According to Bloomberg, these funds, about 75% will be used to fund Intel, TSMC and other companies to build chip manufacturing plants in Germany.

Half of the funds, or 10 billion euros, have been allocated to Intel for the construction of a new production site near Magdeburg in eastern Germany, the report said. The German government is also finalizing negotiations with TSMC for the latter to invest in a plant in Dresden to produce a variety of microcontrollers needed by German automakers. The German government is expected to subsidize 50% of the project, or about €5 billion.

In addition, about €1 billion will be used to support Germany’s own semiconductor giant Infineon in building a new chip factory in Dresden, with a subsidy of 20 percent of the total investment. In addition, German auto parts supplier ZF Friedrichshafen AG and U.S. chipmaker Wolfspeed are also expected to receive government funding to build a silicon carbide chip plant in Saarland, near the French border. The joint venture seeks to receive a cost subsidy of about 25%, equivalent to €750 million.

The funding program will be in place until 2027, and it is interesting to note that these funds come from the Climate and Transition Fund, which was originally set up to finance Germany’s transition to a carbon-neutral economy, but the government has since expanded its investments to cover sustainable economic projects. Previously, German Economy Minister Robert Habeck had proposed using the Economic Stabilization Fund to provide state aid to chipmakers.

At present, the German government has not confirmed or denied its plan. If the news is true, then Germany will become Europe’s most active to chip makers to provide subsidies to the country.

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According to Business Korea, semiconductor industry insiders say that major tech giants are already requesting HBM3E samples from SK Hynix, including AMD, Microsoft and Amazon, to name a few of the big players in the AI industry.

Simply put, if these companies have to get a sample before placing an order, a successful verification will indicate that the product passes compatibility testing. This means that the product’s yield is stable enough for mass production and marks the final stage before delivery.

HBM3E is the next generation of the current HBM3, and SK Hynix is currently the only company in the world that can mass produce HBM3 chips, so other manufacturers looking to purchase HBM3E will have to turn to it. According to reports, SK Hynix makes about 40% of its profits from HBM.

If you count Nvidia, which was the first to request samples, SK Hynix is currently under pressure to meet the needs of so many customers, and sources expect that these companies requesting samples could receive them by the end of this year.

With demand for HBM3E exploding, SK Hynix is using the latest fifth-generation 1b (10nm class) technology to accelerate volume production, which is expected to increase significantly next year.

AMD recently revealed its next-generation GPU, the MI300X, stating that it will receive HBM3 supplies from SK Hynix and Samsung Electronics. The MI300X is reportedly equipped with 2.4x the HBM storage of the Nvidia H100.

In addition to Nvidia and AMD, Amazon and Microsoft are the two giants in the cloud services space, with a combined market share of more than 50%, having introduced generative AI technology and made significant additional investments in AI.

In addition, AWS, the world’s No. 1 cloud service provider operated by Amazon, recently invested $100 million to establish an AI innovation center. Meanwhile, Microsoft’s Azure cloud service is expanding its partnership with OpenAI.

Market research firm TrendForce said, “Large cloud services companies like Amazon AWS and Google are developing their own ASICs and AI servers with Nvidia GPUs, which are the main drivers of the current surge in demand for HBM.”

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EU executives said the projects involve “R&D projects covering the entire value chain of microelectronics and communication technologies, from materials and tools to chip design and manufacturing processes”.

In April, the EU agreed to a program worth 43 billion euros (currently about RMB 328.09 billion) to boost the competitiveness of its semiconductor industry in an attempt to catch up with the United States and Asia.

The plan, known as the European Chips Act, aims to increase the EU’s share of global chip output from the current 10 percent to 20% by 2030, and comes after the U.S. announced its CHIPS for America Act.

The European Commission initially proposed to fund only the most advanced chip factories, but EU countries and parliaments have expanded the scope to cover the entire value chain, including older chip and research and design facilities.

The agreement was welcomed by U.S. chipmaker Intel, which will receive German subsidies for building a factory in Germany. “The European Chip Act will direct investment where it is most needed — in manufacturing capacity, skills and R&D. This goal has strong and broad political support and shows that the EU is serious about securing its future prosperity,” said Hendrik Bourgeois, Intel’s vice president of European government affairs.

