Weekly News | Supply chain trends in Semiconductor industry #171

171st of weekly news

01

On June 14, 2025, the economy ministry's trade administration of Taiwan has updated its strategic high-tech commodities entity list by including Huaiwei, SMIC and many of their subsidiaries to the export control list. The newly added 601 entities also included the overseas subsidiaries of Huawei in Japan, Russia and Germany. According to the current regulations of Taiwan, if local companies hope to export related products to the entities in the list, they must obtain the approval of Taiwan’s authority.

The move is considered as a major upgraded version of Taiwan’s technology export control policy. Previously, although Taiwan prohibited the export of key chip manufacturing equipment such as lithography machine, it did not add major tech companies or chip makers of Chinese mainland to the export control list. The current control list covers the core technologies, materials and equipment required for chip manufacturing, including advanced processes that TSMC relies on to fab high-end chips for its customers such as Nvidia.

The fact that Taiwan adds Huawei & SMIC to export control list is not merely adjustment of its trade policy but another solid evidence of “solicit US support and resist China for Taiwan independence”. The Taiwan government' s move is obviously in line with the US policy of curbing Chinese mainland, and it is trying to contain the development of the technology industry of Chinese mainland by cutting off the channels through which Chinese mainland’s companies can acquire semiconductor technology, materials, and equipment in Taiwan.

From the perspective of economy, this move is a typical way of “lifting a rock only to drop on one's own feet”. More than 30 Taiwan suppliers have been supplying goods for Huawei for many years, with transaction amount worth more than NT$10bn. The current export control policy will seriously affect the business of these manufacturers of Taiwan and may even lead to survival crises for some of them. The mutually beneficial cooperation in terms of economy, trade, science and technology, and industrial fields between both sides of Taiwan Straight is an important cornerstone for the prosperity and stability of Taiwan region. However, this move of the Taiwan government will seriously disrupt the routine exchanges of science and technology across the strait and hinder the cooperation between companies on both sides in terms of chip design and manufacturing.

02

In June 2025, the draft tax bill of the US Senate would increase the tax credit to 30% from 25% of investments in semiconductor manufacturing industry. This move is intended to further motivate chip makers to invest in new plants before the tax credits expire at the end of 2026. The tax bill is one of the major moves of the US government adopted to attempt to bring semiconductor manufacturing from Asia back to the USA.

The CHIPS Act has been the backbone of US domestic policy since Biden signed it in 2022. The programme includes US$39bn in grants and up to US$75bn in loans for manufacturing projects, and its most generous benefit is to provide 25% tax credit for related projects. The main beneficiaries include companies such as Intel, TSMC, Samsung Electronics and Micron. This increase in tax credits will further reduce the investment costs of related companies and encourage more companies to expand their production capacity in the USA.

Although Trump has been calling for abolishing the CHIPS Act, the bipartisan lawmakers are unwilling to remove this subsidy programme that will bring high-paying jobs to their electoral districts. The government officials are reformulating agreements with chip makers to encourage higher investments without increasing taxpayers’funds.

In addition, the tax bill also extended the scope of the tax credits to include wafer production, chip manufacturing equipment manufacturers, and solar wafer production, but the production of basic materials such as polysilicon remained excluded. The Senate hopes to submit the tax bill to Trump before the July 4th Independence Day Holiday, but the final version needs to be approved by the Senate and the House of Representatives before it becomes law.

This increase in tax credits will directly reduce the investment costs of semiconductor companies and encourage more companies to build new plants in the USA. This will help ease the problem of inadequate semiconductor capacity in the USA and improve its competitiveness in the global semiconductor market. In the long run, this policy will help the USA build a more complete semiconductor industry chain and reduce its dependence on external supply chains. By attracting more semiconductor companies to invest in the USA, the country is expected to create new advantages in terms of technology, talents and associated industries. In addition, the expansion of the tax credits not only covers wafer production and chip manufacturing equipment manufacturers but also goes to solar wafer production, which will promote the synergistic development of related industries in the USA.

