According to TechNews on October 18th, The Biden administration has once again tightened restrictions on chip exports to China, and this includes Nvidia’s advanced AI chips.

In a recent press release, the U.S. government announced a renewed restrictions on exports of advanced computing and semiconductor manufacturing products to China. Notably, this includes Nvidia’s cutting-edge AI chips, which will be impacted and could potentially face restrictions on sales to China. The motive behind this action by the Biden administration is to prevent China from bolstering its military capabilities by accessing advanced U.S. technology.

Apart from Nvidia, chip products from industry giants like Intel and AMD might also encounter hurdles in their journey to China. In addition to the actual chips, products from semiconductor equipment manufacturers such as Lam Research, KLA, and Applied Materials may also face increased limitations when destined for China.

These new restrictions, as revealed by the U.S. government, are even more stringent than previous limitations on chip exports. Nvidia’s A800 and H800 chips are among those falling under these tightened restrictions. As a direct consequence, Nvidia’s stock price took a sharp dip, decreasing by nearly 5% on Tuesday.

Following the recent U.S. government ban, Nvidia’s spokesperson, Ken Brown, promptly assured that the company strictly adheres to all relevant regulations. Nvidia is committed to supporting a wide array of products across diverse industries. Given the global demand for Nvidia’s offerings, it’s anticipated that these restrictions will have no immediate, substantial impact on Nvidia’s financial performance.

In a bid to curtail China’s potential access to U.S. chips through third-party channels, these limitations now extend to include the overseas subsidiaries of Chinese firms. Furthermore, the updated regulations expand the list of countries subject to additional export license requirements for advanced chips to over 40 more nations. This expansion is driven by the concern that these countries might transfer chips to China and their presence on the U.S. arms embargo list.

Notably, the interim final rule revises ECCN 3A090 and 4A090 and enforces extra licensing prerequisites for exports to China and the D1, D4, and D5 country groups. These groups include nations like Saudi Arabia, the United Arab Emirates, and Vietnam, though Israel remains excluded.

To safeguard against China’s potential acquisition of U.S. chips through alternative routes, these restrictions have been extended to encompass overseas subsidiaries of Chinese corporations and involve 21 other countries.

However, reports from foreign media indicating that this new U.S. regulation will exempt certain consumer chips used in laptops, smartphones, and gaming consoles. Nonetheless, some chips may still necessitate prior notification and licensing from the U.S. government to be exported.

It’s noteworthy that the U.S. government’s list of newly restricted entities includes two prominent local GPU companies, Moore Thread Technology and Biren Technology. Following the U.S. ban, both firms promptly issued statements of strong protest.

Moore Thread expressed their strong objection, saying, “We are deeply concerned about the inclusion of Moore Thread in the Entity List by the U.S. Department of Commerce. Our company is actively engaging with various stakeholders, and we are assessing the impact of this development.”

Biren Technology also issued a statement, stating, “We vehemently oppose the U.S. Department of Commerce’s actions and will proactively appeal to relevant U.S. government departments, urging them to reconsider their stance.”
(Image: Nvidia)

(Data: US BIS)

Reports indicate that the United States is poised to unveil an updated set of restrictions on chip exports to China this week. Beyond the previously reported tightening measures on AI chips and equipment exports, these new regulations are expected to restrict the supply to chip design companies. The aim is to enhance control over the sale of graphic chips and advanced chip manufacturing equipment for AI applications to Chinese enterprises, with the possibility of adding Chinese chip design companies to the list of restricted entities.

As reported from Reuters and Bloomberg, U.S. authorities will demand that overseas manufacturers obtain licenses to fulfill orders from these companies and subject Chinese firms attempting to circumvent restrictions by using third-party countries for shipping to additional inspections. While the new regulations are expected to be announced this week, the potential for delays should not be ruled out.

In October 2022, the United States declared export restrictions on advanced semiconductor processes and chip manufacturing equipment bound for China, as a measure to prevent the development of cutting-edge technology that could potentially bolster military capabilities for geopolitical adversaries.

Following the implementation of these export bans, U.S. tech companies, such as Nvidia and Applied Materials, incurred significant losses in orders. For example, Nvidia was unable to sell its two most advanced AI chips to Chinese companies, leading to the introduction of a “downgraded” chip, the H800, designed specifically for the Chinese market to bypass existing regulations.

