According to ChinaScope, an effort is currently underway to strengthen Huawei's HarmonyOS platform's presence. The local government of Shenzhen has unveiled an ambitious program aimed at supercharging the development of native applications for the operating system. The "Shenzhen Action Plan for Supporting the Development of Native HarmonyOS Open Source Applications in 2024" outlines several key goals to foster a more robust and competitive ecosystem around HarmonyOS. One primary objective is for Shenzhen-based HarmonyOS apps to account for over 10% of China's total by the end of 2024. To facilitate this, the city plans to establish at least two specialized industrial parks dedicated to HarmonyOS software development across various application domains.

Furthermore, the initiative calls for over 1,000 software companies in Shenzhen to obtain HarmonyOS development talent qualifications, underscoring the city's commitment to cultivating a skilled workforce for the platform. Perhaps most impressively, the action plan encourages eligible companies to ramp up their outsourcing services for HarmonyOS app development, with a lofty target of reaching 500,000 HarmonyOS developers. This would represent a significant influx of developer talent focused on the platform if achieved. The Shenzhen government's push aligns with China's broader strategy to reduce reliance on foreign technologies and promote the adoption of domestic alternatives like HarmonyOS. While initially launched by Huawei as a workaround for U.S. sanctions, HarmonyOS has since expanded to power many devices, including smartphones, tablets, smartwatches, and TVs.

According to Bloomberg's latest investigation, Huawei and Semiconductor Manufacturing International Corporation (SMIC) have submitted patents on the self-aligned quadruple patterning (SAQP) pattern etching technique to enable SMIC to achieve 5 nm semiconductor production. The two Chinese giants have been working with the Deep Ultra Violet (DUV) machinery to develop a pattern etching technique allowing SMIC to produce a node compliant with the US exporting rules while maintaining the density improvements from the previously announced 7 nm node. In the 7 nm process, SMIC most likely used self-aligned dual patterning (SADP) with DUV tools, but for the increased density of the 5 nm node, a doubling to SAQP is required. In semiconductor manufacturing, lithography tools take multiple turns to etch the design of the silicon wafer.

Especially with smaller nodes getting ever-increasing density requirements, it is becoming challenging to etch sub-10 nm designs using DUV tools. That is where Extreme Ultra Violet (EUV) tools from ASML come into play. With EUV, the wavelengths of the lithography printers are 14 times smaller than DUV, at only 13.5 nm, compared to 193 nm of ArF immersion DUV systems. This means that without EUV, SMIC has to look into alternatives like SAQP to increase the density of its nodes and, as a result, include more complications and possibly lower yields. As an example, Intel tried to use SAQP in its first 10 nm nodes to reduce reliance on EUV, which resulted in a series of delays and complications, eventually pushing Intel into EUV. While Huawei and SMIC may develop a more efficient solution for SAQP, the use of EUV is imminent as the regular DUV can not keep up with the increasing density of semiconductor nodes. Given that ASML can't ship its EUV machinery to China, Huawei is supposedly developing its own EUV machines, but will likely take a few more years to show.

Chinese e-commerce and cloud giant Alibaba announced its plans to launch a server-grade RISC-V processor later this year, and it showcased a RISC-V-powered laptop running an open-source operating system. The announcements were made by Alibaba's research division, the Damo Academy, at the recent Xuantie RISC-V Ecological Conference in Shenzhen. The upcoming server-class processor called the Xuantie C930, is expected to be launched by the end of 2024. While specific details about the chip have not been disclosed, it is anticipated to cater to AI and server workloads. This development is part of Alibaba's ongoing efforts to expand its RISC-V portfolio and reduce reliance on foreign chip technologies amidst US export restrictions. To complement the C930, Alibaba is also preparing a Xuantie 907 matrix processing unit for AI, which could be an IP block inside an SoC like the C930 or an SoC of its own.

In addition to the C930, Alibaba showcased the RuyiBOOK, a laptop powered by the company's existing T-Head C910 processor. The C910, previously designed for edge servers, AI, and telecommunications applications, has been adapted for use in laptops. Strangely, the RuyiBOOK laptop runs on the openEuler operating system, an open-source version of Huawei's EulerOS, which is based on Red Hat Linux. The laptop also features Alibaba's collaboration suite, Ding Talk, and the open-source office software Libre Office, demonstrating its potential to cater to the needs of Chinese knowledge workers and consumers without relying on foreign software. Zhang Jianfeng, president of the Damo Academy, emphasized the increasing demand for new computing power and the potential for RISC-V to enter a period of "application explosion." Alibaba plans to continue investing in RISC-V research and development and fostering collaboration within the industry to promote innovation and growth in the RISC-V ecosystem, lessening reliance on US-sourced technology.

