Japan and the Netherlands may be joining the US in its efforts to isolate the Chinese semiconductor industry over security concerns.
The US has been working to restrict high-tech components from making their way to China. Some analysts believe the country’s semiconductor industry has “collapsed,” but Beijing is spending big to revitalize it.
According to The Guardian, Japan and the Netherlands are preparing to join the US in its efforts. The confirmation came via a US official that seemed to confirm the existence of a deal but failed to provide any details.
“We can’t talk about the deal right now,” said Don Graves, deputy commerce department secretary. “But you can certainly talk to our friends in Japan and the Netherlands.”
If the deal does exist, it will prove a major setback to China’s semiconductor industry, cutting it off from even more of its supply chain.
Dell will reportedly no longer use Chinese-made chips in its computers beginning in 2024, the latest challenge to China’s semiconductor industry.
China has faced mounting pressure on its semiconductor industry as the US and allies have tried isolating China and restricting the country’s access to leading technology. Much of the action is driven by concerns over surveillance and espionage, with many Chinese companies having close ties to Beijing and it’s spying apparatus.
According to Nikkei Asia, Dell plans to eliminate the use of chips made by Chinese firms. What’s more, the company also plans to phase out chips manufactured in China by non-Chinese companies.
“The goal is quite aggressive. The determined shift involves not only those chips that are currently made by Chinese chipmakers but also at the facilities in China of non-Chinese suppliers,” one person with direct knowledge of the matter told Nikkei. “If suppliers don’t have responding measures, they could eventually lose orders from Dell.”
HP has evidently has also expressed an interested in reducing or eliminating its dependence on China-based manufacturing facilities, but Dell’s move has certainly made waves in the industry.
“There are thousands of components for notebook computers, and the ecosystem was so mature and complete in China for years,” a chip supplier exec that works with both Dell and HP told Nikkei. “Previously we knew Dell kind of had plans to diversify from China, but this time it is kind of radical. They don’t even want their chips to be made in China, citing concerns over the U.S. government’s policy. … It’s not just an evaluation, it’s not crying wolf. It’s a real and ongoing plan, and this trend looks irreversible.”
China’s semiconductor was reportedly on the verge of collapse as a result of US sanctions. China is already planning a $143 billion package to buoy its chipmaking industry. If other companies follow Dell’s example, however, it could result in the wholesale devastation of what remains.
The US is ramping up pressure on China, asking its allies to restrict semiconductor exports to the country.
The US has been trying to limit China’s access to advanced semiconductors, even using its recently passed CHIPS Act to force companies that accept funding not to provide China with their latest tech. According to Nikkei Asia, the US is trying to convince its allies to follow suit.
“We were talking to our allies. No one was surprised when we did this, and they all know that we’re expecting them to cover likewise,” said Alan Estevez, undersecretary of commerce for industry and security.
Japan is already considering similar measures, and is looking to see what action other countries may take. Should Japan move forward with restrictions, it will be a significant step given that it has an even larger share of the semiconductor market than the US. According to Nikkei, the US holds 12% and Japan holds 15%. Taiwan and South Korea each have roughly 20% of the market.
Should Japan follow the US’ lead, experts believe it could result in much closer ties and trade between the two countries.
“I expect of addressing a common concern about China, then that creates an opportunity for the Japan and the U.S. governments to reduce barriers on trade between Japan and the United States,” said Kevin Wolf, former assistant secretary of commerce for export administration under the Obama administration.
“This will actually result in even better cooperation between Japan and the United States and fewer restrictions on joint development and production of advanced node items,” Wolf added.
AI chip revenue is set for stellar growth in the coming years, hitting $130 billion by 2030.
AI is poised to be one of the most revolutionary advancements in the history of technology, with the prospect of transforming countless industries. Behind the AI revolution are the chips that power it and the companies that make them. According to GlobalData, the industry is poised for a compound annual growth rate (CAGR) of 30%, going from $12 billion a year in 2021 to $130 billion in 2030.
“This rapid expansion will be driven by chips specifically optimized for AI with their share of the combined micro-component and digital logic semiconductor market set to increase from less than 10% in 2021 to at least 40% by 2030,” says Josep Bori, Research Director at GlobalData Thematics Intelligence.
“Deep learning neural networks continue to expand their capabilities, now including face recognition, medical diagnosis, and self-driving cars,” Bori continues. “This has been led by an improvement in the mathematical models used and the exponential growth in the model sizes and training data sets.”
GlobalData says most of the AI chip development is currently coming from redesigning existing microprocessors to better handle AI loads. At the same time, there is the possibility that a revolutionary leap in technology, such as quantum computing or neuromorphic chips, could lead to major advancements in the field.
Despite the promising outlook for the AI chip industry, GlobalData warns that ongoing tension between the US and China could put future prospects in jeopardy.
