Weekly News | Supply chain trends in Semiconductor industry #189

189th of weekly news

01

On October 29, Jensen Huang, CEO of Nvidia, said at Beijing Forum that “US shall permit exporting high-end AI chips to China” and warned that US continuous export control will hurt the scale and innovation capabilities of US semiconductor industry. Previously, the US commerce Department had included A100/H100 and subsequent Hopper and Blackwell frameworks in the US export control list. Nvidia's “cut-down” chips exported to China have reduced its computing power by more than 60%, and the lead time is still as long as 40 weeks. Jensen Huang said that China accounts for about 20% of its data center revenue, and if Nvidia continues being shut out of the Chinese market, it will lose cash flow of US$8bn per year and will be forced to cut its investment in the R&D of next-gen chips. Guo Jiakun, the spokesman of the Foreign Ministry, responded on the same day that China had repeatedly stated its principle and position on the chip issue. “We hope that the USA will take practical actions to safeguard the stability of the global production and supply chain”, and for specific issues shall be consulted with the competent authorities.  

It is rare that Jensen Huang made such public statement in China, highlighting that US export control has caused substantial harms to Nvidia's profitability and R&D tempo. If the US government continues tightening exports of advanced AI chips to China, Nvidia may be forced to move more capacity and R&D to Europe and the Middle East to avoid the “US-origin” label. For China, the Foreign Ministry has kept some room for its stance, not only reaffirming its opposition to unilateral sanctions, but also maintaining the technical saying of “competent organization”, thus allowing room for future negotiations. In the short term, the market has been rumoring about “expected restriction ease” in advance. The stock of computing power leasing and server segments rose in the afternoon. In the mid- to long-term, it will still be necessary to observe whether US will adjust the “guardrail rules” again in the election year. If US continues to upgrade export control, China’s accelerators developed by local GPU & cloud vendors will usher in the window of substituting imported products, but advanced packaging and HBM still rely on the external chain, and comprehensive substitution will still require a transition period of two to three years.

02

On October 30, Henna Virkkunen, Executive Vice President for Tech Sovereignty of EU, confirmed on a social platform that, she would meet with Nexperia management in Brussels this Friday to listen to the solution about “the recent significant tensions in the increasing tension of supply of automotive and industrial chips”. Data from the EU Internal Market Division showed that the lead time of standard logic and MOSFET devices, of which 30% were supplied by Nexperia, has been extended from 20 weeks to 40 weeks, and the price of some vehicle chips has risen by 60%. According to Henna Virkkunen, if the shortage of chips affects the production schedule of vehicles before Christmas, EU may activate emergency provisions of the Chip Act, including priority orders, co-purchasing, and temporary export license. Nexperia has just been ordered by the Dutch government to divest part of its R&D business last month, and its Dongguan plant in China has been blocked by the new export regulation of key minerals, and its capacity utilization rate has dropped to 70%. The meeting will assess whether Nexperia’s plants in Europe (Hamburg, Manchester) can release an additional 50,000 units of 8-inch equivalent chip capacity in Q4 and discuss whether EU will provide a quick subsidy to lock capacity.

EU will hold a ministerial meeting with a single chip vendor, which is really a rare situation, highlighting the high dependence of the automotive supply chain on Nexperia’s standard parts and exposing Europe's vulnerability at the node of mature chip processes. In the short term, if priority orders are to be placed, the risk of a “broken chain” will be alleviated at the end of the year and spot goods speculation will be depressed. In the mid and long term, it is still necessary to see whether EU could take advantage of the crisis negotiation to keep more packaging & testing capacity in Europe and avoid the lose-lose circulation of “Dutch restriction - China counteracting”. For Nexperia, if it receives EU temporary subsidy, it can hedge against the loss from exports to China, but it will also be bound to more localized capacity and data sharing obligations, and its flexibility in global capacity layout will be reduced. For other fabs, the outcome of the meeting may be the first case that EU invoked the Chip Act to intervene in the market, thus setting a benchmark for subsequent public funding.

03

On October 30, China and US declared after meeting at Kuala Lumpur that US would suspend increasing the original “reciprocal 24% tariff ” for another year and cancel the “10% Fentanyl Tariff ” and China would simultaneously suspend export control of rare earth and other export control measures for one year which was announced on October 9. The two sides also froze US “50% Affiliates Rule” on chip export control released at the end of September, Section 301 Investigation into China’s targeting of maritime and shipbuilding sectors and China’s countermeasures for a period of 12 months, and extend the existing tariff exclusion list. The agreement covers bilateral commodities of approximately US$180bn. It is estimated that the customs clearance costs will be reduced by 7%-9% from November, and the container shipping prices will go down 5%. The state heads of China and US also instructed the special teams of energy and agriculture to prepare a procurement schedule within 30 days, and Alaska LNG and North China soybeans became the first batch of incremental projects.