A 2019-signed export license has allowed Intel to supply laptop processors to Huawei, under an exclusive deal—this US Government approved arrangement was not viewed favorably by AMD. The rival chipmaker apparently missed out on the securing of a similar trade license back in 2021. According to a new Reuters report, Team Red and a handful of supporters have attempted to revoke Intel's license—worth hundreds of millions of dollars. Two anonymous sources allege that: "Intel has survived an effort to halt chip sales to Huawei...giving one of the world's largest chipmakers more time to sell to the heavily sanctioned Chinese telecoms company." Intel and Huawei's symbiosis is set to end later this year—folks on the inside reckon that the current US administration will not approve a renewal. Reports suggest that Qualcomm is not anticipating a renewal either—Huawei is an approved buyer of Snapdragon chips, but industry whispers indicate an eventual shift to in-house fare.

Intel, Huawei, US Commerce Department and the White House have declined to comment on the aforementioned scenario. Reuters also sent a query to AMD, but the publication did not receive a response. Earlier last year, a government official revealed that "Huawei's licensing policy" was under review, alongside a general push to scrap a number of trade deals. According to insiders, the same government official allegedly told companies—in private—that the US Commerce Department would fix "the licensing discrepancy." Another anonymous source believes that the agency shelved these plans late last year, for reasons unknown—they stressed that there is potential for a revival. Given the upcoming expiry of Intel and Huawei's arrangement—within the year—it makes little sense to implement a drastic change.

SMIC, China's largest semiconductor manufacturer, is reportedly assembling a dedicated team to develop 3 nm semiconductor node technology, following reports of the company setting up 5 nm chip production for Huawei later this year. This move is part of SMIC's efforts to achieve independence from foreign companies and reduce its reliance on US technology. According to a report from Joongang, SMIC's initial goal is to commence operations of its 5 nm production line, which will mass-produce Huawei chipsets for various products, including AI silicon. However, SMIC is already looking beyond the 5 nm node. The company has assembled an internal research and development team to begin work on the next-generation 3 nm node.

The Chinese manufacturer is expected to accomplish this using existing DUV machinery, as ASML, the sole supplier of advanced EUV technology, is prohibited from providing equipment to Chinese companies due to US restrictions. It is reported that one of the biggest challenges facing SMIC is the potential for low yields and high production costs. The company is seeking substantial subsidies from the Chinese government to overcome these obstacles. Receiving government subsidies will be crucial for SMIC, especially considering that its 5 nm chips are expected to be up to 50 percent more expensive than TSMC's due to the use of older DUV equipment. The first 3 nm wafers from SMIC are not expected to roll out for several years, as the company will prioritize the commercialization of Huawei's 5 nm chips. This ambitious undertaking by SMIC represents a significant challenge for the company as it strives to reduce its dependence on foreign semiconductor technology and establish itself as an essential player in the global manufacturing industry.

According to the latest report from Bloomberg, AMD has hit a roadblock in offering its top-of-the-line AI accelerator in the Chinese market. The newest AI chip is called Instinct MI309, a lower-performance Instinct MI300 variant tailored to meet the latest US export rules for selling advanced chips to China-based entities. However, the Instinct MI309 still appears too powerful to gain unconditional approval from the US Department of Commerce, leaving AMD in need of an export license. Originally, the US Department of Commerce made a rule: Total Processing Performance (TPP) score should not exceed 4800, effectively capping AI performance at 600 FP8 TFLOPS. This rule ensures that processors with slightly lower performance may still be sold to Chinese customers, provided their performance density (PD) is sufficiently low.

However, AMD's latest creation, Instinct MI309, is everything but slow. Based on the powerful Instinct MI300, AMD has not managed to bring it down to acceptable levels to acquire a US export license from the Department of Commerce. It is still unknown which Chinese customer was trying to acquire AMD's Instinct MI309; however, it could be one of the Chinese AI labs trying to get ahold of more training hardware for their domestic models. NVIDIA has employed a similar tactic, selling A800 and H800 chips to China, until the US also ended the export of these chips to China. AI labs located in China can only use domestic hardware, including accelerators from Alibaba, Huawei, and Baidu. Cloud services hosting GPUs in US can still be accessed by Chinese companies, but that is currently under US regulators watchlist.

