Photo credit: www.investing.com

Chinese Tech Firms Stockpile HBM Chips Amid U.S. Export Controls

SEOUL/SINGAPORE (Reuters) – Major Chinese technology corporations, including Huawei and Baidu, along with various startups, are actively acquiring high bandwidth memory (HBM) semiconductors from Samsung Electronics. This surge in purchasing comes as anticipation grows regarding forthcoming U.S. restrictions on exports of these critical components to China, according to three informed sources.

Since the beginning of 2024, these companies have significantly increased their acquisition of HBM semiconductors, which are integral for artificial intelligence (AI) applications. As a result, Chinese companies have begun to represent approximately 30% of Samsung’s HBM chip revenue during the first half of this year, as revealed by one of the sources.

This trend illustrates China’s determination to maintain its technological advancements in the face of escalating trade conflicts with the U.S. and other Western nations. Furthermore, it highlights the ripple effects these tensions have on the international semiconductor supply chain.

Sources reported that U.S. authorities are expected to present a new export control framework this month, which will impose additional limitations on shipments aimed at bolstering China’s semiconductor sector. This package is anticipated to include specific measures targeting access to high bandwidth memory chips.

While the U.S. Department of Commerce refrained from providing comments, it previously indicated its commitment to adapting export controls to ensure national security and protect America’s technological landscape in an evolving threat environment.

The implications of the anticipated HBM restrictions and their potential effects on China remain unclear, as Reuters was unable to confirm the specifics of the proposed measures.

HBM semiconductors play a crucial role in the development of modern processors, including Nvidia’s graphics processing units, which are essential for generative AI applications. Currently, only three major manufacturers produce HBM chips: South Korea’s SK Hynix and Samsung, alongside U.S.-based Micron Technology.

Current demand from China is primarily centered around the HBM2E variant, which is significantly behind the most advanced HBM3E model. The ongoing global AI surge has contributed to a shortage in supply for the more advanced version, complicating China’s aspirations in the tech sector.

Nori Chiou, the investment director at Singapore’s White Oak Capital Partners, commented on the situation, noting, “China’s demand for Samsung’s HBM has surged tremendously, particularly as other suppliers’ capacities are fully committed to American AI firms, and China’s own technological development is still emerging.”

Though it is difficult to quantify the exact volume or monetary value of the HBM chips being stockpiled in China, a range of companies—spanning satellite manufacturers to established tech giants like Tencent—have been actively procuring these chips. Recently, the chip design startup Haawking placed an order for HBM chips from Samsung, as cited by one of the sources.

In addition to these efforts, Huawei is reported to be utilizing Samsung’s HBM2E chips for its advanced Ascend AI chip production, showcasing the vital role these semiconductors play in the company’s technological capabilities.

Despite the ongoing developments, both Samsung and SK Hynix opted not to provide comments, while Micron, Baidu, Huawei, Tencent, and Haawking did not respond to inquiries regarding the matter. The sources requested anonymity due to the sensitive nature of the topic.

Competition in HBM Production

While Chinese enterprises, including Huawei and memory chip manufacturer CXMT, are making incremental progress in their own HBM production, focusing on older HBM2 models, these advancements may be hindered by the forthcoming U.S. regulations.

Restrictions on HBM sales to China could have a more pronounced effect on Samsung compared to its main competitors, who have less reliance on the Chinese market, as indicated by well-informed sources. Micron has been abstaining from HBM sales to China since the previous year, whereas SK Hynix, which counts Nvidia among its key customers, is concentrating on developing more advanced HBM chips.

Earlier this year, SK Hynix announced it was reorganizing its production to enhance output of the HBM3E model, noting that its HBM chips had been completely sold out for 2024 and were nearly allocated for 2025 as well.

Source
www.investing.com