The “double freezing” of tariffs and export controls enables China-US trade to gain a one-year policy buffer period. Export enterprises can lock long-term list, and shipping, ports and foreign trade e-commerce sentiment will be recovered first. However, the agreement adopted the mechanism of “renew every one year”, so the structural contradictions in the industries of semiconductors and shipbuilding have not been resolved. The US government still retains the Section 301 investigation tool, and there will be new changes after the election. China only suspends its export control of rare earth, but the detailed scheme has not yet been finalized. In the short term, the agreement will reduce the cost of US consumer goods and tech hardware and will fillip end-of-year sales season. In the mid and long term, it is necessary to see whether the two sides can transform the suspensions into a systematic tariff reduction, and advance WTO reform negotiations simultaneously. Otherwise, Q4 2026 will see the “tariff cliff” again.

04

Nvidia will supply 260,000 high-end GPUs to buyers from South Korea, one of its largest single regional orders to date. According to the purchase agreement, Electronics, SK Group, Hyundai Motor Group, NAVER Cloud, and South Korea National AI Computing Center will jointly deploy these chips to build an “AI Factory” and cloud infrastructure. Nvidia said that South Korea's advantages in manufacturing and data infrastructure make it the “core node” of the next round of AI industrial revolution. The shipment mainly features Blackwell architecture. The AI computing power of a single chip rises three folds compared to that of Hopper and supports up to 4.5 TB/s of HBM3E bandwidth, significantly compressing LLM training time. For Nvidia, which is trying to fight against the volatility of the supply chain between China and US, the order not only generates revenue of US$2bn to US$3bn but also strengthens its bargaining power in the Asia-Pacific sovereign cloud market. In addition, the order also serves as a model for the subsequent replication of “National AI Cluster” in Japan and EU.

The sales of 260,000 chips to South Korea shows that high-end computing power is going from Internet giants to national infrastructure. Nvidia took this opportunity to disperse geopolitical risks and lock storage giants Samsung and SK Hynix as its ecological allies, forming a closed loop of “GPU+HBM” and consolidating the supply chain “moat”. For South Korea, its access to scarce training resources at one time can accelerate the iterations of homegrown LLM and autopilot but it still needs to face challenges in terms of energy consumption, capital support, operation and maintenance. In the short term, the order will boost Nvidia's data center revenue growth in FY2026; in the long term, if more governments follow suit to establish “sovereign AI cloud”, the company is expected to upgrade its single sale to a continuous subscription, opening a new profitability curve.

05

On October 28, China’s first national-level “Automotive Chip Validation Pilot Service Platform” has been officially put into operation, thus ending the history of adopting various standards to detect automotive-grade chips. The platform is jointly built by China Automotive Technology and Research Center and a number of state-owned central enterprises. It has 13 labs including environmental reliability, failure analysis, information security labs and more than 80 sets of equipment, and can perform more than 30 national standard verifications, able to detect 9 categorizes of chips (of 81 subtypes) at one time including auto driving, intelligent cabin, power, safety and so forth. China Automotive Technology & Research Center (Shenzhen) will unveil its nameplate and will rely on the “1-13-3-1”corporate structure, namely, 1 central enterprise consortium, 13 laboratories, 3 industry platforms, and 1 national quality standards laboratory. It will provide “one-stop services” for homemade chips from design, pilot to mass production, and is expected to reduce the validation period by 40% and lower down cost by 30%. The Ministry of Industry and Information of China pointed out that the platform will first dock with OEM factories of BYD, Geely, and NIO, and will complete the joint certification of 30 key chips next year, forming a replicable road map to mount such chips on vehicle, thus laying a quality base for replacing imported chips with “Chinese chips” on a large scale.

06

According to the news of SEMI, on October 30, Piotech Inc. released its financial report for Q3 2025 and it achieved operating income of RMB2.266bn over Q3, up 124.15% YoY. Piotech, a leading homemade film deposition equipment supplier, announced at its earnings meeting that its advanced process verification machine has been validated by multiple leading wafer vendors and has entered the state of mass production officially. The company's next-gen PF-300T Plus and pX, Supra-D reaction chamber supporting PF-300M platform have been delivered in batches for key processes such as PECVD Stack, ACHM, Bianca for 28nm and smaller nodes, and ALD equipment is also continuously delivered for advanced storage and logic production lines in a large scale. As of June 2025, the company's contractual liabilities rose to RMB4.54bn, up 52% YoY. With orders up to its capacity in hand, it has built a foundation for its subsequent high revenue growth. Shenyang No.2 Fab Industrialization Base has started construction, with a total investment of RMB1.77, expected to be put into operation by the end of 2026. The fab can additionally produce 200 sets of high-end thin film deposition and bonding equipment per year, and its total production capacity will rise by about 60%, further meeting local wafer fabs’ urgent needs of homemade equipment.

07

On October 30, UNT announced that it had completed issuing domestic first private IC enterprise tech innovation bonds. The issue amount of the tech innovation bonds in the current period was RMB500mn. The full-time subscription multiply of the issuance was 3.64, and the final coupon rate is only 1.6%, significantly lower than LPR in the same period. The raised proceeds will mainly be used for the expansion of 12-inch automotive-grade IGBT/SiC production line and the R&D of MEMS sensors. UNT, as the largest automotive-grade power device foundry in China, has won orders from BYD, NIO, Li Auto, GAC AION, and other OEM automakers, and has been introduced into Europe famous Tier1 plants. The company said that the low-cost fund raising will help improve its monthly IGBT capacity from 30,000 units to 45,000 units, further consolidating its share in the new-energy automotive electric drive module market.