At MWC Barcelona 2024, Huawei launched the Huawei OptiXtrans DC908 Pro, a new platform for Data Center Interconnect (DCI) designed for the intelligent era. This innovative platform ensures the efficient, secure, and stable transmission of data between data centers (DCs), setting a new standard for DCI networks. As AI continues to proliferate across various service scenarios, the demand for foundation models has intensified, leading to an explosion in data volume. DCs are now operating at the petabyte level, and DCI networks have evolved from single-wavelength 100 Gbit/s to single-wavelength Tbit/s.

In response to the challenges posed by massive data transmission in the intelligent era, Huawei introduces the next-generation DCI platform, the Huawei OptiXtrans DC908 Pro. Compared to its predecessor, the DC908 Pro offers higher bandwidth, reliability, and intelligence.

Huawei's new server CPU based on the HiSilicon Taishan V120 core has shown impressive single-threaded performance that matches AMD's Zen 3 architecture in a leaked Geekbench 6 benchmark. The Taishan V120 is likely being manufactured on SMIC's 7 nm process node. The Geekbench 6 result posted on social media does not identify the exact Huawei server CPU model, but speculation points to it being the upcoming Kunpeng 930 chip. In the benchmark, the Taishan V120 CPU operating at 2.9 GHz scored 1527 in the single-core test. This positions it nearly equal to AMD's EPYC 7413 server CPU based on the Zen 3 architecture, which boosts up to 3.6 GHz and which scored 1538 points. It also matches the single-threaded performance of Intel's Coffee Lake-based Xeon E-2136 from 2018, even though that Intel chip can reach 4.5 GHz boost speeds, scoring 1553 points.

The Taishan V120 core first appeared in Huawei's Kirin 9000 smartphone SoC in 2020. Using the core in server CPUs would allow Huawei to achieve competitive single-threaded performance to rival AMD's last-generation EPYC Milan and Intel's older Skylake server chips. Multi-threaded benchmarks will be required to gauge the Kunpeng 930's overall performance fully when it launches. Huawei continues innovating its ARM-based server CPU designs even while facing restrictions on manufacturing and selling chips internationally due to its inclusion on the US Entity List in 2019. The impressive single-threaded results versus leading x86 competitors demonstrate Huawei's resilience and self-reliance in developing homegrown data center technology through its HiSilicon division. More details on the Kunpeng 930 server chip will likely surface later this year, along with server configurations from Chinese OEMs.

Global technology brand HONOR today unveiled the HONOR MagicBook Pro 16, a revolutionary AI-powered laptop which sets to redefine the traditional laptop landscape. Based on HONOR's platform-level AI capabilities and joint efforts with technology partners such as Microsoft, Intel and NVIDIA, HONOR is bringing PCs into the AI PC era, marking a significant milestone in computing, offering users an unparalleled AI experience and transforming their device interactions.

"At HONOR, our commitment lies in embracing open collaboration with industry partners to foster a flourishing ecosystem. We firmly believe in the transformative power of collaborative synergy, especially in the era of AI. By leveraging the collective expertise of top industry players, we are dedicated to crafting exceptional products and delivering unparalleled experiences to consumers worldwide," said George Zhao, CEO at HONOR.

Huawei's Ascend 910B AI GPU is reportedly in high demand in China—we last learned that NVIDIA's latest US sanction-busting H20 "Hopper" model is lined up as a main competitor, allegedly in terms of both pricing and performance. A recent Reuters report proposes that Huawei is reacting to native enterprise market trends by shifting its production priorities—in favor of Ascend product ranges, while demoting their Kirin smartphone chipset family. Generative AI industry experts believe that the likes of Alibaba and Tencent have rejected Team Green's latest batch of re-jigged AI chips (H20, L20 and L2)—tastes have gradually shifted to locally developed alternatives.

Huawei leadership is seemingly keen to seize these growth opportunities—their Ascend 910B is supposedly ideal for workloads "that require low-to-mind inferencing power." Reuters has spoken to three anonymous sources—all with insider knowledge of goings-on at a single facility that manufacturers Ascend AI chips and the Kirin smartphone SoCs. Two of the leakers claim that this unnamed fabrication location is facing many "production quality" challenges, namely output being "hamstrung by a low yield rate." The report claims that Huawei has pivoted by deprioritizing Kirin 9000S (7 nm) production, thus creating a knock-on effect for its premium Mate 60 smartphone range.