“In our view, the ongoing trade dispute between China and the US has negative implications for the global progress of AI semis technology,” added Bori. “We believe China will play a leading role in AI, due to its leadership in AI software and IoT technology, and its progress in low end chips manufacturing. However, unless China solves its access to extreme ultraviolet (EUV) lithography technology, currently indirectly prevented by US sanctions, it will likely struggle in AI in the datacenter, and most likely autonomous vehicles.”
In the wake of Russia’s invasion of Ukraine, experts are concerned the conflict could significantly impact the semiconductor supply chain.
Semiconductor manufacturers have been struggling to keep up with demand since the outset of the pandemic. Early lockdowns and quarantines impacted supply, while people working from home and avoiding public activities drove up demand.
According to VentureBeat, research firm Techcet attributes Ukraine with supplying 90% of the neon gas used in the lasers the US semiconductor industry relies on to manufacture chips. Further complicating the issue, Russia supplies 35% of the palladium for US chipmakers.
CNBC is reporting that Ukrainian President Volodymyr Zelenskyy says Russian troops have been stopped “in most directions,” as of early Friday morning. It’s unclear if the situation will stabilize, or if it will continue to deteriorate.
One thing is certain: The longer the conflict goes on, the more likely the semiconductor supply chain will fall further behind.
President Joe Biden has urged Congress to pass the CHIPS Act, as the US looks to become more semiconductor independent.
The CHIPS Act is a piece of legislation that would provide $52 billion in subsidies to chipmakers that manufacture on US soil. The pandemic shone a spotlight on the risks of being dependent on one country, or one region, for something as important as semiconductors. As the pandemic spread, early lockdowns in China and Asia helped contribute to a shortage the industry is still grappling with. National security concerns have increased in recent years as well, leading to an even bigger push toward semiconductor independence.
The goal of CHIPS Act is to help companies establish the infrastructure and manufacturing facilities needed to competitively manufacture chips in the US. Intel has been a big proponent of the legislation, and CEO Pat Gelsinger was in attendance when Biden addressed Congress during the State of the Union, according to CNET.
“Intel’s CEO, Pat Gelsinger, who is here tonight, told me they are ready to increase their investment from $20 billion to $100 billion. That would be one of the biggest investments in manufacturing in American history,” Biden said. “And all they’re waiting for is for you to pass this bill…Send it to my desk. I’ll sign it.”
TSMC and Sony may team up on a new semiconductor factory in Japan, in an effort to hep ease the semiconductor shortage.
The semiconductor shortage has impacted multiple industries, from computers to automobiles. Companies are working to address the shortage, opening new factories and foundries in an effort to boost production.
According to Nikkei, TSMC and Sony are looking at the possibility of opening a new factory in Japan. The project could be worth an estimated $7 billion. The proposed factory would manufacture camera image sensors, automotive chips and other products.
The proposed project would seem to have the support of the Japanese government, with the project supported by government subsidies. Nikkei’s sources said the new factory could go into production as early as 2024.
Volkswagen’s truck unit, Traton Group, is taking chips from unfinished vehicles to finish others, a new indication of the impact of the semiconductor shortage.
The semiconductor industry has been reeling as a result of the global pandemic. Early shutdowns and lockdowns interrupted production, while demand for laptops, tablets and gaming rigs skyrocketed. The auto industry has been particularly hard-hit, with multiple manufacturers slowing or halting production, or shipping vehicles without their full complement of fuel economy chips.
In the case of the Traton Group, a Volkswagen subsidiary, the company is pulling semiconductors from unsold finished vehicles and putting them in unfinished vehicles that have been sold, according to Insider.
The company blamed a recent COVID-19 outbreak in Malaysia, a hub for automotive semiconductor manufacturing.
The semiconductor shortage continues to take a toll, with Subaru announcing it is temporarily shutting down plants in Japan in July.
The COVID-19 pandemic helped spark a worldwide shortage in the semiconductor industry. While production was initially impacted as a result of lockdowns, the demand has been uncharacteristically high as people have bought laptops, tablets and gaming devices in record numbers.
The auto industry has been hit particularly hard, with Ford, GM, BMW and Honda all being impacted. Subaru is now planning on closing plants its Japan Gunma plants in July, according to Reuters.
“It is part of the production adjustment due to shortage of semiconductors,” Subaru spokesperson said.
The plants will be shut down on July 16, although the company is also considering shutting down its Kosai and Sagara plants in Shizuoka, Japan. Should it go that route, those plants will be closed two and seven days respectively.
NVIDIA’s attempt to purchase Arm Holdings may be headed for a rocky patch, as the company may miss its deadline.
When NVIDIA announced it would be acquiring Arm, an initial deadline was set for March 2022. Unfortunately for the company, it appears European regulators may not want to start examining the case until after the summer holiday, according to Reuters. Since the deal cannot proceed without US, European and Chinese regulators signing off, NVIDIA is effectively dead in the water until the EU regulators make a move.
