Weekly News | Supply chain trends in Semiconductor industry #169

169th of weekly news

01

TSMC has made a major breakthrough in 2nm process node, and its yield of 2nm chips has successfully risen to 90%. This progress is mainly due to TSMC's risk trial production at the Baoshan Wafer Fab in Hsinchu. Since the start of the pilot production in July 2023, the yield rate of 2nm process has rapidly increased from 60% to 90%, showing the speed and stability of TSMC’s technology advance. In addition, TSMC plans to achieve a monthly capacity of 50,000 to 80,000 units of 2nm chip wafers by the end of 2025, and further increase the capacity to 120,000 to 130,000 units by 2026.

TSMC is building a dedicated production line for its largest customer, Apple, and its production capacity is expected to be increased to 50,000 units per month by the end of 2026. The production line will adopt Wafer-Level Multi-Chip Module (WMCM) packaging technology for Apple’s iPhone processor for the first time. Apple's A20 processor will be the first chip to adopt TSMC's 2nm process technology, and it is expected to be launched in iPhone 18 series, which will be released in H2 2026.

Compared with its 3nm process technology, TSMC’s 2nm technology delivers up to 10-15% faster performance or up to 25-30% greater energy efficiency while also enhancing transistor density by 1.7 folds. In addition, the market demand for 2nm chips is strong, and the quantity of 2nm chips in design is four times that of 5nm chips. TSMC's fab in Arizona also operates nearly at full capacity, with major customers including Apple, Nvidia, Qualcomm, AMD and Broadcom.

The high yield rate of 2nm process technology and the rapid mass production capacity will further consolidate TMSC’s leading position in the global semiconductor manufacturing field. As Apple is the largest customer of TSMC, the construction of the dedicated production line will bring stable orders and revenues to TSMC. The high yield rate and capacity expansion will increase market confidence in TSMC and attract more customers to adopt its advanced processes.

Apple's A20 processor based on 2nm process will deliver much better performance, lower power consumption and stronger AI capabilities. The dedicated production line will ensure stable supply of chips for Apple and reduce the risk of chip supply disruption due to insufficient capacity or technical problems. Apple will further increase the technology gap with its competitors by adopting advanced 2nm process and WMCM packaging technology.

The success of TSMC's 2nm process not only provides strong technical support for its customers such as Apple but also sets a new benchmark for the global semiconductor industry. In the future, TSMC is expected to keep its leading position in the advanced process sector as technology advances and market demand increases. At the same time, it also provides new challenges and opportunities for other semiconductor companies.

02

On May 29, the US Department of Commerce’s Bureau of Industry and Security (BIS) has issued notices to Synopsys, Cadence, and Siemens EDA, the three top providers of electronic design automation (EDA) software, requiring them to stop offering services to China. This move is intended to curb China's efforts to develop advanced process chips. At present, Siemens EDA has banned users in China from getting access to some of its technology-related websites, and the other two big players are also watching and planning to take action according to the latest policy guidance.

After receiving the notification, Synopsys suspended and withdrew its financial guidance for Q3 of FY2025 and the whole fiscal year. At the same time, Cadence said that permissions must be applied for all its exports to China on a case-by-case basis. The ban has a significant impact on the businesses of Synopsys and Cadence and both of the companies experienced significant price fluctuations after the news.

TChina contributed 16% of Synopsys’ revenue and 12% of Cadence’s, respectively, and the complete disruption of the software supply will lead to a significant decrease in their revenue in the Chinese market. In addition, Synopsys suspended its financial guidance for Q3 and FY2025, reflecting the uncertainty about its business prospect. Despite facing short-term losses, Synopsys is still advancing its acquisition of Ansys, hoping to increase its competitiveness through the consolidation of resources. In addition, Synopsys continues enhancing its Ai-related design activities, which may provide it new growth points in other markets.

The US supply cut-off policy may lead to further fragmentation of the global semiconductor industry chain, urging China to speed up building an independent and controllable semiconductor industry chain. With the rise of domestic EDA software firms in China, the competitive landscape of the global EDA market will change. The rise of domestic EDA firms may pose a certain threat to the market share of international giants such as Synopsys and Cadence.

03

The US ban on AI chips exported to China impacted Nvidia significantly, and Nvidia identified inventory losses of US$4.5bn in last quarter. In response to this dilemma, Nvidia is developing a downgraded AI chip named “B30”for the Chinese mainland market in an attempt to comply with the export restrictions. 

B30 chip will be based on the latest Blackwell architecture and GDDR7 graphic memory instead of high bandwidth memory (HBM), and it will not adopt TSMC's advanced packaging technology. The highlight of this chip is that it supports multi-GPU expansion for the first time and allows users to build computing clusters of higher performance by connecting multiple chip modules. This feature of the chip is particularly important for high-performance computing and AI trainings, because multi-GPU configurations can dramatically improve computing efficiency and throughput.

Although the US export ban led to short-term inventory losses to NVidia, Nvidia, through the development of B30, is expected to reopen the Chinese market and reduce the long-term impact of the ban on its business. The multi-GPU expansion function of B30 is an innovative design that can reduce the performance of a single chip and increase the overall computing power through clustering, which will help Nvidia to remain competitive in the Chinese market.

The launch of B30 is likely to drive the growth of AI server foundry orders in Chinese mainland and bring new business opportunities to related foundry plants. Although B30 mitigated the impact of the US chip export ban to some extent, it also shows China's dependence on foreign high-end chip technology. In the long run, this will further promote the acceleration of independent R&D and industrial upgrading of chip technology in Chinese mainland.

