The U.S. lawmakers is reportedly attempting to further drive the “decoupling” of the Pentagon’s supply chain from China. According to sources cited by Bloomberg, the U.S. Congress has prohibited the Pentagon from procuring batteries produced by six Chinese companies, including CATL and BYD.

Additionally, the other four battery manufacturers set to be banned are Envision Energy, EVE Energy, Gotion High-Tech, and Hithium Energy Storage Technology. Based on the report, of the top 10 battery suppliers in the world, just three are non-Chinese companies.

It is noted that this regulation is part of the “2024 National Defense Authorization Act,” passed on December 22, 2023. However, commercial purchases, such as Ford’s procurement of batteries from CATL in Michigan and Tesla’s sourcing of batteries from BYD, are temporarily exempt from these measures.

As per IJIWEI’s report, the U.S. government has long been eyeing the Chinese new energy vehicle supply chain. Previously, U.S. Treasury Secretary Janet Yellen argued that China’s new energy vehicle industry posed a threat to the “national security” of the United States.

At the end of 2023, a document was signed, stipulating that from 2024 onwards, all electric vehicles produced in the U.S. are prohibited from using Chinese batteries. The signing of this document is evidently unfavorable for companies in the electric vehicle battery industry looking to expand into the U.S. market.

According to the conditions for electric vehicle subsidies under the U.S. IRA Act, starting in 2024, the use of battery components produced by entities from “Foreign Entity of Concern” (FEOC) countries is prohibited. In 2025, the prohibition extends to the use of key minerals processed or recycled in FEOC countries. FEOC encompasses China, North Korea, Russia, and Iran.

The U.S. Department of Energy, in December 2023, released a notification of a proposed interpretive rule, requesting comments to define FEOC, covering overseas subsidiaries of Chinese companies and overseas enterprises with more than 25% ownership by Chinese state-owned enterprises.

However, given the current distribution of the battery supply chain, completely bypassing the Chinese battery supply chain in the U.S. is challenging. Even if feasible, it would come with substantial costs. The result could be a short-term inability to reduce vehicle prices, further impacting the gradually weakening demand for electric vehicles in the United States.

TrendForce indicates that the combined sales of BEVs and PHEVs in the United States totaled approximately 1.46 million vehicles in 2023. Due to the requirement that many vehicles must meet local assembly criteria in the U.S. to qualify for subsidies, numerous models lost subsidies in 2023.

It is expected that in 2024, various automakers will increase the proportion of local assembly, expanding consumer options to stimulate demand. However, stringent conditions for battery adoption could become one of the variables affecting the growth of electric vehicle sales in the United States.

Read more

• China Projected to Export 1.2 Million NEVs in 2023 amid Tightening Tariffs by the US, Says TrendForce
• [News] China’s New Energy Vehicle Penetration Rate Exceeds 40%, Expected Optimistic Growth by 2024

(Photo credit: Pixabay)

Due to consumer spending pressures this year, the smartphone market is not as robust as before. With Apple facing strained relations with China, market sentiment continues to be pessimistic about Apple’s prospects.

Recently, citing from a report from Jefferies Financial Group’s analyst, Bloomberg stated that the sales volume of Apple’s latest products in China is expected to decline by 30% compared to last year in 2024, potentially experiencing a double-digit decline for the whole year.

The Wall Street Journal once reported that last year, the Chinese government announced its restriction on officials using iPhones, with at least eight provinces instructing officials to cease using iPhones.

This restriction not only applies to government agencies but also extends to state-owned enterprises, including large entities in China’s power generation, harbor construction, mining, manufacturing, education, and investment markets.

In addition to political restrictions, Apple is also facing pressure from Chinese competitor Huawei. Analysts from Jefferies Financial Group previously stated that sales of Huawei’s Mate 60 Pro surpassed the iPhone 15.

In 2023, Huawei held the highest market share in the Chinese smartphone market, growing by approximately 6% compared to the same period in 2022, while Apple’s market share in China declined by 4% year-on-year.

