Chinese Tech Giants Secure HBM Chips: US Export Controls Expected

Several Chinese technology companies, including Huawei and Baidu, as well as various start-ups, are currently stockpiling High Bandwidth Memory (HBM) semiconductors from Samsung Electronics. This move comes in anticipation of expected U.S. export restrictions on sales of these chips to China, according to well-informed sources. The rapid increase in purchases of AI-capable semiconductors has resulted in China accounting for about 30% of Samsung's HBM chip sales in the first half of 2024. These strategic measures by China underscore its goal to stay technologically on track despite increasing trade conflicts with the U.S. and other Western nations. At the same time, they highlight the global impact of tensions on the semiconductor supply chain. According to sources, the U.S. government plans to release an export control package later this month that will include new regulations for the Chinese semiconductor market. These restrictions are expected to also affect the supply of HBM chips. The U.S. Department of Commerce did not comment specifically but emphasized that it continuously evaluates the threat landscape and adjusts export controls to protect national security and the technological ecosystem. The importance of HBM chips is also highlighted by their role in the development of advanced processors, such as Nvidia's graphics processors for generative AI applications. Only three major manufacturers globally produce these semiconductors: SK Hynix and Samsung from South Korea, and the U.S.-based Micron Technology. China's current demand is primarily focused on the HBM2E model, which is two generations behind the latest HBM3E version. The increased demand for AI applications has led to a shortage in the supply of the most advanced models. According to Nori Chiou of White Oak Capital Partners, China's particular interest in Samsung's HBM chips is due to its still undeveloped domestic technology level, as other manufacturers' capacities are already booked by American AI companies. In addition to technology giants, other sectors in China are also buying HBM chips; a chip design start-up named Haawking reportedly placed an order with Samsung recently. According to a source, Huawei uses Samsung's HBM2E semiconductors for its advanced Ascend AI chip. Samsung and SK Hynix declined to comment, and there were also no comments from Micron, Baidu, Huawei, Tencent, and Haawking. China's efforts to develop its own HBM production are evident at Huawei and CXMT, but these could be affected by the new U.S. rules. Samsung could be particularly impacted by potential sales restrictions to China, as it is more focused on the Chinese market than its competitors. Micron already withdrew from selling HBM products to China last year, while SK Hynix has expanded its capacities for producing advanced HBM chips and is sold out for this year and almost until 2025.