In recent years, the U.S., Japan and the Netherlands, have increasingly expanding restrictions on China in semiconductor technology. South Korea, on the other hand, has been cautiously responding to U.S. demands due to its significant dependence on the Chinese market.

Yet, according to a report by South Korean media outlet The Korea Herald, the U.S. is increasing pressure on South Korea to comply with its export controls to China.

At the Korea-U.S. Economic Security Conference 2024 held in Washington, D.C. on September 10th, U.S. Commerce Department Undersecretary Alan Estevez called on South Korea’s two leading HBM manufacturers, Samsung and SK hynix, to align with U.S. export controls on China. He urged that their production capacity be reserved for supplying advanced chips to allied nations, rather than competitors such as China.

Estevez emphasized his appreciation for South Korea’s long-standing cooperation with the U.S., but pointed out that since AI can be used for military purposes, it is crucial to prevent China from acquiring advanced chips to train AI models.

South Korea’s Trade Minister Cheong In-kyo responded that while they will discuss the matter with the U.S., export controls have a significant impact on South Korea’s businesses and economy.

Some industry sources cited by The Korea Herald have further pointed out that the direct export volume of chips from Samsung and SK hynix to China is not significant, so the actual impact may be limited.

However, per a previous Reuters report cited sources, it’s indicated that about 30% of Samsung’s HBM chip sales in the first half of this year were to China.

The Korea Institute for Industrial Economics and Trade noted that, unlike Japan and the Netherlands, South Korea cannot fully align with U.S. export control measures due to its significant reliance on exports to China.

Per the Chosun Daily citing data from South Korea’s Ministry of Trade, Industry, and Energy and the Korea International Trade Association, it’s shown that in July of this year, South Korea’s exports to China increased by 14.9% year-on-year to USD 11.4 billion, the highest since October 2022. Notably, memory exports surged 89% year-on-year to USD 6.8 billion.

Semiconductor exports saw particularly strong growth, with chip exports rising 49% year-on-year. In June this year, Korea’s memory exports also amounted to USD 8.8 billion, accounting for 65.8% of total semiconductor exports, which reportedly represents the highest proportion in two years since December 2021.

These figures reflect South Korea’s robust performance in the chip sector and the strong demand from the Chinese market for Korean semiconductors and other ICT products.

Meanwhile, due to the U.S.’s strict restrictions on chip manufacturing technology, China is striving for breakthroughs in the HBM field.

The HBM market is currently dominated by South Korea’s SK hynix, Samsung Electronics, and the U.S.’s Micron, all of which are producing the latest standard HBM3 chips.

However, a report from Tom’s Hardware, citing industry sources, has indicated that Chinese companies, including CXMT, have made progress in developing HBM and are in the early stages of production. Huawei is also collaborating with other Chinese companies, with plans to produce HBM2 chips by 2026.

Read more

• [News] ChangXin Memory Technologies in China Has Reportedly Begun Mass Production of HBM2
• [News] Progress Made in Chinese Consortium’s Development of HBM, Reportedly Targeting HBM2 Production by 2026

(Photo credit: Samsung)

While Samsung Electronics is said to be delivering an oversea workforce cut up to 30%, a report from Korean media outlet Business Korea on September 11th has added that persistent issues with its 2nm yield rate have led Samsung to decide to withdraw personnel from its Taylor, Texas plant, signaling another setback for its advanced wafer foundry business.

Originally envisioned as a mass production hub for advanced processes below 4nm, the Taylor facility’s strategic location near major tech companies was intended to attract U.S. clients. However, despite rapid development, Samsung continues to face 2nm yield issues, resulting in performance and production capacity falling short of its main competitor, TSMC.

Reportedly, Samsung’s wafer foundry yield is below 50%, particularly in processes below 3nm, while TSMC’s advanced process yield is around 60-70%. This gap has widened the market share difference between the two companies.

As per a report from TrendForce, TSMC held a 62.3% share of the global wafer foundry market in the second quarter, while Samsung’s market share was only 11.5%.

Industry sources cited by Business Korea further added that Samsung’s Gate-All-Around (GAA) yield is around 10-20%, which is insufficient for handling orders and mass production. Such yields have forced Samsung to reconsider its strategy and withdraw personnel from the Taylor plant, leaving only a minimal number of staff.

Samsung Electronics had signed a preliminary agreement to receive up to KRW 9 trillion in subsidies from the U.S. Chips Act. However, a key condition for receiving the funding is that the plant must operate smoothly, and Samsung’s current difficulties put this agreement at risk.

Reportedly, Samsung Chairman Lee Jae-Yong personally visited major equipment suppliers like ASML and Zeiss, hoping to achieve breakthroughs in process and yield improvements. However, there have been no significant results so far, and it remains uncertain when personnel might be reassigned back to the Taylor plant.

Read more

• [News] Samsung Reportedly Buckling Under Pressure, with Plans to Cut Overseas Workforce by Up to 30%
• [News] Samsung Signals Will to Collaborate with Other Foundries on Basedie

(Photo credit: Samsung)

Despite U.S. export controls aimed at preventing Chinese companies from acquiring advanced AI chips, small cloud service providers in China have reportedly found ways to obtain NVIDIA’s A100 and H100 chips. The cost of renting cloud services in China is even lower than in the U.S.

According to a report from the Financial Times, four small-scale Chinese cloud providers are offering servers equipped with eight A100 chips each, charging around USD 6 per hour. In comparison, similar services from U.S. cloud providers cost approximately USD 10 per hour.

As Chinese companies are reportedly bypassing U.S. export controls, industry sources cited by the Financial Times have further noted that the lower prices in China may hint at a robust local supply of NVIDIA chips.

