China's AI semiconductor chip development efforts face hurdles as US prepares new restrictions
China's efforts to develop homegrown artificial intelligence (AI) semiconductor chips are facing a bigger challenge, as the United States prepares to issue new regulations to restrict South Korea's exports of advanced memory chips to Chinese companies.
Mainland China will be in a difficult position if the new US restrictions disrupt the supply of high-bandwidth memory (HBM) chips from South Korea, due to a lack of domestic alternatives, according to industry experts. HBM chips, a type of dynamic random access memory (DRAM) stacked vertically using advanced packaging technology, play a core role in the operation of modern graphics processing units (GPUs) and AI accelerators.
The Washington administration is considering new export regulations to restrict the shipment of advanced chips to China, Reuters reported, which has blocked some Chinese AI chipmakers from accessing 7-nanometer wafer foundry services from foreign suppliers, a key factor in developing advanced AI semiconductors.
According to a report from Taiwanese market research firm TrendForce, two South Korean memory chip giants, SK Hynix and Samsung Electronics, dominate the global HBM chip market, with each holding about 48% of the market share by 2023. China is currently heavily dependent on memory chip supplies from South Korea, with Samsung and SK Hynix's sales in the market soaring in the first half of the year, thanks to booming demand for advanced AI chips.
“If China cannot import HBM chips, it will suffer serious losses in the short to medium term,” said Jeongdong Choe, senior analyst at Canadian research firm TechInsights, noting that most of the HBM chips used in China, especially the HBM2 and HBM2E series, are supplied by two Korean giants, Samsung and SK Hynix.
Despite receiving strong financial support from the government, China’s leading DRAM maker ChangXin Memory Technologies (CXMT) has yet to reach mass production capacity for HBM chips. CXMT’s technology is still at least two generations behind its South Korean rivals, despite its ongoing efforts to close the gap by 2023.
According to a report from US investment bank Morgan Stanley on November 25, published by analysts Shawn Kim, Duan Liu and Michelle Kim, manufacturer CXMT is currently cooperating with a domestic chip testing and packaging company to develop the first domestic HBM chip line.
"Both Chinese companies have filed more than 100 patents related to HBM chip development globally since 2022. However, commercialization is still far away, and the products are at risk of being less competitive due to technology access restrictions under pressure from US regulations," analysts said.
Similar to Semiconductor Manufacturing International Corp (SMIC), China's leading semiconductor foundry, CXMT is facing strict restrictions from the US on the import of advanced chipmaking equipment. To comply with these regulations, CXMT can only use 17-nanometer and 18-nanometer process technology to produce DRAM and mobile DRAM chips.
Meanwhile, rivals from the US and South Korea have gone further, tapping into advanced technology nodes below 10 nanometers, creating a significant gap in manufacturing capacity and product performance.
According to Jeongdong Choe of TechInsights, CXMT is currently developing its second-generation HBM2 chips. However, mass production in China is not expected until 2025 or even later. He also emphasized that even if CXMT can achieve large-scale production, its yield rate may only be around 30% or lower, a figure that is difficult to compete in the global market.
Meanwhile, SK Hynix, which pioneered the world's first HBM chip in 2013, launched the HBM2 series in 2018. Just two months ago, the company continued to lead the way with the announcement of the 12-layer HBM3E chip, a fifth-generation product that is expected to become mainstream by 2025.
Notably, semiconductor manufacturer Nvidia's new generation GPU product lines such as B300 and GB300 are expected to integrate this advanced configuration, strengthening SK Hynix's role in the field of high-performance memory chips.
However, CXMT is still considered China's biggest hope in the DRAM memory chip sector. According to Morgan Stanley, CXMT has made a strong mark by increasing its production capacity from 57,000 wafers per month in 2022 to 210,000 wafers per month in the fourth quarter of this year, accounting for more than 11% of global DRAM chip production capacity. This achievement marks a significant step forward in CXMT's efforts to narrow the gap with international competitors.