Patriotic Enthusiasm Supports Local Smartphone Brands

Driven by “patriotic enthusiasm,” according to Jefferies’ estimation, Huawei’s smartphone shipments last year reached 35 million units, falling below the expected 40 million, possibly due to constraints in component supplies.

The Huawei Mate 60 Pro features a SMIC-manufactured 7nm processor tailor-made for the domestic market. Huawei continues to develop and expand its HarmonyOS operating system, competing with iOS and Android.

Yet, according to MacDailyNews, Huawei has allegedly exaggerated the capabilities of the Mate 60. In reality, its processor specifications lag behind Apple by several generations.

The “Kirin 9000S” is a 7nm chip, with a Geekbench 6 single-core score of 1,267 and a multi-core score of 3,533. In comparison, Apple’s A17 Pro features a 3nm chip, scoring 2,902 in Geekbench 6 single-core and 7,221 in multi-core tests.

The Huawei Mate 60 falls behind even Apple’s entry-level third-generation iPhone SE. The latter is equipped with the 5nm A15 Bionic chip from September 2021, scoring 2,237 in Geekbench 6 single-core and 5,173 in multi-core tests.

Smartphone Price Reduction Fails to Boost Sales

To salvage the market, iPhone 15 Pro and iPhone 15 Pro Max witnessed a substantial 16% price reduction on the Pinduoduo e-commerce platform during the first week of 2024, with similar discount levels observed in December. However, analysts from Jefferies believe that these discounts will not stimulate sales growth.

As iPhone sales constitute approximately 52% of Apple’s total revenue, China has consistently represented Apple’s most crucial international market.

In the face of the competitive pressure in the Chinese market this year, TrendForce analysis suggests that Huawei’s successful sales will exert sales pressure on Apple, which also targets the high-end market in China.

Therefore, TrendForce is not optimistic about the production forecast for Apple in 2024, estimating the annual production volume to be around 215-225 million, slightly lower or flat compared to the previous year.

In terms of regional market operations, Apple continues to increase its production share in India, aiming to offset the lost market share in China through the growth of the high-end market in India. It is estimated that by 2025, the production share in India will further increase to 25-30%.

Read more

• [Tech Recap and Glimpse 5-4] Can Huawei Successfully Capture Apple’s High-End Smartphone Market?
• [Insights] Chinese Government Invests in Huawei Supply Chain; Semiconductor Self-sufficiency for China’s Long-Term Growth

(Photo credit: Huawei)

In order to comply with new regulations on the export of chips to the United States, NVIDIA has been consistently releasing AI chips and graphics cards tailored for the Chinese market.

However, according to sources cited by The Wall Street Journal, since November 2023, major cloud service provider (CSP) in China such as Alibaba and Tencent have been testing samples of NVIDIA’s special chips. These Chinese enterprises have conveyed to NVIDIA that the quantity of chips they plan to order in 2024 will be significantly lower than their initial plans.

According to a report from The Wall Street Journal, in October 2023, the United States announced new regulations preventing NVIDIA from selling advanced AI chips to China. However, NVIDIA swiftly developed a “special edition” chip for China, allowing them to continue selling chips in the Chinese market without violating regulations.

Nevertheless, NVIDIA is facing another challenge: major Chinese CSPs are not actively purchasing the “downgraded” performance versions of the chips.

Chinese enterprises have been testing the highest-performance version, H20, of NVIDIA’s “special edition” AI chips. Some testers have mentioned that this chip enables efficient data transfer among multiple processors, making it a better choice than domestic alternatives for building chip clusters required for processing AI computational workloads.

However, testers also indicate that they need more H20 to compensate for the performance gap compared to previous NVIDIA chips, which increases their costs.

The report indicates that in the short term, the performance advantage of NVIDIA’s “downgraded” chips over domestic Chinese products is diminishing, making Chinese-made chips increasingly attractive to buyers.