U.S. officials have revealed plans to introduce new guidelines for AI chips, including the restriction of certain advanced data center AI chips that currently do not fall under any limitations. They are considering the removal of “bandwidth parameters” to prevent the entry of AI chips perceived as too powerful into China.

However, they plan to introduce expanded guidelines for chip control, which may reduce communication speeds among AI chips. Slower communication could increase the complexity and cost of AI development, particularly when many chips need to be connected for training large AI models. Additionally, the U.S. will introduce “performance density parameters” to guard against potential future workarounds by companies.

Reports suggest that the United States is looking to prohibit the export of Nvidia’s H800 chip, a “downgraded” chip designed for the Chinese market to legally bypass existing regulations.

The Biden administration is also preparing for additional scrutiny of Chinese companies attempting to modify shipping and manufacturing locations in a bid to evade specific country restrictions. This rule will continue to limit sales of specific chips to Chinese companies through overseas subsidiaries and related entities, requiring authorization before exporting restricted technology to countries that could serve as intermediaries.

Furthermore, the progress in Huawei’s new smartphones has prompted the U.S. authorities to tighten control further, initiating investigations for actions against Huawei or SMIC that will be carried out independently of the new export control regulations.

In response to the anticipated expansion of U.S. export controls on Chinese companies, Chinese Foreign Ministry Spokesperson Mao Ning stated, “We have made our position clear on US restrictions of chip exports to China. The US needs to stop politicizing and weaponizing trade and tech issues and stop destabilizing global industrial and supply chains. We will closely follow the developments and firmly safeguard our rights and interests.”

(Image: Nvidia)

As reported by The Wall Street Journal today, Taiwan Semiconductor Manufacturing Company (TSMC) is poised to secure an additional one-year exemption from the United States. TSMC’s semiconductor facility in Nanjing, China, is expected to continue operations in the “foreseeable future” as long as significant technical upgrades are not undertaken.

U.S.’s Attitude towards Semiconductor Giants in Asia

The U.S. imposed a ban on chip exports to China in October of the previous year, restricting semiconductor equipment manufacturers using U.S. technology from exporting to China without obtaining a license.

On October 9th, the South Korean government revealed that both Samsung and SK Hynix have earned recognition as “Validated End-Users (VEUs)” by the U.S., granting them the ability to import specific U.S. chip manufacturing equipment into their existing Chinese facilities without further U.S. approval.

The status of TSMC’s designation as a “Certified End-User” remains undisclosed,  and the Taiwanese government has not made any public statements on this issue at this time.

South Korea’s Future Challenges after Secured U.S. Exemption

Over the preceding year, the South Korean government and related companies have been actively engaged in mediation with the U.S. government and will persist in their efforts during the extended one-year exemption. “In reality, we cannot evade political risks and geopolitical uncertainties,” stated Choi Sang-mook, Chief Secretary for Economic Affairs in the South Korean President’s Office.

Through back to September 22th, the U.S. Department of Commerce released the final regulations for the “Chip Act.” The rules indicate that subsidized chip manufacturers will enter into binding agreements with the U.S. Department of Commerce, limiting expansion and collaborative scientific research activities in countries including China. The restrictions for advanced processes and mature processes are set at 5% and 10%, respectively. This implies a severely restricted scope for expansion, and the future prospects for Samsung and SK Hynix’s continued growth in China remain uncertain.

Nevertheless, the U.S. decision to grant Samsung and SK Hynix an indefinite exemption bodes well for the semiconductor industry in China, the United States, South Korea, and the global semiconductor supply chain. As per Samsung’s statement, most of the uncertainties associated with its semiconductor production in China have been resolved. Meanwhile, SK Hynix underscores that this development bolsters the stability of the global semiconductor supply chain.

(Image: TSMC)

Major economies are investing heavily in semiconductor industries, with China leading at $143 billion, the U.S. at $52.7 billion, and the EU at $47 billion, according to “EE Times”. India plans to give $922 million amid U.S.-China tensions.

Despite China’s much larger subsidies compared to India’s, the Chinese semiconductor industry faces various challenges. But under mainly from the United States, to slow down its progress, some Chinese companies are struggling to survive, while others are shutting down. For instance, after OPPO’s unexpected announcement in May to close their IC design company ZEKU, active for less than 4 years, Holding Group, Geely, also declared on August 8th that it would halt its self-developed chip business through the Xingji Meizu group, only 5 months after its launch.