This move by Nvidia may change the landscape of the global AI chip market, especially in China. B30 may generate some competitive pressure on other international chipmakers as well as domestic chip companies.

04

According to the Wall Street Journal, recently, HP, the global PC giant, has announced a major strategic shift, with plans to move all production lines for the North American market out of China by the end of June 2025 and to start “targeted price increasing” for several product lines. This adjustment of HP was mainly due to the high tariffs imposed on Chinese goods by the US, causing HP’s operating costs to rise significantly.

HP CEO Enrique Lores said the impact of the US tariffs far exceeded expectations, so the company decided to advance its production lines transfer originally scheduled in September to the end of June, three months ahead of the schedule. To mitigate its cost pressure, HP will simultaneously adjust prices of some products and continue to advance its a cost-control program by laying off 9,000 people worldwide.

HP has accelerated capacity expansion in Vietnam, Thailand, India, Mexico and the US, of which Thailand becomes the biggest beneficiary, not only because the local labor cost is only 60% of that of China but also because HP can also effectively bypass the tariffs imposed by the US. However, the localization rate of electronic components in Southeast Asia is less than 60%, so the supply chain stability is still to be tested.

Although HP plans to circumvent tariffs by relocating production lines, it still has to bear high relocation costs and supply chain adjustment costs in the short run. It is estimated that HP will face cost pressures of approximately US$500mn in FY2025 due to increased tariffs. In the long run, the diversification of supply chain helps reduce dependence on a single country and increase HP's risk-resistance in global markets. HP plans to hedge cost increases through "targeted price increases," but consumers are price-sensitive, which may cause HP to lose market shares. HP's leaving may drive the relocation of some suppliers, which will have certain impact on the PC industry chain in China, but also provides an opportunity for the transformation and upgrading of China's manufacturing industry. The manufacturing industry of China may take this opportunity to invest more in high value-added links and enhance its position in the global industrial chain.

05

According to the official website of Shanghai Stock Exchange, on the evening of June 4, Cambricon Technologies’ application for raising RMB4.98bn in a private placement was accepted by Shanghai Stock Exchange. Cambricon Technologies’ refinancing complies with the company rating standard of "light assets, high investment in R&D” and its fund raising is another representative case of implementing “the eight rules of Shanghai STAR market”. 

According to the private placement scheme, Cambricon Technologies intends to issue no more than 20,872,800 shares with a total raised fund not exceeding RMB4.98bn, which will be mainly used for three sectors: RMB2.9bn will be used for LLM chip platform projects, RMB1.6bn for LLM software platform projects, and the remaining RMB480mn for supplementary liquidity.

Cambricon Technologies said that the implementation of this investment project by fund raising is conducive to further improving its chip R&D & design capability, tech reserve and product strength, consolidate and develop its market competitiveness and realize its long-term sustainable development. It is worth mentioning that this is the second private placement for refinancing carried out by Cambricon Technologies since its going public at Shanghai STAR market in July 2020, and it is also the largest fund raised by Cambricon Technologies at present.

06

According to report of Urumqi Evening News, on June 4, Urumqi Ganquanbao Economic and Technological Development Zone (Industrial Zone) officially signed an agreement with Nanjing Feelstar Electronic Technology Co., Ltd. and Fujian Dazhuo Holdings Co., Ltd., marking the official settlement of the fourth-generation diamond semiconductor project with total investment of RMB265mn.

It is learned that the fourth generation diamond semiconductor project in Urumqi is mainly to produce diamond thermal sink plates and cultivate diamonds. The former is used as thermal dissipation material of high thermal conductivity and has wide application prospect in the fields of electronics and optoelectronics, especially in terms of high-end thermal dissipation. The project will be commenced in September 2025 and is expected to be completed and put into operation in May 2026.

A related head of the project said that diamond, as a fourth-generation semiconductor material, has the performances of ultra-wide bandgap and high thermal conductivity and is called the "ultimate semiconductor material." After being put into operation, the project will fill some of the gaps in related fields in China.

07

On the evening of June 5, Goke Microelectronics Co., Ltd. (“Goke Microelectronics”) disclosed the restructuring program and intended to acquire 94.366% of the shares of Ningbo Semiconductor International Corporation (SMIC Ningbo) via share issue and cash payment and the trading of its shares will resume upon the opening of the market on June 6. At the same time, it intends to issue shares to no more than 35 select investors to raise funds and the transaction is expected to constitute a major asset restructuring and related transaction. On the same day, SMIC announced that SMIC Holdings, a wholly-owned subsidiary of SMIC, would transfer 14.832% of its shares in SMIC Ningbo to Hunan Goke Microelectronics Co., Ltd. After the completion of this equity transfer, SMIC Holdings will completely withdraw its investment in SMIC Ningbo.

SMIC Ningbo adopts specialized wafer foundry mode, focuses on RF front-end, MEMS sensor and other special technology, and is one of the few domestic manufacturers of BAW filters. Goke Microelectronics said that the transaction is to respond to the national policy on the IC industry and is a key layout for replacing exported products with homemade products in the field of core semiconductor devices. After completing the acquisition, Goke Microelectronics will build a dual driving system featuring “digital chip design + analog chip manufacturing” and develop downstream application markets such as smart phones, smart IoT by relying on its advantages in RF front-end technology. 

It is worth mentioning that SMIC Ningbo has signed a strategic cooperation framework agreement with a domestic leading mobile terminal company, which will purchase 50% of the total number of RF filters required for its mobile terminal products from 2025 to 2028.