Semiconductor Week in Review (Dec 22 - 28) :
This week in semiconductors saw major shifts as the US launched a probe into China's silicon carbide chip dominance while boosting domestic producers, ChangXin Memory (CXMT) began DDR5 production challenging global memory makers, and Taiwanese firms positioned for the cloud AI chip boom. Traditional Chinese manufacturers like Gree Electric made surprising pivots into chips, highlighting the industry's rapidly evolving landscape amid intensifying technological competition.
US launches probe into China's silicon carbide chip dominance amid domestic industry struggles
In a significant move highlighting the intensifying US-China tech rivalry, the US government has initiated a Section 301 investigation into China's silicon carbide (SiC) semiconductor manufacturing while boosting support for domestic producers through substantial funding packages.
The investigation comes as Chinese manufacturers have captured nearly 50% of global SiC substrate exports in the first nine months of 2024, putting pressure on US companies like Wolfspeed, which has faced significant challenges including a CEO departure, workforce reduction, and facility closures despite receiving $750 million in government support.
The US administration has responded by extending financial aid to other domestic producers, including Bosch ($575 million in combined subsidies and loans), X-Fab ($50 million), and Coherent ($48 million), as Chinese competitors like TankeBlue and Sanan continue aggressive capacity expansion, with China projected to reach an annual SiC substrate production capacity of 4.68 million wafers by 2026.
Chinese memory maker begins DDR5 production, challenging global rivals
ChangXin Memory Technologies has begun mass-producing DDR5 memory chips with an 80% yield rate, marking China's first entry into advanced DRAM manufacturing and potentially disrupting the market dominated by Samsung, SK Hynix, and Micron.
While CXMT hasn't officially confirmed the production, Chinese module manufacturers are already selling 32GB DDR5 modules using chips made with 17.5-nanometer technology, pushing beyond US export restrictions that limit Chinese firms to 18nm processes. The development follows CXMT's successful LPDDR5 rollout for mobile devices and partnerships with Chinese smartphone makers Xiaomi and Transsion.
Industry experts predict the company's monthly production capacity will peak in 2025 at 170,000 wafers, though its notable exclusion from recent US sanctions may be linked to Japanese diplomatic efforts to protect equipment suppliers' interests in the Chinese market.
Biden's chip scrutiny may reshape global semiconductor landscape
US intensifies oversight of China's mature process chips amid growing tensions in the semiconductor industry, prompting major American PC manufacturers to eliminate Chinese-designed components from their supply chains and forcing IC design firms to adapt their strategies.
While Chinese clients increasingly demand domestic chip fabrication, industry experts maintain that China's expanding mature process capacity primarily serves internal needs, with limited global impact due to the technological advantages held by US and Taiwanese firms. The potential tightening of US restrictions could benefit Taiwanese companies by neutralizing Chinese competitors' pricing advantages, though it may also accelerate China's push for technological independence.
Market analysts anticipate that new policies will deepen market decoupling, particularly affecting US and Chinese sectors, while creating opportunities for European and Taiwanese firms equipped with flexible production capabilities to navigate the evolving landscape.
Chinese appliance makers, shoe firm make unexpected pivot to chip sector amid US curbs
Traditional Chinese manufacturers are making surprising forays into the semiconductor industry as the nation seeks to counter US trade restrictions. Home appliance giant Gree Electric, footwear manufacturer AoKang International, and rare earth entrepreneur Shi-hui Zhu have emerged as unlikely players in the chip sector through various investments and acquisitions.
Notable moves include Gree's CNY5.5 billion investment in a silicon carbide chip facility, AoKang's stake in memory chip maker United Memory Technology, and Zhu's controlling investment in semiconductor equipment firm Wanye Enterprises through his Vital group. While Gree's vertical integration strategy in developing chips for its appliances shows promise, industry observers remain skeptical about AoKang's ability to navigate the complex semiconductor landscape, particularly given its recent financial struggles with losses of CNY576 million in 2022-2023.
The trend highlights China's aggressive push for semiconductor self-sufficiency, though experts caution that success in this highly technical sector requires more than just capital investment.
Gree claims chip independence as Chinese appliance maker ships 200 million units
Gree Electric, China's leading air conditioner manufacturer, has achieved a significant milestone in its semiconductor venture, shipping nearly 200 million self-developed chips without government funding, according to Chairwoman Ming-zhu Dong. The company's chip journey, which began in 2012, has evolved from establishing China's first domestic IPM production line to building what it claims will be Asia's largest automated compound semiconductor facility.
With investments totaling over CNY50 billion in chip R&D and a product portfolio spanning MCUs, AIoT SoCs, and power semiconductors, Gree has reported impressive growth in its semiconductor segment, generating CNY10 billion in revenue and CNY2 billion in net profit in 2023.
However, this diversification comes amid challenges in its core business, with the company facing declining air conditioner sales and investor skepticism about its transformation strategy, as its main appliance business saw a 5.39% revenue drop in the first three quarters of 2024.
China's mature chip push raises global market disruption concerns
China's aggressive expansion in mature semiconductor manufacturing, backed by substantial state investments and following its successful solar panel strategy playbook, is raising concerns about potential market disruption despite US export controls. With Chinese semiconductor equipment spending projected to reach $41 billion in 2024 – representing 40% of global expenditure – and SMIC's record $7.5 billion capital expenditure in 2023, Beijing is rapidly building domestic chip-making capabilities.
Morgan Stanley and Bernstein data show China's share of global mature chip production has grown from 14% in 2017 to 18% in 2023, while domestic customers now represent 53% of local foundries' demand, up from 48% in 2017. Although US Secretary of Commerce Gina Raimondo acknowledges the limitations of export controls in stopping China's progress, the developments pose potential risks to established players like GlobalFoundries (GF) and Texas Instruments (TI), challenging Washington's semiconductor supply chain strategy.
Taiwan IC firms eye cloud AI ASIC boom amid market expansion
As cloud service providers and AI companies drive unprecedented demand for custom chips, Taiwanese IC designers are positioning themselves to capture a slice of the expanding cloud AI and ASIC markets over the next three years. While industry leaders Broadcom and Marvell Technology maintain their dominance through superior technological capabilities, particularly in computing and high-speed transmission, Taiwanese players like AIchip Technologies and Global Unichip are leveraging local supply chain advantages to offer competitive solutions.
The market opportunity has also attracted established firms such as MediaTek and Egis Technology, who are forming strategic partnerships and developing specialized technologies like SerDes and Universal Chiplet Interconnect Express to gain footholds in the technology-driven sector. Industry analysts project exponential growth in production capacity between 2025 and 2027, largely driven by anticipated demand for cloud ASICs, though Taiwanese manufacturers currently lag behind their American counterparts in securing new orders.