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Market Trend（Oct. 30）

Memory chip prices are bouncing back! The latest performance of storage manufacturers beyond expectations

On October 30, local time, Western Digital, a storage giant, announced financial results for Q1 2024, reporting revenue in Q1 of $2.75 billion, up 3% QoQ and down 26% YoY. From the perspective of the terminal market, the price of flash memory in the quarter still fell down, but due to the growth of shipment of flash memory products, some of its businesses showed a QoQ increase. Looking ahead, Western Digital predicts that its revenue in Q2 FY2024 will be between $2.85 billion and $3.05 billion.

As the CEO of Western Digital said, Western Digital’s first fiscal quarter results exceeded expectations as the company team’s efforts to bolster business agility and develop differentiated and innovative products across a broad range of end-markets have resulted in sequential margin improvement across flash and HDD businesses. He pointed out that the company’s consumer and client end markets continue to perform well and its cloud end market is expected to keep growing. As the market conditions continue to improve, the company’s improved cost structure will enable itself to capitalize on enhanced earnings power.

In addition, according to the data of TrendForce on September 12, in the global NAND Flash market in Q2 2023, Western Digital ranked fourth in the world with a market share of 14.7%.

Comments:

The factors such as economic headwinds, sluggish demand of consumer electronics and others have led to a downturn in the storage market, and there is oversupply in the market. Western Digital, Micron, Samsung, KIOXIA and other storage giants can only choose to slash production and investment to adjust their inventory. Now more than half of the difficult 2023 has passed, and the recent news that memory chips will rise in Q4 has emerged. The insiders said that the industry is gradually entering the rising period.

From the point of view of product price, DRAM and NAND Flash have seen a universal price increase since Q4. The contract prices of DRAM, for example, are projected to see a quarterly rise of about 3-8%. Whether this upward momentum can be sustained will rely on the suppliers steadfastness in maintaining production cuts and the degree of resurgence in actual demand. However, the general-purpose server market is a critical determinant.

Company Trend（Oct. 31）

Nvidias $5bn China AI chip to be canceled under new U.S. export restrictions

According to report of the Wall Street Journal, Nvidia will have to cancel several hundred million dollars of advanced AI chips destined for China next year under new US export restrictions, which may block Chinese tech giants from acquiring key AI resources. According to insiders, Nvidia has already completed the China orders of advanced AI chips ordered for this year, and is pushing to deliver some orders for 2024 before the new curb takes effect in mid-November. But the U.S. government sent a letter to Nvidia last week, saying that new export restrictions on selling high-end chips in some countries, including China, took effect immediately.

The insiders said major China-based companies such as Alibaba Group, ByteDance & Baidu, have placed large-scale orders to be delivered next year.

A spokesman for Nvidia said the company has been supplying its advanced AI computing systems to customers in the U.S. and elsewhere and is pursuing additional supply. These systems use graphics chips affected by the rules. The spokesman said these new export controls would not have a meaningful impact in the near term.

Comments:

The export restrictions on AI chips are part of a wider effort by the Biden administration to curtail China’s access to advanced chips, AI tools and other technology that the U.S. believes China could use to advance its military and cyberwarfare capabilities. Over the long term, restrictions blocking the sale of AI chips to China will result in a permanent loss of opportunities for the U.S. industry to enter the Chinese market. Nvidia stood in the breach of the restriction because its AI chips, which are essential in creating popular AI tools such as OpenAI’s ChatGPT, and are the most advanced and widely deployed in the world.

The latest chip restrictions may slow down China’s pace in developing advanced AI capabilities and force Chinese developers to use homemade substitutes. Currently, these export rules cover most high-performance AI and data center chips made by NVIDIA, Intel and Advanced Micro Devices. Chinese companies will have to rely on their chip inventory, use less advanced chips or find other workarounds.

