Weekly News | Supply chain trends in Semiconductor industry #173

173rd of weekly news

01

Recently, the AI chip project of Microsoft has encountered major setback. According to the latest report, Microsoft’s self-developed chip has been delayed by at least six months, pushing mass production into 2026. The chip is expected to fall well short of the performance of Nvidia’s flagship Blackwell chip. This delay is mainly due to unforeseen design changes, staffing constraints and high turnover. 

Specifically, Microsoft required changes in designing the Braga chip during the development process to incorporate the new features proposed by OpenAI, which led to stability issues in during simulation testing and set the project back several months. Despite these challenges, Microsoft executives insisted that the chip design be completed by the end of the year, putting a lot of pressure on the team, which led to about one-fifth of the team members leaving. 

Microsoft started developing the AI chip in 2019 and unveiled the Maia 100 chip in 2023. However, the chip is primarily used for in-house testing and has not yet been applied in real scenario. In addition, it was designed for image processing rather than the currently dominating generating AI services in the market. Microsoft is secretly developing three chips, code named Braga, Braga-R, and Clea, targeting deployment in data centers in 2025, 2026, and 2027, respectively. However, the delay of the first chip casts doubts on whether Microsoft will meet this ambitious launch target. 

The technical challenges and brain drain issues faced by Microsoft's AI chip project highlight the complexity and difficulty in self-developed chips. The design changes and stability issues caused delays in the project progress, and the pressure on the team and the high turnover further complicated the project difficulty. This shows that even for tech giants like Microsoft, to develop in-house AI chips can be a daunting task. Although facing the setback, Microsoft is advancing its AI chip project and plans to unveil several chips in the coming years. However, Microsoft's AI chips may not be able to match Nvidia's in terms of performance at least until 2027. During this period, Microsoft may continue to rely on Nvidia’s chips and will accelerate the development and innovation of its own chip technology.

02

On June 27, local time, the Canadian government ordered Hikvision Canada Limited to cease operations in Canada and shutter its business in Canada in 120 days over the so-called “national security”. Mélanie Joly, the Minister of Industry of Canada, said the government’s decision was based on the “information provided by Canada’s security and intelligence community“ but did not disclose any evidence or technical details. At the same time, the Canadian government has simultaneously banned federal agencies from purchasing Hikvision products, and required a comprehensive screening and replacing existing Hikvision equipment. 

On June 29, Hikvision said it “strongly” disagrees with the government's decision to order it out of Canada and views the move lacks factual basis, procedural fairness and transparency. Hikvision pointed out that the Canadian government's allegations were based on a misinterpretation of China’s legal provisions such as the National Security Law and the National Intelligence Law and focused on evaluating the shareholding structure of the company's state-owned holdings rather than its technical security. Hikvision stressed that the company has global business coverage, always adheres to business ethics, strictly abides by the laws and regulations of the place where its business is conducted, and conducts legal and compliant operations globally.

The Canadian government shuts down Hikvision on the grounds of “national security”. This practice lacks facts and procedural fairness and is to discriminate against and repress Chinese enterprises. This move of Canada not only harmed Hikvision’s legitimate rights and interests but also undermined normal economic and trade between China and Canada. Hikvision's response demonstrates its strong opposition to the Canadian government's unreasonable decision and its determination to operate its global business complying with laws and regulations. Hikvision will continue to defend its interests through legal channels and provide quality services to its customers worldwide. This incident once again highlights the challenges encountered by Chinese enterprises in the process of going global. Faced with unreasonable sanctions imposed by some countries, Chinese enterprises should strengthen their independent R&D capabilities and reduce their dependence on foreign markets. At the same time, Chinese enterprises should actively seek legal means to protect their legitimate rights and interests.

03

On July 2, the BIS of the US officially lifted export control of top EDA suppliers such as Synopsys, Cadence, and Siemens AG to China. Siemens said it had restored full access to the recently restricted software and technology to Chinese customers; Synopsys is working hard to restore the supply of restricted products in China, and Cadence has also restored normal access to its software products and related technologies to its customers in China. 

At the end of May this year, the BIS of the US asked these EDA suppliers to stop supplying goods to their Chinese customers over “China's restrictions on exports of rare earth products”. The lifting of the EDA export control is part of a trade agreement between China and the US aimed at facilitating the flow of key technologies between the two countries. EDA, as an important part in the IC industry chain, is named “the mother of the chip”, used to facilitate the processes like functional design, integration, verification, physical design of hyperscale IC chips. The US lifting of the EDA export control on China means that Chinese chip designers can regain access to these advanced EDA software and technology services, which will help ease the R&D pressure on these enterprises and stabilize the supply order of the global semiconductor industry chain.

For the chip design industry in China, the lifting of the export control is a positive signal. Once the domestic chip designers can regain advanced EDA tools, their R&D pressure will be eased. Especially for those relying on advanced EDA tools for chip design projects at 7nm and below, the export control lift is of great significance. In addition, it will help stabilize the supply order of the global semiconductor industry chain. Previously, the US export control not only disrupted the pace of the Chinese market but also affected the global business landscape and revenue of related companies. Although some of the export restrictions have been lifted, a number of industry insiders pointed out that the reversibility and stability of the US policy still need to be closely watched. The US government's policy blows hot and cold. In the future, the US government may readjust its policy on export to China again, which may bring uncertainties to Chinese chip designers. 

