjustment.  They’re transforming the Longtan Aspire Park in Northern Taiwan into a hub for mass-producing Micro LED technology and integrated automotive display modules. Insiders suggest that AUO’s LTPS production line in the Singapore plant has already started moving to Longtan Aspire Park, where they’re gearing up for Micro LED technology development and eventual mass production.

Regarding AUO’s Singapore plant, the company recently stated that they are conducting a thorough evaluation of the operational efficiency of their various plants worldwide. The production schedule for the Singapore plant extends until early 2024, and they’ll subsequently assess the equipment and assets. The company is in the process of discussing and evaluating the related strategies, and they haven’t made any final decisions yet. AUO’s Singapore plant employs approximately 500 people, and they are committed to following local regulations to safeguard their employees’ rights.

In an earning calls last year, Chairman of VIS, Leuh Fang, revealed that the company already operates five 8-inch fabs. Fab 5 still has the potential for increased wafer production, but due to the challenges of acquiring new 8-inch equipment, establishing a brand-new 12-inch fab in Singapore makes more sense if customer demand necessitates capacity expansion.

This development isn’t entirely surprising, as there’s a precedent for fab transactions between AUO and VIS. In late April 2021, AUO sold its L3B plant in the Hsinchu Science Park, along with its related equipment, to VIS for NT$905 million (pre-tax).
(Image: AUO)