Informed sources cited from the report suggest that major players like Alibaba and Tencent are redirecting some advanced semiconductor orders to domestic companies and relying more on internally developed chips. This trend is also observed with the other two major chip buyers, Baidu and ByteDance.

Looking ahead in the long term, Chinese customers are uncertain about NVIDIA’s ability to continue supplying them with chips, as U.S. regulatory authorities have committed to regularly reviewing chip export controls, potentially tightening restrictions on chip performance further.

From the perspective of China’s efforts in the independent development of AI chips, TrendForce previously highlighted in its press release that Chinese CSPs like Baidu and Alibaba are actively investing in autonomous AI chip development.

Baidu developed its first self-researched ASIC AI chip, Kunlunxin, in early 2020, with its second generation scheduled for mass production in 2021 and the third expected to launch in 2024. Post-2023, Baidu aimed to use Huawei’s Ascend 910B acceleration chips and expand the use of Kunlunxin chips for its AI infrastructure.

After Alibaba’s acquisition of CPU IP supplier Zhongtian Micro Systems in April 2018 and the establishment of T-Head Semiconductor in September of the same year, the company began developing its own ASIC AI chips, including the Hanguang 800.

TrendForce reports that T-Head’s initial ASIC chips were co-designed with external companies like GUC. However, after 2023, Alibaba is expected to increasingly leverage its internal resources to enhance the independent design capabilities of its next-gen ASIC chips, primarily for Alibaba Cloud’s AI infrastructure.

According to the data from TrendForce, currently, around 80% of the high-end AI chips used by Chinese cloud computing companies are sourced from NVIDIA. However, in the next five years, this proportion may decrease to 50% to 60%.

Read more

• [News] NVIDIA’s China-exclusive Chip H20 to Begin Production in Q2 by Wistron
• China Continues to Enhance AI Chip Self-Sufficiency, but High-End AI Chip Development Remains Constrained, Says TrendForce

(Photo credit: NVIDIA)

In pursuit of big chip technology, a team from the Chinese Academy of Sciences has designed an advanced 256-core processor system based on 16 chiplets and aims to expand this design to a 1,600-core big chip.

With each new generation of chips, increasing transistor density becomes progressively challenging. Chip manufacturers are exploring various methods to enhance processor performance, including architectural innovations, larger die sizes, multi-chiplet designs, and wafer-scale chips.

In a recent research paper, the Institute of Computing Technology at the Chinese Academy of Sciences has introduced a 256-core multi-chiplet design and further explored wafer-scale methods, constructing a big chip using an entire wafer.

The team presented an advanced 256-CPU multi-chiplet, referred to as the Zhejiang Big Chip, in the paper. This design is composed of 16 chiplets, each housing 16 CPUs based on the RISC-V architecture.

These chiplets are interconnected in a traditional symmetric multiprocessor (SMP) manner through a network-on-chip, so the chiplets could share memory.

Researchers from the Chinese Academy of Sciences stated that this design allows for scalability up to 100 chiplets (or 1,600-core).

Reports indicate that the chiplets are manufactured by Semiconductor Manufacturing International Corporation (SMIC) using 22-nm process technology. However, the power consumption of a 1,600-core component interconnected by an interposer and manufactured using a 22-nm process is not specified.

Researchers have noted that the multi-chiplet design can be applied to supercomputer processors. Within each chiplet, multiple cores are interconnected with ultra-low latency. Additionally, advanced packaging technology benefits the communication between chiplets, minimizing delays and NUMA (Non-Uniform Memory Access) effects in highly scalable systems to the greatest extent possible.

Read more

• [In-Depth Analyses] China Advances to 8-Inch SiC Substrates in 2023

(Photo credit: SMIC)

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.

Read more

• [News] Surge in Chip Manufacturing Equipment Imports from the Netherlands to China, Soaring Tenfold After U.S. Tightens Restrictions
• [News] EUV as a Strategic Asset in the Most Advanced Processes: Progress in Intel/TSMC/Samsung’s Adoptions

(Photo credit: ASML)