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Source Pexels

Data show that semiconductor production fell 17.1% in February, the largest year-over-year decline since December 2008, when semiconductor production plunged 18.1%. Compared with the same period last year, semiconductor production in February decreased by 41.8%.

Sources from the Korea Statistics Office said that the global demand for memory chips has weakened since the second half of last year, and the production of system semiconductors has also declined recently.

South Korea’s chip industry is an important pillar of the country’s economy, accounting for 12% of total exports in February. However, the South Korean economy is facing greater difficulties due to the decline in global demand for chips, which already experienced negative growth last quarter.

To address this challenge, the South Korean government hopes the economy will recover in the second half of the year and continue to support semiconductor investment as a key driver of economic growth. Last Thursday, South Korea’s parliament passed a plan to promote the semiconductor industry, providing tax incentives for companies to stimulate investment.

However, South Korea’s chip industry also faces geopolitical risks and the threat of a potential economic downturn. As central banks tighten monetary policy to combat inflation, the recession could further hit demand. In addition, U.S. technology companies continue to lay off employees also reflects the reduction in investment enthusiasm.

On the other hand, Korea’s total industrial output fell by 8.1% year-on-year in February, beating market expectations. The cyclical leading index also declined 0.3% from the previous month.

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Some manufacturers said that at this stage the fab side silicon wafer inventory is “more to full out”, and still needs time to digest.

Silicon wafers for TSMC, Intel, Samsung, UMC, and another wafer fab production necessary raw materials, are the key indicator to observe the dynamics of the semiconductor boom, especially if the spot price is close to the current market conditions, more than the contract price to reflect market dynamics in the first place.

At this stage, the silicon wafer spot quotation, the industry is some three months, and most of them are updated once every six months. Silicon wafer fabs frankly, accept the spot price adjustment, because “now we must first seek to sell to move”.

The media pointed out that in the relatively weakest demand for 6-inch silicon wafers, the spot price fell by about a single-digit percentage this quarter; as for 8-inch silicon wafers, there is a slight drop in the spot price of items, but also because of the continued shortage of supply and a small increase in items, on average, little change. The 12-inch silicon wafers’ spot price is relatively stable, but manufacturers confessed that customers have requested a price reduction, and the two sides are negotiating.

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In the fourth quarter of 2022, UMC’s revenue was NT$67.836 billion (approximately RMB 15.127 billion), a decrease of 10% from the previous quarter and a year-on-year increase of 14.8%, which was the lowest point in the past three quarters; in 2022, UMC’s revenue NT$278.705 billion (approximately RMB 62.151 billion), a year-on-year increase of 30.8%.

Analysts said that due to the impact of inflation and the conflict between Russia and Ukraine, UMC faces weak demand and cannot avoid being affected by the inventory adjustment of the semiconductor industry. However, UMC will work closely with customers to deal with the current market situation.

In addition, UMC said that the demand for smartphones, personal computers and consumer electronics products has cooled, and has not yet seen a recovery, but the demand for automotive and industrial fields is still good.

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According to Korean media Business Korea, Broadcom was investigated and then proposed a “voluntary correction program” in which they hope to invest 20 billion won over five years for the Korean semiconductor industry.

According to the report, of the 20 billion won, 7.7 billion won will be used for engineer training and 12.3 billion won for new and existing non-large fabless companies. In addition, they will also train 150 students and employees each year for two weeks to two months in semiconductor data collection and analysis, automotive chip design, and for companies to help them enter the industry and build test and verification environments.

Broadcom was investigated because the Korea Fair Trade Commission found Broadcom components in Samsung smartphones released before March last year, but the two companies are not currently doing business together.

The investigation found that the U.S. semiconductor manufacturing company forced other companies to sign a three-year contract for the sale of smartphone components. It also required Samsung Electronics to purchase more than $760 million in components annually, with the remainder to be paid when the amount was not reached.

The commission will decide next month whether to accept the plan. If the KFTC finds its proposal reasonable, the case could be closed without punitive measures.