Since the fall of 2022, the U.S. has banned NVIDIA from supplying A100 chips to China, and the more powerful H100 chips have not been approved for sale there.

However, industry sources and startups have revealed that these chips are still available in China. Ads for A100 and H100 have appeared on social media platforms like Xiaohongshu and e-commerce sites such as Taobao, with prices higher than those abroad.

At the Huaqiangbei electronics market in Shenzhen, reportedly, industry sources have revealed that the price of NVIDIA’s H100 is quoted at USD 23,000 to USD 30,000, while Chinese online sellers list it at USD 31,000 to USD 33,000.

Meanwhile, larger Chinese cloud providers such as Alibaba and ByteDance emphasize service stability and security in the local market. For servers equipped with A100 chips, they charge two to four times more than smaller cloud providers.

According to another source cited by Financial Times, large companies must consider regulatory compliance, which puts them at a disadvantage because they are reluctant to use smuggled chips. In contrast, smaller providers are less concerned.

The same report also indicate that after the US government tightened export controls in October last year, servers from Supermicro equipped with eight H100 chips were priced as high as approximately CNY 3.2 million. However, as supply constraints eased, the price has dropped to around CNY 2.5 million.

Several sources cited by the report claim that merchants from Malaysia, Japan, and Indonesia frequently ship Supermicro servers or NVIDIA chips to Hong Kong, from where they are then transported to Shenzhen.

In response to these issues, NVIDIA reportedly stated that it primarily sells chips to well-known partners, ensuring that all sales comply with U.S. export regulations.

NVIDIA also mentioned that its used products can be obtained through various channels and, although they cannot track products after sale, they will take appropriate action if they determine a customer is violating U.S. export controls.

Read more

• [News] China’s 1H24 Chip Equipment Purchases Exceed Taiwan, Korea, and US Combined, Reaching USD 25 Billion
• [News] China Contributes Over 40% of U.S. Chip Equipment Makers’ Revenue despite Export Controls

(Photo credit: iStock)

As per a report from Bloomberg citing sources, it’s pointed out that TSMC’s first US fab in Arizona began producing engineering wafers using the 4nm process in April, with yields reportedly comparable to those manufactured in its Southern Taiwan Science Park facility, showing promise in meeting its targets.

Addressing on the matter, TSMC reportedly stated that the project is proceeding as planned and is making good progress, without further commenting on the yield.

TSMC plans to build three plants in Arizona, each with cleanroom spaces twice the size of typical logic fabs in the industry. The first fab is expected to begin mass production in the first half of 2025.

TSMC’s second fab in Arizona will use 2nm process technology to meet strong AI-related demand, with production expected to begin in 2028. The third fab will employ 2nm or even more advanced process.

TSMC stated that once the fabs are fully operational, they will deliver the same level of manufacturing quality and reliability in Arizona as is provided in its Taiwan facilities.

The U.S. government officially announced in April that it will provide a USD 6.6 billion subsidy to TSMC, and confirmed that TSMC will build its third fab in Arizona, USA, with total investment rising to USD 65 billion.

Read more

• [News] TSMC’s Kumamoto Fab Influence Expands, Economic Spillover Effect Expected to Exceed JPY 10 Trillion
• [News] TSMC Receives USD 6.6 Billion for Chipmaking from the US Government, Commits to Constructing Third Fab

(Photo credit: TSMC)

To counter the U.S.’s ongoing semiconductor restrictions launched the U.S., China has outspent the U.S., South Korea, Japan, and Taiwan combined on chip manufacturing equipment in the first half of this year.

However, sources cited by a report from Commercial Times have warned that China’s excessive investment could soon lead to global overcapacity issues in traditional chip production, which is similar to the oversupply problems seen in the electric vehicle and solar energy sectors in recent years.

Per the data cited by CNBC from the Semiconductor Equipment and Materials International (SEMI), China spent USD 24.73 billion on chip manufacturing equipment in the first half of 2024, surpassing the combined USD 23.68 billion spent by the U.S., South Korea, Japan, and Taiwan during the same period. This surge in spending is driven by China’s efforts to achieve semiconductor self-sufficiency amid U.S.-China tensions.

The report further notes that since the U.S. implemented stricter export restrictions in October 2022, Chinese companies have been rapidly accelerating their procurement. SEMI data suggests that China’s total procurement this year is expected to exceed USD 35 billion.

Citing Clark Tseng, Senior Director at SEMI, the report indicated that the current equipment stockpiling trend may continue into the second half of this year and is expected to ease only by 2025 as companies work to absorb excess capacity.

Citing Alex Capri, a Senior Lecturer at the National University of Singapore and Research Fellow at the Hinrich Foundation, CNBC pointed out that Chinese companies are preemptively stockpiling chip manufacturing equipment in response to the risk of further export restrictions from Washington before the U.S. presidential election.

Capri highlighted that as China is making smooth progress in traditional chip production, the world might soon face an oversupply of traditional chips, similar to the overcapacity issues seen in electric vehicles and solar panels.

As a result, companies outside China could struggle to compete in the sector with lower-priced products from Chinese companies.

A previous report from Bloomberg pointed out that China has thus become the largest market by revenue for top global chip equipment suppliers. The latest quarterly financial reports from companies such as Applied Materials, Lam Research, and KLA show that China contributes approximately 40% of their revenue.

For Japanese company TEL and Dutch company ASML, the contribution from the Chinese market is even more significant, with nearly half of their revenue coming from China.

Read more

• [News] China’s 1H24 Chip Equipment Purchases Exceed Taiwan, Korea, and US Combined, Reaching USD 25 Billion
• [News] China’s Import of Chip Making Equipment Hit New High This Year, with Mature Nodes Driving the Demand

(Photo credit: SMIC)