According to a recent report from ‘EE Times,’ governments from around the world are actively pursuing semiconductor self-sufficiency to meet their high-tech and communication needs. China, in particular, has taken the lead by planning a substantial $143 billion subsidy program to boost its industry and reduce dependence on the United States.

In the U.S., the ‘Chips ACT’ passed last year allocated $52.7 billion in subsidies. As per McKinsey, the cumulative commercial investments related to this endeavor have already exceeded $200 billion.

The European Union is also making its mark, aiming to increase its global semiconductor market share from 10% to 20% by 2030. The ‘European Chips Act’ is expected to see $47 billion in government investment. TSMC has confirmed plans to establish a factory in Germany and is expected to receive relevant subsidies.

Singapore is projecting a $19 billion subsidy for its semiconductor industry, while Japan’s exact subsidy scale remains unknown, with reports suggesting a minimum of $6.5 billion. South Korea is focusing on tax reductions for semiconductor-related companies, offering 15% tax credits for corporate groups and up to 25% for small and medium-sized enterprises.

Recently, the UK and India have joined the battle. The UK has set aside a $1.5 billion subsidy, and India’s ‘Semicon India’ initiative offers at least $922 million to bolster its influence in the global electronics supply chain. While Malaysia hasn’t disclosed the amount of support for its chip industry, the country is providing approved priority industries, especially high-tech firms, with a full 10-year tax exemption. The government also offers investment subsidies and various incentives within specific investment zones.

Amidst U.S. restrictions, China initially aimed to boost its chip industry and create its own ‘China chips.’ However, setbacks have occurred. OPPO’s IC design company, ZEKU, formed in 2019, spent a staggering $44 billion over three years only to shut down on May 12th, leaving 3,000 employees jobless. Geely Holding Group’s subsidiary, Xingji Meizu, also announced on August 8th their decision to halt self-developed chip operations due to global economic uncertainties. Their focus will now turn to product innovation and software user experiences.

(Source: https://ec.ltn.com.tw/article/breakingnews/4392195)

Global PCB market revenue will decline by 3.4% in 2023 due to low demand for consumer electronics, reaching around USD 80.5 billion, down from approximately USD 83.3 billion in 2022. However, the industry is expected to rebound, with a potential to reach USD 100 billion by 2027, with a CAGR of 3.7% from 2022~2027, led by automotive PCBs of USD 9.2 billion accounting for the largest part in 2022, and will reach USD 15.6 billion in 2027. TrendForce research shows that China dominates PCB production with a 53% market share in 2023, followed by Taiwan at 13%, Korea at 10%, Japan at 9%, and SEA at 8%.

China’s rising labor costs, environmental regulations, and geopolitical tensions have led to a shift in the PCB supply chain outside of China. SEA, with its labor advantages and free trade benefits, has become a popular destination for PCB manufacturers. TrendForce says that Thailand currently accounts for 50% of the total PCB production value in SEA. Major Taiwanese manufacturers have established factories in Thailand to establish complete industry chains. With an average monthly salary level of $8,800, Thailand is well-positioned to become a key production base for the PCB industry in Southeast Asia.

SEA PCB Production Value to Follow China’s Closely in the Next 10 Years

SEA such as Thailand, Malaysia, and Vietnam have an average manufacturing labor cost of about half of that in China, but their production efficiency is still 20% lower than China’s. In addition, SEA is limited by a shortage of industry talents and incomplete supply chains, resulting in high procurement costs, especially for mid-to-high-level engineering and management personnel. Therefore, large-scale investment in the region is still unlikely at this stage. As the PCB industry chain relocation requires a long time due to its cluster effect, China is expected to remain the world’s largest PCB producer in the next 10 years, accounting for over 40% of the global PCB production value, while SEA is expected to become the 2^nd largest producer.

Taiwanese companies are leading the expansion of PCB factories in Southeast Asia.

Taiwanese PCB manufacturers have the highest market share at 34%, but only 38% of their production capacity is located in Taiwan, with the majority around 60% being concentrated in China. To follow the trend of supply chain relocation, 9 Taiwanese PCB manufacturers, including Elite Material, ITEQ, and CCL, plan to establish factories in Thailand, while Chinese manufacturers like Shenzhen Jove Enterprise, and China Eagle Electronic have all set up factories in Thailand. International ones like CMK and Kyoden have also set up factories in Thailand, while TTM, Simmtech, and AT&S focus on Malaysia, and Vector Fabrication has chosen Vietnam.