03

According to the latest report, TSMC has achieved a 60% yield during the production of 2nm chips, reaching the threshold of stable mass production. This achievement not only shows that TSMC’s leading advantages in advanced process technology and further consolidated its dominance in the global semiconductor market.

TSMC’s 2nm process technology will use a new architecture called gate-all-round (GAA), with performance to increase 10-15% over 3nm (N3E) at the same power consumption, energy efficiency up 10-15%, power consumption down 25-30%, and transistor density up 15% over 3nm process technology. These technological improvements enable 2nm chips to show significant advantages in terms of performance and energy efficiency, especially suitable for meeting increasing demands for chips of advanced processes in areas such as HPC, AI and mobile terminals.

At present, TSMC has received orders for chips of 2nm process from tech giants such as Apple, Nvidia, AMD, Qualcomm and MediaTek. Among them, AMD has announced that its nextgen EPYC Venice server processor will be based on TSMC's 2nm process technology, showing the official launch of 2nm process technology in commercial applications. In addition, TSMC also plans to achieve a monthly capacity of 50,000 units of wafers for 2nm chips by the end of 2025 and plans to triple its capacity by 2027.

TSMC's high yield of 2nm chips and advanced technology enable it to take a dominant role in the nextgen chip market. With better performance and higher energy efficiency, 2nm chips will meet the urgent demands in fields like HPC, AI and mobile terminals. Due to its strong R&D capability and robust technology iteration strategy, TSMC successfully secured its market position and further widened the technology gap with its rivals. 

TSMC's 2nm process has won recognition of many tech giants, and some companies like Apple, Nvidia and AMD have pre-booked their production capacity. This kind of trust of customers not only reflects TSMC's technological leadership but also provides a solid guarantee for its future revenue growth. Although Samsung is actively developing 2nm process technology, its yield and mass production progress still lag behind those of TSMC. TSMC's leading position allows it to maintain its dominance in the global chip market in the era of 2nm process, while Samsung may only act as a secondary supplier to compete with it.

04

According to report of Nikkei, Chinese automakers, including SAIC, Changan, GWM, BYD, Li Auto, and Geely, are actively advancing automobile projects equipped with 100% homemade chips. At least two brands plan to mass produce their first models by 2026. This goal is an essential move of Chinese mainland to accelerate its chip independence programme against the background of tense China-US relations, aiming to reduce its dependence on foreign chip suppliers.

The Ministry of Industry and Information Technology (MIIT) of China has led the strategy of localization of chips, and the latest policy goal is to achieve 100% independent R&D and manufacturing of auto chips by 2027. Although this goal is not a mandatory requirement, it serves as a policy framework to motivate related companies to increase their technological investment and improve their supply chain security. At present, the intelligent cabin and automatic driving systems developed by Chinese automakers still rely on foreign chips, such as Nvidia and Qualcomm's products, but local automakers are accelerating the process of replacing them with homemade chips. 

In addition, international auto chip giants such as Infineon, NXP and STMicroelectronics are also speeding up their cooperation with local foundry factories in China to increase their production capacity in China. At the same time, Chinese auto companies are also optimizing their chip validation process to reduce the certification period of some non-critical function chips from 5 years to 6 to 9 months compared to conventional automotive grade chips so as to accelerate the application of homemade chips.

Chinese auto companies hope to achieve 100% local production of chips, which not only means a breakthrough in terms of technology but also is an important sign of industrial upgrading. This will significantly improve the competitiveness of Chinese automobile industry in the global market, reduce their dependence on external supply chains, and enhance the independent, controllable capacity of the industry. The policy guidance of the MIIT provides a clear development orientation for automobile companies, encourages them to increase investment in R&D, and accelerates the process of producing homemade chips. The positive response of auto companies shows that China's autonomy in the field of auto chips has entered a substantive stage.

