Hello everyone! This is Chen Ting-Huang, greeting you from Taipei.
In early August, I had the unique opportunity to visit Infineon's silicon carbide power semiconductor factory in Kulim, Malaysia. Dressed in full cleanroom attire — suit, boots, head cover, mask, gloves — I toured the facility and learned about some key chip manufacturing processes.
The most impressive part of the tour was the high-temperature furnaces that operate at up to 2,000 degrees Celsius, which one chip expert described as “like a rice cooker.” I also saw the wet station, where chemicals are applied to the wafers.
The hour-long tour was very educational, but towards the end, I began to feel suffocated and dizzy in my head-to-toe outfit. The experience reminded me of how demanding semiconductor manufacturing is, where strict protocols must be followed to ensure that even the tiniest particles do not contaminate the manufacturing environment. I could never have imagined that engineers and technicians work here up to eight hours a day, working day and night shifts to keep the factory running 24/7.
Last week, a friend shared with me photos of the Baroque Frauenkirche, Hofburg Church, and gorgeous gardens he took during a visit to Dresden to attend the groundbreaking ceremony for TSMC's first semiconductor fab in Europe. The picturesque riverside city on the Elbe, with its clear blue skies and serene atmosphere, left me wondering why anyone would choose to work in a semiconductor fab. “I'd rather be having a picnic than be cooped up in a cleanroom,” my friend joked. “This serene environment could be a competitive threat.”
Everyone I spoke to in the technology supply chain cited culture, talent, and infrastructure as factors in succeeding in this industry, or any industry. For example, I heard that at TSMC's Arizona factory, high-priority meetings are often conducted in Mandarin and only attended by Taiwanese staff to facilitate communication. This shows the difficulty of assimilating into a new culture and becoming more international.
The importance of infrastructure was underscored in a conversation with an executive at ASE Technology Holdings, the world's largest chip packaging and testing company, which is investing in the U.S. and recently acquired land in Kitakyushu for its expansion into Japan.
In Asia, ASE has operations in the Philippines, Malaysia, Singapore, South Korea, Taiwan and China. Company executives said chip packaging is one of the most difficult supply chains for the U.S. and Europe to implement domestically because it typically has lower margins and lower levels of automation compared to chip manufacturing.
“The technological infrastructure needed for advanced chip packaging is not as developed as it is in the U.S. or Europe,” the executive said, so even if chip production increases in those regions, the bulk of the packaging is likely to continue to take place in Asia.
iPhone Keywords: India and AI
Apple has started assembling its latest iPhone 16 series, including the premium Pro models, in India, writes Nikkei Asia's Laurie Li and Chen Tingfang, marking a significant milestone as India is now producing the company's top-end iPhones at roughly the same time as China, Apple's main manufacturing base.
India has historically focused on assembling older iPhone models and lagged behind China, but that gap has narrowed significantly over the past year. Despite India's progress, its capacity to produce higher-value components remains limited. Most electronic components are still manufactured in China, assembled into modules, and shipped to India for final assembly.
Apple has also placed large orders with suppliers for the iPhone 16 series, signaling that it expects strong sales, especially for premium models with new Apple Intelligence features. The company has projected production orders of 88 million to 90 million units, with some suppliers giving even higher estimates.
Doubling
China's top tech companies are going all-in on AI, planning to double their capital spending to $7 billion in the first half of 2023, according to Ryan McMorrow and Eleanor Alcott of the Financial Times.
Companies including Alibaba, Tencent, ByteDance and Baidu are pouring money into buying processors and infrastructure to run advanced AI models, despite U.S. sanctions aimed at thwarting Chinese efforts in the sector.
Alibaba alone saw spending grow 123% year over year, and its business of renting AI GPUs to startups is finally starting to reinvigorate its cloud division.
TikTok's parent company, ByteDance, is also investing heavily, using its $50 billion cash pile to build out AI infrastructure in China and Malaysia, and is a major buyer of Nvidia's H20 chips that are restricted for China.
But spending by Chinese tech companies still pales in comparison to U.S. tech giants, who spent a combined $106 billion in the first half of the year.
Terrifying Flame
The fire caused by a Mercedes-Benz electric car in the port city of Incheon has sent shock waves through South Korea's auto market, which has been a leader in EV adoption, driven by government incentives and a strong battery and auto industry. Nikkei Asia's Kim Jaewon writes that the incident could have global implications and ripple effects for EV and battery manufacturers.
Mercedes-Benz and South Korea's Hyundai both ranked in the world's top 10 for EV shipments in the first half of 2024.
The fires have prompted South Korean policymakers to move to require all EV makers to disclose their battery suppliers. The Mercedes-Benz EQE 350+ model involved in the crash used batteries made by China's Farasis Energy, but Hyundai's main supplier is South Korean company SK On. LG Energy Solutions and China's CATL are also major suppliers to Hyundai.
As the fires have sparked negative publicity about EVs, some battery makers such as LG Energy Solutions are using the opportunity to highlight their safety records and battery management systems in an effort to gain market share.
Good, but not good enough
Nvidia reported another strong quarterly result, driven by robust demand for AI computing. Even sales to the Chinese market, where the company has to offer downgraded versions of some chips to comply with U.S. export controls, rose year over year, writes Nikkei Asia's Yifan Yu.
But investors who have grown accustomed to expecting surprises from Nvidia were less than impressed. Many are skeptical about how long the surge in AI demand can last, as many tech companies still struggle to monetize new technologies. Nvidia shares fell sharply in after-hours trading, dragging down the stock price in morning trading in Asia.
The company reported $3.7 billion in revenue from China, up 33.8% year over year and 47.2% quarter over quarter. China represents up to 25% of data center revenue, driven primarily by AI computing. NVIDIA CFO Colette Kress acknowledged China's large contribution to the company's data center business in the quarter, but noted it was below pre-export ban levels and was facing increased competition in the market.
Recommended reading
1. Chinese retailer PDD shares plummet $55 billion after warning of inevitable profit decline (FT)
2. Malaysia's social media licensing plan draws criticism from big tech companies (Nikkei Asia)
3. Toyota and BMW to partner to manufacture fuel cell vehicles (Nikkei Asia)
4. China's export restrictions on semiconductor materials fuel concerns about semiconductor production (FT)
5. Philippines eases caps on digital banks as industry races for profits (Nikkei Asia)
6. IBM cuts China research team, shifts work to other regions (FT)
7. Japanese chipmaker Kioxia files for biggest IPO of the year in Tokyo (FT)
8. Grab adds 1,000 electric vehicles, mostly from BYD, to its Indonesian fleet (Nikkei Asia)
9. Deepfakes explode in Japan, breaking down language barriers (Nikkei Asia)
10. Microsoft plans Windows security overhaul after CrowdStrike outage (FT)
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