According to a Bloomberg report on September 12, the Chinese government is encouraging local carmakers to export knock-down kits to their overseas factories, where key car components are produced in China and then shipped to the destination markets for final assembly. This strategy aims to avoid punitive tariffs on Chinese cars, while ensuring that advanced EV technologies remain within China.

In recent months, Chinese electric vehicles have faced tariff barriers in Europe and the U.S. On May 14, the White House announced an increase in tariffs on Chinese EV imports to 100%. The European Union imposed additional tariffs on pure electric vehicles from China starting July 4. On August 26, per a report from Reuters, Canada also announced a 100% tariff on Chinese electric vehicles.

To avoid these tariffs, Chinese car manufacturers are setting up production facilities abroad. For instance, BYD signed a USD 1 billion investment agreement with the Turkish government on July 8 to build a factory in Turkey with an annual production capacity of 150,000 electric vehicles, expected to start operations by the end of 2026.

Reportedly, it’s hinted that the new factory may facilitate BYD’s entry into the European market, given Turkey’s customs union agreement with the EU. Turkey also imposed a 40% tariff on Chinese cars in June. Regarding this matter, BYD declined to comment.

The report from Bloomberg also claims that, in July, China’s Ministry of Commerce held a meeting with several car manufacturers.

During this meeting, the Ministry suggested keeping key EV technologies within China and instructed that car manufacturers should avoid making any automotive-related investments in India.

Additionally, companies planning to invest in Turkey were advised to notify both the Ministry of Industry and Information Technology, which oversees China’s EV industry, and the Chinese embassy in Turkey.

The Ministry of Commerce indicated that countries inviting Chinese car manufacturers to set up factories are typically those considering or implementing trade barriers against Chinese vehicles. Officials reportedly advised attendees not to blindly follow trends or trust investment offers from foreign governments.

The Ministry’s guidance to keep critical production within China may hinder the global expansion efforts of these manufacturers, who are seeking new customers to offset intense competition and sluggish domestic sales, factors that are impacting their profitability.

This measure could also affect European countries that have been courting Chinese manufacturers, hoping to attract job opportunities and boost their local economies.

Read more

• [News] EU Plans to Cut Tariffs on China-Made Tesla EVs from 20% to 9%, with Final Decision Expected in October
• [News] Punitive Tariffs on Chinese EVs by US Reportedly to Further Hinder BYD, Leapmotor and Others’ Global Expansion Plan, while EU Investigation Persists

(Photo credit: BYD)

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.

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• [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)

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)

Amid the escalating tech war between China and the US, along with rising geopolitical tensions, China has accelerated its import of chip manufacturing equipment since the middle of last year to counter potential US chip sanctions, with Dutch company ASML and Japanese company Tokyo Electron (TEL) benefited the most.

Notably, according to the Semiconductor Equipment and Materials International (SEMI), despite US sanctions preventing China from acquiring advanced EUV lithography equipment from ASML, it reported that China’s spending on chip manufacturing equipment has reached USD 25 billion in the first half of this year, exceeding the combined total of Korea, Taiwan, and the US. SEMI data also shows that China’s spending remained strong in July and is expected to set a new annual record.

Meanwhile, per the trade data from China’s General Administration of Customs cited by Bloomberg, from January to July this year, Chinese companies imported chip manufacturing equipment worth nearly USD 26 billion, surpassing the previous record set in the same period in 2021.

SEMI projects that China will become the largest investor in new fab construction, including equipment purchases. It is expected that the country’s total spending on chip equipment for the entire year of 2024 will reach USD 50 billion.

Clark Tseng, SEMI’s senior director of market intelligence, further highlighted that at least more than 10 tier-two chip manufacturers are actively purchasing new equipment, which is driving China’s overall spending.

China is now reportedly 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.

Additionally, per a report from Commercial Times, amid a global economic slowdown, China is the only region where chip manufacturing equipment spending increased in the first half of this year compared to the same period last year.

Tseng also noted that SEMI anticipates spending on new plant construction in China will “normalize” over the next two years.

Read more

• [News] China’s Import of Chip Making Equipment Hit New High This Year, with Mature Nodes Driving the Demand
• [News] China Contributes Over 40% of U.S. Chip Equipment Makers’ Revenue despite Export Controls

(Photo credit: iStock)

According to a report from the China Business Network, Huawei, seems to have overcome the pressure of U.S. sanctions, as it posted strong financial results in the first half of 2024 on August 29.

The report shows that Huawei’s revenue for the first half of the year reached CNY 417.5 billion, a year-on-year increase of 34.3%. The net profit was CNY 55.1 billion, up 18.2% year-on-year, marking the best performance for this period in the company’s history.

It is further reported that Huawei’s revenue for the first half of the year has already surpassed the CNY 401.3 billion recorded in the first half of 2019, second only to the CNY 454 billion in the first half of 2020.

This is also the first time in history that Huawei’s net profit for the same period has exceeded CNY 50 billion, higher than the CNY 46.6 billion recorded in the first half of last year. The net profit margin for the first half of this year reached 13.2%.

Huawei’s rotating chairman, Xu Zhijun (Eric Xu), stated that the group’s overall operating performance met expectations.

He then pointed out that Huawei will continue to implement its high-quality strategy, continuously optimize its industrial portfolio, strengthen development resilience, and build a prosperous business ecosystem, providing more competitive products and solutions for its customers.

Currently, Huawei divides its business into five segments: ICT Infrastructure Business, Consumer Business, Cloud Computing Business, Digital Power Business, and Intelligent Automotive Solution Business.

Huawei did not disclose the revenue details for each business segment. However, according to last year’s annual report, the consumer business remains the main revenue driver, while Huawei Cloud has shown the fastest growth.

On the other hand, according to a recent report released by Seres, the new company under Huawei’s Intelligent Automotive Solution Business – Shenzhen Yinwang Intelligent Technology Co Ltd – achieved revenue of CNY 10.43 billion in the first half of 2024, a tenfold increase compared to the same period last year. The company’s net profit reached CNY 2.231 billion, with a net profit margin of 21.38%.

Read more

• [News] Huawei Rumored to Launch New High-End AI Chip, Potentially Rivaling NVIDIA’s H100
• [News] Huawei’s Shanghai R&D Center Nears Operation; Talent Apartments Set for September Completion

(Photo credit: Huawei)