The localization of chips will greatly enhance the supply chain security of China’s automobile industry and reduce the supply risks due to changes in international situation. At the same time, it also injects confidence in the market, indicating that China has the ability to develop key technology independently. International chip giants accelerated their local landscape in China, reflecting the importance of the Chinese market and the trend of global industrial cooperation. However, this also intensified the competition in the market, and Chinese automakers need to constantly upgrade their technical level to secure a place in the global market.

05

On June 16, 2025, the Economy and Informationization Bureau of Guangzhou Development Zone and the Huangpu District Industrialization and Informationization Bureau of Guangzhou jointly issued "Several Policies and Measures to Support High-Quality Development of Integrated Circuit Industry in Huangpu District of Guangzhou Development Zone", aiming to accelerate the high-quality development of the regional IC industry and create a third-pole core carrier area for the IC industry in China.

The purpose of the policy is to optimize the development layout of the industry, support the implementation of key projects, and drive superior resources and high-quality companies to gather at the park. The focus lies in achieving breakthrough in chip design, special technology, advanced packaging testing, EDA tools, equipment and parts and other areas, creating a whole industrial chain covering design, manufacturing, materials, equipment and parts, and building a comprehensive IC industry cluster.

The key is to seek breakthrough in designing high-end chips such as CPU, GPU, FPGA, and so on, and the authorities will provide strong support for the development and design of AI chips, optical chips, IoT chips, storage chips, RF chips, baseband chips, automobile-grade chips, display driving chips and others. The authorities encourage related enterprises to independently carry out high-end chip architecture design based on new devices, new materials, new processes such as RISC-V, ARM and so forth. For eligible companies, they will be granted subsidies based on different levels not more than 40% of the cost of taping out, and a single company will receive subsidies up to RMB5mn per year. 

06

Recently, Huawei unveiled a patent for a quad-chiplet packaging design, which has attracted widespread attention in the industry. According to foreign reports, the patent may be used for its next-gen AI accelerator known as the Ascend 910D. 

Huawei’s quad-chiplet design was filed in 2023 under the title of “An integrated device, communication chip and communication device”. The patent uses bridge technology(e.g. TSMC’s CoWoS-L) rather than ‘just’ an interposer. Specifically, it demonstrates a quad-chiplet stacking solution based on a silicon media layer that enables ultra-high-speed data transfer between chips via a vertical interconnect technology. Therefore, it can achieve the integration of four computing chips in a single packaged chip. In addition, to meet the demand for AI-training processors, the chip is expected to be paired with multiple sets of HBM and

Huawei’s “quad-chiplet” packaging technology achieves performance comparable to that of a single chip of advanced process by combining several chiplets. With this method, several chiplets can be integrated with chips of mature processes (such as 14nm, 7nm), which can then be integrated with advanced packaging technology, thus effectively bypassing the limitations in terms of advanced processes.

07

Recently, report said that NIO plans to split its chip business into an independent entity and will introduce strategic investors. This news has been confirmed officially. The newly established independent entity named “Anhui Shenji Technology Co., Ltd.”has completed its business registration on June 17, 2025.

The registered address of Anhui Shenji Technology Co., Ltd.(Shenji) is the same as that of NIO's headquarters in China, namely, Hengchuang Intelligent Technology Park in Hefei Economic and Technological Development Zone, Anhui Province. The legal representative of Shenji is Bai Jian, head of NIO chip and intelligent hardware business. Shenji has a registered capital of RMB10mn and its business scope covers IC chip design and services, IC chip and product sales, technical services, technology development, technology consulting, technology exchange, technology transfer, technology promotion, etc.

Anhui Shenji Technology Co., Ltd. will undertake the business of NIO’s intelligent drive chip “Shenji NX9031”. The chip is based on 5nm automobile-grade process and has integrated more than 50bn transistors. The computing power of each chip is up to 1000+TOPS and is the highest level in the industry at present. The mass production of the chip started in early 2025 and it was first used in NIO ET9 and other models.