Semiconductor Manufacturing International Corp (SMIC) is preparing new semiconductor production lines at its Shanghai facilities according to a fresh Reuters report—China's largest contract chip maker is linked to next generation Huawei SoC designs, possibly 5 nm-based Kirin models. SMIC's newest Shanghai wafer fabrication site was an expensive endeavor—involving a $8.8 billion investment—but their flagship lines face a very challenging scenario with new phases of mass production. Huawei, a key customer, is expected to "upgrade" to a 5 nm process for new chip designs—their current flagship, Kirin 9000S, is based on a SMIC 7 nm node. Reuter's industry sources believe that the foundry's current stable of "U.S. and Dutch-made equipment" will be deployed to "produce 5-nanometer chips."

Revised trade rulings have prevented ASML shipping advanced DUV machinery to mainland China manufacturing sites—SMIC workers have reportedly already repurposed the existing inventory of lithography equipment for next-gen pursuits. Burn Lin (ex-TSMC), a renowned "chip guru," believes that it is possible to mass produce 5 nm product on slightly antiquated gear (previously used for 7 nm)—but the main caveats being increased expense and low yields. According to a DigiTimes Asia report, mass production of a 5 nm SoC on SMIC's existing DUV lithography would require four-fold patterning in a best case scenario.

NVIDIA's H800 AI GPU was rolled out last year to appease the Sanction Gods—but later on, the US Government deemed the cutdown "Hopper" part to be far too potent for Team Green's Chinese enterprise customers. Last October, newly amended export conditions banned sales of the H800, as well as the slightly older (plus similarly gimped) A800 "Ampere" GPU in the region. NVIDIA's engineering team returned to the drawing board, and developed a new range of compliantly weakened products. An exclusive Reuters report suggests that Team Green is taking pre-orders for a refreshed "Hopper" GPU—the latest China-specific flagship is called "HGX H20." NVIDIA web presences have not been updated with this new model, as well as Ada Lovelace-based L20 PCIe and L2 PCIe GPUs. Huawei's competing Ascend 910B is said to be slightly more performant in "some areas"—when compared to the H20—according to insiders within the distribution network.

The leakers reckon that NVIDIA's mainland distributors will be selling H20 models within a price range of $12,000 - $15,000—Huawei's locally developed Ascend 910B is priced at 120,000 RMB (~$16,900). One Reuters source stated that: "some distributors have started advertising the (NVIDIA H20) chips with a significant markup to the lower end of that range at about 110,000 yuan ($15,320). The report suggests that NVIDIA refused to comment on this situation. Another insider claimed that: "distributors are offering H20 servers, which are pre-configured with eight of the AI chips, for 1.4 million yuan. By comparison, servers that used eight of the H800 chips were sold at around 2 million yuan when they were launched a year ago." Small batches of H20 products are expected to reach important clients within the first quarter of 2024, followed by a wider release in Q2. It is believed that mass production will begin around Spring time.

According to the latest teardown from TechInsights, China's biggest technology maker, Huawei, has been shipping laptops with technology supposedly sanctioned by the United States. As the teardown shows, TechInisights has discovered that Huawei's Kirin 9006C processor is manufactured on TSMC's 5 nm semiconductor technology. Originally, the United States have imposed sanctions on Huawei back in 2020, when the government cut off Huawei's access from TSMC's advanced facilities and forbade the use of the latest nodes by Huawei's HiSilicon chip design arm. Today's findings show signs of contradiction, as the Qingyun L540 notebook that launched in December 2023 employs a Kirin 9006C chipset manufactured on a TSMC 5 nm node.

TechInsight's findings indicate that Kirin 9006C assembly and packaging occurred around the third quarter of 2020, whereas the 2020 Huawei sanctions started in the second quarter. Of course, the implication of the sanctions likely prohibited any new orders and didn't prevent Huawei from possibly stockpiling millions of chip orders in its warehouse before they took place. The Chinese giant probably made orders beforehand and is using the technology only now, with the Qingyun L540 laptop being one of the first Kirin 9006C appearances. Some online retailers also point out that the laptop complies with the latest security practices required for the government, which means that they have been in the works since the chip began the early stages of design, way before 2020. We don't know the stockpile quantity, but SMIC's domestic efforts seem insufficient to supply the Chinese market alone. The news that Huawei is still using TSMC chips made SMIC's share go for a 2% free fall on the Hong Kong stock exchange.