04

On July 2, US local time, according to the order issued by the US Department of Commerce, Alpha and Omega Semiconductor (AOS), a chipmaker, has agreed to pay US$4.25mn(~RMB30.45mn) to make a settlement with the US Department of Commerce for violating the regulations in selling chips to Huawei Technologies. The order states that AOS sold 1,650 power controllers, smart power stages, and relevant items to Huawei in 2019 (when Huawei fell on the “sanctioned list” of the US). Although these products were designed and manufactured by foreign countries, AOS is still subject to export control regulations of the US because it exported these products to China from the US. The suppliers of the companies on the sanctioned list (i.e. the “Entity List”) must obtain a license. The document filed by AOS to US Securities and Exchange Commission (SEC) earlier this year shows that US authorities have been investigating AOS’ dealings with Huawei since 2019. 

The document states that the US Department of Justice has closed the investigation in January 2024 without filing any accusation, but the US Department of Commerce is still conducting civil investigation. On April 16, 2025, AOS said it had received a letter from the US Department of Commerce accusing it of violating export controls. The company had a meeting to discuss a possible solution. According to AOS, it has reached an agreement with the BIS to close the investigation into its violation of the export controls. According to the agreement, AOS agreed to pay a US$4.25mn fine to solve the charge. This resolution does not impact AOS’s ongoing business operations and brings to an end the US government’s five-year-plus investigation, which did not result in any criminal charges. AOS is pleased to bring this matter to a close with only limited administrative export control charges.

The US fine on AOS once again highlights the irrational and hegemonic act of its “long arm jurisdiction”. The US government politicized and instrumentalized economy, trade, and science and technology issues, and this unilateral bullying not only seriously damaged the legitimate rights and interests of Huawei but also undermined the stability of the global industrial chain and supply chain. Although Huawei has made some achievements in developing chips, US export controls have still caused some impact on Huawei's supply chain. The fine on AOS may cause some enterprises to worry about cooperation with Huawei, but Huawei still has strong independent R&D capabilities and market competitiveness.

05

According to the news of SEMI, Hwatsing announced its investment in the construction of a wafer regeneration capacity expansion project. 

The announcement shows that in order to effectively capture the window phase of accelerating expanding the production capacity of wafer fabs, amplify first-mover advantages and scale effect, and further expand the market share of wafer regeneration services, the company plans to set up a new wholly-owned subsidiary to build a wafer regeneration capacity expansion project in Kunshan City, Jiangsu Province. The total production capacity of Hwatsing’s wafer regeneration capacity expansion project is 400,000 units per month, and the construction period is expected to be no more than 18 months. The capacity of the first phase of the project is 200,000 units per month, the initial investment is expected to be no more than RMB500mn. However, the final total investment is based on the actual investment, and the company will invest in the project according to its projects as required. 

According to Hwatsing, as domestic 12-inch wafer fabs accelerate production expansion, the new production lines require more and more advanced process, the demand for dummy wafers, monitor wafers, and test wafers surged rapidly. Therefore, the company need to further improve wafer regeneration processing capability to better meet customers’ needs.

06

According to Nanjing Daily News, on June 30, Nanjing city held a major industrial project promotion project in June, and Jiangsu Silicon Integrity Semiconductor Technology Co., Ltd. (JSSI) started building the project of AI advanced packaging & testing base. 

It is reported that JSSI’s AI advanced packaging & testing base project is located in Qiaolin New City Pukou Economic Development Zone, with a total investment of approximately RMB5.5bn. The project will be built into a high-end IC packaging & testing base in phases. In the first phase of the project, the investment will be RMB1bn, and a 153,000-square-meter modern plant will be built. The plant will be equipped with advanced production equipment to establish two international leading high-end packaging lines. The project will overcome the difficulty in packaging AI computing chip and accurately meet the demand for high-performance packaging of 5G communication chip and vehicle-grade chip. After reaching the target capacity, the first phase of the project will produce 18,000 units of 2.5D packaging products and 300 million wafer-grade high-density chip packaging products per year. 

Information shows that Jiangsu Silicon Integrity Semiconductor Technology Co., Ltd. (JSSI) was established at Pukou Economic Development Zone in September 2020, focusing on semiconductor IC packaging and testing business. At present, it has developed high-end packaging products such as WLCSP, Bumping, LGA, BGA, and 2.5D packaging, and successfully launched CAPiC crystal particle and advanced packaging technology platform.

07

On July 3, 2025, the first chip-grade post-quantum crypto card was unveiled in China. This card was jointly developed by Anhui Qasky Quantum Technology Co. Ltd. and Professor Liu Dongsheng’s team from Huazhong University of Science and Technology, indicating that China has made a major breakthrough in engineering applications of quantum security technology. 

This chip-grade post-quantum crypto card adopts post-quantum crypto SoC chip and quantum random digit chip technology architecture and supports multiple international leading post-quantum crypto algorithms. It is compatible with traditional SM algorithm and can efficiently achieve digital signature and authentication, key generation and other critical security functions. The multi-scenario testing data shows that this crypto card can be adapted to and applied widely in key infrastructure areas such as Party and government business, finance, communications, energy and so on. 

With the rapid development of quantum computing technology, traditional cryptography is confronted with unprecedented challenges. Once the traditional cryptography is cracked by quantum computers, critical areas such as financial transactions, medical data, and energy scheduling will face the risk of information leakage. To meet these challenges, post-quantum cryptography was developed to protect against quantum computer attacks and provide better solutions for information security.