Exclusive-Chinese firms stockpile high-end Samsung chips as they await new US curbs, say sources By Reuters

By Heikyong Yang, Fanny Botkin, and Karen Freifeld

SEOUL/SINGAPORE (Reuters) – Chinese tech giants including Huawei Technologies and Baidu Inc as well as startups are stockpiling ultra-wideband memory semiconductors from Samsung Electronics Co Ltd in anticipation of U.S. restrictions on chip exports to China, three sources said.

Companies have ramped up purchases of AI-capable semiconductors since early this year, helping China capture about 30% of Samsung’s HBM chip revenue in the first half of 2024, one of the sources said.

The moves show how China is preparing to maintain its technology ambitions amid rising trade tensions with the United States and other Western countries, and how the tensions are impacting the global semiconductor supply chain.

U.S. authorities plan to unveil a package of export controls this month that will impose new restrictions on shipments to China’s semiconductor industry, Reuters reported last week, citing sources.

The package is expected to set standards for restricting access to high-bandwidth memory chips, the sources said. The U.S. Commerce Department declined to comment but said in a statement last week that it continually assesses the evolving threat environment and updates export controls “to protect U.S. national security and safeguard our technology ecosystem.”

Reuters was unable to determine details of the proposed restrictions on HBM and how they would impact China.

HBM chips are essential components in the development of advanced processors such as Nvidia’s (NASDAQ:) GPUs that can be used for generative AI work.

There are only three major chipmakers producing HBM chips — South Korea’s SK Hynix and Samsung, and US-based Micron Technology (NASDAQ: ) .

A source familiar with China’s interest in HBM said Chinese demand for chips is largely focused on the HBM2E model, which is two generations behind the more advanced HBM3E. The global boom in artificial intelligence has led to a shortage of the advanced model.

“Since domestic technology development is not yet fully mature, Chinese demand for Samsung’s HBM has become exceptionally high, with other manufacturers’ capabilities already fully booked by US AI companies,” said Nori Chew, investment director at White Oak Capital Partners in Singapore.

While it’s difficult to estimate the volume or value of HBM chips stored in China, companies ranging from satellite manufacturers to tech firms like Tencent have been buying them, the two people said. One of the people said chip design startup Haawking recently ordered HBM chips from Samsung.

Meanwhile, Huawei is using Samsung’s HBM2E semiconductors to manufacture its advanced Ascend AI chip, according to one of the sources.

Samsung and SK Hynix declined to comment. Micron, Baidu, Huawei, Tencent and Hocking didn’t respond to requests for comment. The sources declined to be identified because of the sensitivity of the matter.

Samsung vs HBM Competitors

Chinese companies have made some progress in HBM production, with Huawei and memory chip maker CXMT focusing on developing HBM2 chips, which are three generations behind the HBM3E model, Reuters reported earlier.

But these efforts may be affected by the new American base.

The restrictions on HBM sales to China could have a bigger impact on Samsung than on its main rivals, which rely less on the Chinese market, said the sources briefed on the sales.

Micron has refrained from selling HBM products to China since last year, while SK Hynix, which counts Nvidia among its major HBM customers, is focusing more on producing advanced HBM chips, they said.

SK Hynix said earlier this year it was adjusting production to expand HBM3E production and its HBM chips were sold out this year and are expected to be nearly sold out by 2025.