Company Trend（Oct. 31）

PSMC finalized its first wafer fab in Japan following TSMC and UMCs presence in Japan

On October 31st, Powerchip Semiconductor Manufacturing Corporation (PSMC) announced that it had signed the Memorandum of Cooperation   with SBI Holdings, Inc., Miyagi Prefecture, Japan and JSMC, confirming that JSMCs first wafer fab would be located in Ohira Village, Kurokawa district, Miyagi prefecture, specifically within the second northern Sendai central industrial park. By far, TSMC, UMC and PSMC, the three major wafer foundries from Taiwan Province, China, have established wafer production lines in Japan. According to industry insiders, this is of great benefit for Japan to revitalize its semiconductor industry.

It is reported that PSMC’s fab will produce 28nm, 40nm and 55nm chips for automobiles and industries, and plans to produce 40,000 units of 12-inch wafers per month. PSMC said that after the Japanese government announced the subsidy amount for the investment of the wafer fab, the stakeholders would reconfirm the effect of the Memorandum of Cooperation and start the fab construction as scheduled. In August this year, PSMC and SBI jointly established JSMC Co., Ltd., and formally decided to establish a fab in Japan and made preparations for it.  According to earlier reports, PSMC plans to build several fabs in Japan, and the phase I construction is scheduled to start 2024, with a total investment of JPY400 bn (US$2.6 bn).

Comments:

Since 2021, Japan has made various countermeasures to revitalize its semiconductor industry. On the one hand, Japan strengthens domestic manufacturing capacity; on the other hand, it enhances international cooperation to promote R&D of advanced technology. Japan actively encourages the development of its semiconductor industry. In terms of strengthening the R&D of advanced technologies, eight Japanese companies, including Toyota, Sony, Softbank, KIOXIA, Denso, NEC, NTT and Mitsubishi UFJ, have jointly established Rapidus, which signed an agreement with IBM to develop 2nm process node technology based on IBM, aiming to realize the localization of 2nm chips in 2027.

In terms of strengthening domestic manufacturing capacity, Japan also attaches great importance to the development of local semiconductor supply chain and increases financial subsidies to attract industry leaders to set up fabs in Japan. It is learned that manufacturers including TSMC, PSMC, UMC and Micron have already received subsidies. It is worth noticing that, TSMC, UMC and PSMC, the three major wafer foundries from Taiwan Province, China, have established wafer production lines in Japan.

Company Trend（Nov. 2 ）

Wistron sold its Indias iPhone foundry for US$120 million to Tata Group

Recently the board of directors of Wistron announced to sell 100% of its Indian subsidiary, Wistron InfoComm Manufacturing (India) Private Limited (WMMI), to Indias Tata Group for US$125 million, and said that the transaction would be completed as soon as possible.

It is reported that WMMI is the largest of Wistrons three factories in India and is mainly responsible for the assembly of iPhones. The factory, located in Narasapura, about 50 kilometers from Bangalore, covering an area of 2.2 million square feet, has eight iPhone production lines and 10,000 employees, including thousands of engineers, contributing about NT$ 30 billion, which accounts for about 3% of Wistrons total revenue.

After the sale of WMMI, Wistron will still retain after-sales service and related production lines for vehicles and storage in India. Although the amount of this sale was much lower than previously reported US$600 mn, there was no loss on its books. On the contrary, by reducing factory expenses in India, the industry estimates that Wistron can earn more than NT$0.5 per share per share.

Comments:

In recent years, Wistron is gradually downsizing and transforming its iPhone assembly business due to the thinning margin. As a result, Wistron is shifting its business area outside iPhone foundry business, such as the server market. Wth the completion of the acquisition of WMMI, Tata Group will enter the iPhone supply chain and become a pure "Make in India" enterprise. This will not only help India improve the overall mobile phone assembly capacity and supply chain management capabilities, but also help improve the strength of Indias local manufacturing industry. According to report, after acquisition of WMMI, Tata Group will set up more parts factories and iPhone production lines and open 100 Apple stores in India.