Image source Unsplash

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This is the first time the U.S. and Japan have held an “economic” version of the 2+2 talks. The two sides involved in the talks included U.S. Secretary of State John Blinken, Commerce Secretary Raimondo, Japanese Foreign Minister Yoshimasa Hayashi and Koichi Hagiyota.

Although the two sides did not reveal too many details of this “new R&D institute” in the semiconductor field through an official statement after the talks, Japanese media reported that the institute will be established in Japan at the end of this year to research 2nm semiconductor chips; the institute will also include a prototype production line, and will start mass production in 2025. At the same time, Japan’s Industrial Technology Research Institute, RIKEN, the University of Tokyo and others will cooperate to set up research bases.

Currently, the vast majority of sub-10nm semiconductor wafers for smartphones are produced in Taiwan, China.

The latest forecast data released by the World Semiconductor Trade Statistics (WSTS) shows that in 2022, the global semiconductor market is expected to grow by 16.3% to reach a size of $646 billion; by 2023, despite a slowdown in growth, but will maintain a positive growth of 5.1%. 2023, the logic chip market is expected to reach $200 billion, accounting for about 30% of the total market size.

Japan has a “glorious” history in the global semiconductor industry. World Semiconductor Trade Statistics Organization data show that in the 1980s, Japan’s share of the global semiconductor industry chain is about 50%, but then Japan’s influence has declined year by year, in recent years by China, South Korea, the United States, etc., the global market share has slipped to about 10% before the epidemic. 2021, U.S. companies have the largest share of the global semiconductor market, reaching 46%.

There is no shortage of semiconductor-related companies in Japan. According to rough statistics from the Japanese media, there are 84 semiconductor-related companies throughout Japan, the largest number in the world. However, Japanese companies are only responsible for the production of low-value-added products in the semiconductor industry chain, 64% of semiconductor products need to rely on imports.

Tian Zheng, an associate researcher at the Japan Research Institute of the Chinese Academy of Social Sciences, told the first financial reporter that as early as the mid to late 1970s, Japan’s high-tech industry, especially the semiconductor industry, has shown the momentum of rapid development, Japanese semiconductor products began to crowd the U.S. market, resulting in the increasing U.S. trade deficit with Japan, the development of high-tech industries between Japan and the United States around the intense friction, highlighted in the semiconductor industry, “the U.S. media at the time even to ‘Japan-U.S. semiconductor war’ to describe.”

“Despite some de-escalation measures taken by the Japanese government, the friction between Japan and the U.S. in the semiconductor field did not improve significantly and was eventually resolved with the signing of the Japan-U.S. Semiconductor Agreement (hereinafter referred to as the ‘Agreement’) through negotiations between the two countries,” Tianzheng said.

The agreement puts forward a number of restrictive “conditions” on Japan’s development in the field of semiconductors: for example, Japan is required to increase imports of semiconductor products from the United States; Japan is required to reduce exports of semiconductor products to the United States; Japan is required to strengthen the protection of intellectual property rights.

“Despite the negative impact of the Japan-U.S. Semiconductor Agreement, Japanese companies maintained an advantage in the world market in the late 1980s.” Tian Zheng said, “In fact, Japanese companies in the field of semiconductor industry lost their dominant position mainly occurred after the mid-1990s when South Korea and China and Taiwan’s semiconductor companies ‘later to take over the dominant position of Japanese semiconductor companies. “

Tian Zheng believes that it was the signing and implementation of the agreement that had a profound impact on the development of the Japanese semiconductor industry, resulting in the Japanese semiconductor industry in the late 1990s from boom to bust.

He cited examples, such as the numerical targets specified in the agreement affected the fair competition in the market and inhibited the development of Japanese high-tech enterprises. According to the requirements of the agreement, the U.S. semiconductor products at the time to the share of the Japanese market must reach 20%. “In order to reach this target, Japanese high-tech companies continued to increase the use of U.S. semiconductor products in the production process, and there was even a situation that encouraged the use of semiconductor products produced by the United States, a competitor, in preference.” He said.

In addition, the agreement also impacted the Japanese high-tech companies’ investment in equipment, affecting the continuity of their equipment investment, which in turn affected the upgrading of semiconductor products, resulting in Japanese high-tech companies missed the window of the world’s semiconductor market demand shift, resulting in product development lagging behind competitors.