Should the March 2022 deadline pass without a deal, the companies have the option of extending the deadline to September, at which point either one can walk away if the deal doesn’t receive government approval.
There will likely be significant pressure on Arm to do just that, as governments and companies alike are concerned with NVIDIA purchasing the chipmaker. The UK, in particular, is concerned about losing its greatest tech success story to a US rival.
Similarly, the many companies that rely on Arm processors are concerned NVIDIA will not uphold the same Swiss-like neutrality Arm has always maintained, being willing to work with any and all other companies. Some are also concerned NVIDIA may hold back some of Arm’s more significant breakthroughs for itself.
Intel CEO Pat Gelsinger has reiterated the company’s view that the semiconductor shortage could last several years.
Semiconductors are in short supply, thanks to the pandemic and resulting, complicating factors. Production was initially hurt as a result of lockdowns, and demand has been up significantly as more people rely on laptops and tablets for remote work. Gaming and cryptocurrency mining has also strained supply.
Two months ago, Gelsinger said the shortage would last for another couple of years. According to Reuters, Gelsinger is now saying it could take a couple of years just to address shortages in foundry capacity and components.
“But while the industry has taken steps to address near term constraints it could still take a couple of years for the ecosystem to address shortages of foundry capacity, substrates and components,” Gelsinger said in a virtual session at the Computex trade show in Taipei.
Gelsinger also credited the transition to remote work and remote learning as one of the single biggest drivers, saying it had led to a “cycle of explosive growth in semiconductors” that has placed huge strain on global supply chains.”
President Biden has signed an executive order authorizing a review of the US supply chain, including semiconductors.
The US has suffered from a number of major supply chain crises over the last year. At the outset of the pandemic, medical professions struggled with a shortage of PPE. Most recently, multiple industries have been impacted by a shortage of semiconductors. The automotive industry, in particular, has been one of the hardest hit.
President Biden’s executive order is not a short-term solution, but is an attempt to devise a long-term plan to address the country’s need for semiconductors, pharmaceuticals, rare-earth elements and large-capacity batteries.
“And the bottom line is simple: The American people should never face shortages in the goods and services they rely on, whether that’s their car or their prescription medicines or the food at the local grocery store,” said President Biden when announcing the executive order.
The supply chain review will also help pave the way for additional jobs, as well as secure existing ones, by ensuring workers have the critical supplies they need. For example, the semiconductor shortage recently halted production at three GM plants. Ensuring a safe supply of critical components will keep companies and entire industries running.
“This is about making sure the United States can meet every challenge we face in this new era — pandemics, but also in defense, cybersecurity, climate change, and so much more,” continued President Biden. “And the best way to do that is by protecting and sharpening America’s competitive edge by investing here at home. As I’ve said from the beginning, while I was running: We’re going to invest in America. We’re going to invest in American workers. And then we can be in a much better position to even compete beyond what we’re doing now.
“Resilient, diverse, and secure supply chains are going to help revitalize our domestic manufacturing capacity and create good-paying jobs, not $15 an hour — which is what we need to do someday. And sooner is better, in my view. But jobs that are at the prevailing wage.”
IBM announced an agreement with Globalfoundaries that will see the latter acquire IBM’s commercial semiconductor business, including intellectual property, personnel, and technologies related to IBM Microelectronics.The deal will also see Globalfoundaries become IBM’s exclusive server processor semiconductor technology provider for 22 nanometer (nm), 14nm and 10nm semiconductors for the next 10 years.
According to Bloomberg, IBM is paying Globalfoundaries $1.5 billion to take the unprofitable unit off its hands. The cash will be paid over the course of three years.
IBM says the deal enables it to focus on its semiconductor R&D , as well as cloud, mobile, big data, and secure transaction-optimized systems. The company says it continues its previously announced $3 billion investment over five years in semiconductor technology research.
“This acquisition solidifies Globalfoundaries’ leadership position in semiconductor technology development and manufacturing,” said Dr. Sanjay Jha, CEO, Globalfoundaries. “We can now offer our customers a broader range of differentiated leading-edge 3D transistor and RF technologies, and we will also improve our design ecosystem to accelerate time-to-revenue for our customers. This acquisition further strengthens advanced manufacturing in the United States, and builds on established relationships in New York and Vermont.”
“The Agreement expands our longstanding collaboration, which began when Globalfoundaries was created in 2009, and reflects our confidence in Globalfoundaries’ capability,” said IBM Senior Vice President & Director of Research Dr. John E. Kelly III. “This acquisition enables IBM to focus on fundamental semiconductor and material science research, development capabilities and expertise in high-value systems, with Globalfoundaries’ leadership in advanced technology manufacturing at scale and commitment to delivering future semiconductor technologies. We are grateful for the leadership and investments by the states of New York and Vermont in supporting the semiconductor industry.”
IBM’s Tom Rosamillia talks about the agreement more in a blog post.