Trends of some domestic industries

1.Beilanxin’s new generation semiconductor IC chip intelligent manufacturing project put into operation (Oct. 30)

According to the official news of Baotou Municipal Peoples Government, the first semiconductor chip manufacturing project in Inner Mongolia Autonomous Region - Beilanxin’s new generation semiconductor IC chip intelligent manufacturing project was completed and put into operation in the Metal Deep Processing Industrial Park of Baotou Iron and Steel Metallurgical Development Zone.

According to report, the project mainly includes an IC chip production line covering an area of 50,000 square meters, workshops for intelligent design, dust-free intelligent manufacturing, packaging and testing, and a software R&D center. The main products are MCU chips, processing chips, IGBT power control chips and others. After being completed and put into operation, the project plans to produce 120 million units of IC chips annually, and it is estimated that its operating income will be RMB14 bn in five years, with an average annual income of RMB 3 bn.

It is learned that Baotou successfully invited Guangdong Weill Holding Group Co., Ltd. in last July to establish Baotou Beilanxin Electronic Science & Technology Co., Ltd. and invest RMB1.5 bn to build a new generation of semiconductor IC chip intelligent manufacturing project. This project filled the gap in this advanced manufacturing field in Inner Mongolia Autonomous Region and also created a new space for the transformation and development of Baotou.

2.AOFIBER’s integrated photonic chip R&D center and digital intelligence manufacturing base put into production(Oct. 31)

According to the report of the official Wechat account of SCP Suchu High-tech Park, Chuzhou Advance Optical Fiber Co., Ltd. (AOFIBER) integrated photonic chip R&D center and digital intelligence manufacturing base has been put into production formally. It is reported that after completion the project can produce 12 million units of integrated photonic chips, 3.6 million optical communication devices and modules and 1.2 million FAT cases, and can provide all-optical network solutions for third parties.

In addition, the professor from Hefei University of Technology, the Deputy Director of the National Micro-Electro-Mechanical Technology Standardization Technical Committee, and the General Manager of Chuzhou AOFIBER and other parties signed a cooperation agreement on key research and development projects, joint construction of silicon photovoltaic intelligent equipment research center and establishment of a national standardization workstation.

According to data, Chuzhou AOFIBER has won many representative awards and obtained several patents since its establishment, and is a strategic partner of Huawei, Fiberhome and others in terms of optical branching devices, optical fiber patch cords and cases. With technical innovation, the company has achieved the goal of substituting imported products with domestic products and filled the gap in the field of domestic high-speed optical communication integrated optical path chips, which broke the monopoly of foreign enterprises and realized the localization of core devices of optical communication network.

3.100 nm outperforms 7 nm? A team from Tsinghua University proposed a brand new chip architecture.(Oct. 31)

According to the report of "Tsinghua Newsletter” the official news portal of Tsinghua University, the computing power of the all-analog chip combining electronic and light computing (ACCEL) is more than 3,000 times that of the current commercially used high-performance AI chips.

During the team’s demonstration of calculating intelligent visual tasks and traffic scenarios, the system-level energy efficiency (number of operations per unit of energy) of the photoelectric fusion chip reaches 74.8 Peta-OPS/W according to actual measurement, which is more than 4 million times of the current high-performance chips. Figuratively speaking, the power used by a current chip to work for one hour will enable the new chip to work for more than 500 years. The photoelectric fusion chip running at ultra-low power consumption will help solve the heating problem of chips and achieve all-dimensional breakthroughs for the future design of chips.

In terms of fabrication, the minimum linewidth of the optical part of the chip is only 100 nm, while the circuit part only adopts 180nm CMOS process, which has achieved several orders of magnitude performance improvement compared to the high-performance AI chips fabricated with 7 nm process node. At the same time, the materials used for fabricating the chip are simple and easy to obtain, and its cost is only one tenth of the current AI chip.