What is the calculation of the United States and Japan each play?

Recently, in the global semiconductor development boom, the Japanese government is also accelerating the layout to catch up in the semiconductor field “lost thirty years”.

In early June last year, the Japanese government announced a new strategy to strengthen semiconductor design, research and development and production, will cooperate with overseas foundries to build new plants to revive the Japanese semiconductor industry. The new strategy also covers the data pooling center, and wants to make Japan the “core base of the semiconductor industry in Asia”.

First financial reporter in Japan’s Ministry of Economy, Trade and Industry (METI) website to see, that the Japanese government will be the future of semiconductor development and ensure food, and water security as important as the “national project” (national project). The then Minister of Economy, Trade and Industry, Hiroshi Kajiyama, said that the technology industry, including semiconductors, is closely related to people’s livelihoods and is not just a private enterprise or a single industry, but a project that must be promoted with national efforts. The Japanese government will seek to “substantially renovate” chip factories that are considered strategically important to support the global supply chain.

For this cooperation, Tianzheng told Firstrade, that Japan has doubts about the current cooperation between Japan and the United States, “the two sides can cooperate, on the one hand, because Japan now in the field of semiconductors can no longer pose a threat to the United States, on the other hand, it also proves that the United States is limited by the international division of labor and national capacity, can not independently complete the semiconductor research and development and production. It remains to be seen whether Japan and the United States will be able to turn the agreement into a win-win, productive outcome for both sides.”

Ensuring a strong U.S. position in the semiconductor sector has been at the heart of the current U.S. Biden administration’s policy agenda. Since taking office as president last January, Biden has prioritized U.S. competitiveness and security in the semiconductor industry. A comprehensive supply chain assessment released last June set out a vision for U.S. “leadership” and “resilience” in the global semiconductor value chain.

In terms of leadership, Tian Zheng explained that, due to the international division of labor, the United States has always monopolized the semiconductor R & D, design and process technology, that is, to occupy the high-end of the value chain; for the low end of the value chain, in recent years, the U.S. government has also increased its efforts to attract investment to attract semiconductor companies to the United States to put into production. So far, TSMC, Intel, Samsung, Ge-core and Texas Instruments have committed to the United States (new) set up factories. For example, in May 2020, TSMC announced an investment of $12 billion to build a 12-inch fab in the U.S., which is expected to go into production in 2024 with a monthly capacity of 20,000 chips, and the plan is underway. in September 2021, Intel announced a $20 billion investment in the U.S. to break ground on two wafer fabrication plants in Arizona. Intel’s latest investment plan may be as high as $100 billion to build a total of eight manufacturing plants in the United States.

Just on July 28, the U.S. Congress after several games passed the “Chip and Science Act” aimed at providing $ 52 billion in subsidies for the U.S. chip manufacturing industry. Previously, a number of U.S. domestic semiconductor companies to pressure Biden, Intel, TSMC and Samsung are investing in the United States to build factories are lobbying hard to pass the bill as soon as possible, looking forward to providing partial funding for new plants. These chip makers have “threatened” that failure to pass the bill will lead to delays in the opening of factories.

In response, a spokesman for the Chinese Ministry of Commerce said at a regular press conference that the bill provides huge subsidies to the U.S. domestic chip industry, which is a typical differential industrial support policy. Some of the provisions restrict the normal economic, trade and investment activities of the enterprises concerned in China, will cause distortion to the global semiconductor supply chain, causing disruption to international trade. China is highly concerned about this. The implementation of the U.S. bill should be consistent with the relevant WTO rules, in line with the principles of openness, transparency and non-discrimination, and conducive to maintaining the security and stability of the global supply chain and avoiding fragmentation. China will continue to pay attention to the progress and implementation of the bill, and take strong measures to safeguard its legitimate rights and interests when necessary.

Data from the World Semiconductor Trade Statistics Organization shows that, by region, the semiconductor market in the Asia-Pacific region (excluding Japan) is expected to grow by 13.9% this year; the Americas are expected to grow by 22.6%; Europe by 20.8%; and Japan by 12.6%.

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