Huawei's subsidiary HiSilicon has made significant strides in the independent R&D of AI chips, launching the next-gen Ascend 910B. These chips are utilized not only in Huawei's public cloud infrastructure but also sold to other Chinese companies. This year, Baidu ordered over a thousand Ascend 910B chips from Huawei to build approximately 200 AI servers. Additionally, in August, Chinese company iFlytek, in partnership with Huawei, released the "Gemini Star Program," a hardware and software integrated device for exclusive enterprise LLMs, equipped with the Ascend 910B AI acceleration chip, according to TrendForce's research.

TrendForce conjectures that the next-generation Ascend 910B chip is likely manufactured using SMIC's N+2 process. However, the production faces two potential risks. Firstly, as Huawei recently focused on expanding its smartphone business, the N+2 process capacity at SMIC is almost entirely allocated to Huawei's smartphone products, potentially limiting future capacity for AI chips. Secondly, SMIC remains on the Entity List, possibly restricting access to advanced process equipment.

NVIDIA's most recent FY3Q24 financial reports reveal record-high revenue coming from its data center segment, driven by escalating demand for AI servers from major North American CSPs. However, TrendForce points out that recent US government sanctions targeting China have impacted NVIDIA's business in the region. Despite strong shipments of NVIDIA's high-end GPUs—and the rapid introduction of compliant products such as the H20, L20, and L2—Chinese cloud operators are still in the testing phase, making substantial revenue contributions to NVIDIA unlikely in Q4. Gradual shipments increases are expected from the first quarter of 2024.

The US ban continues to influence China's foundry market as Chinese CSPs' high-end AI server shipments potentially drop below 4% next year
TrendForce reports that North American CSPs like Microsoft, Google, and AWS will remain key drivers of high-end AI servers (including those with NVIDIA, AMD, or other high-end ASIC chips) from 2023 to 2024. Their estimated shipments are expected to be 24%, 18.6%, and 16.3%, respectively, for 2024. Chinese CSPs such as ByteDance, Baidu, Alibaba, and Tencent (BBAT) are projected to have a combined shipment share of approximately 6.3% in 2023. However, this could decrease to less than 4% in 2024, considering the current and potential future impacts of the ban.

The Chinese semiconductor industry is advancing, and interestingly, it is growing rapidly under sanctions, even with the blacklisting of companies by the US government. China's semiconductor industry is mainly represented by companies like Semiconductor Manufacturing International Corp (SMIC) and Huawei Technologies, who are leading the investment and progress in both chip manufacturing and chip design. According to the latest interview with Bloomberg, former TSMC Vice President Burn J. Lin said that the US government and its sanctions can not stop the advancement of Chinese semiconductor companies. Currently, Lin notes that SMIC and Huawei can use older machinery to produce more advanced chips.

Even so, SMIC could progress to 5 nm technology using existing equipment, particularly with scanners and other machinery from ASML. Development under sanctions would also force China to experiment with new materials and other chip packaging techniques that yield higher performance targets. SMIC has already developed a 7 nm semiconductor manufacturing node, which Huawei used for its latest Mate 60 Pro smartphone, based on Huawei's custom HiSilicon Kirin 9000S chip. Similarly, the transition is expected to happen to the 5 nm node as well, and it is only a matter of time before we see other nodes appear. "It is just not possible for the US to completely prevent China from improving its chip technology," noted Burn J. Lin.

Phytium, a Chinese semiconductor company that faced U.S. government sanctions from 2021, has introduced its latest data center processor, the 64-core Feiteng Tengyun S2500. Designed for cloud and high-performance computing applications, this processor features a large-capacity shared L3 cache, enhanced security capabilities for cloud servers, and improved memory subsystem reliability. The Feiteng Tengyun S2500 features 64 FTC661 cores developed by Phytium, which are based on Armv8 ISA. Reportedly, the CPU features 64 MB of L3 cache and 512 KB of L2 per core, bringing the total to 96 MB of processor cache. Compared to the previous generation line, the S2500 brings an L3 cache and TDP of 150 Watts, up from 90 Watts of previous generation.

This is Phytium's first new CPU in several years, raising questions about its production capacity and access to foundries, given its sanctions-related restrictions. It is currently unknown which foundry will manufacture the Feiteng Tengyun S2500, and we expect to hear more about it as (if) units get shipped. So far only display units have made appearance. Nonetheless, the company has continued its hardware development efforts and garnered interest in collaborating with Huawei to unify hardware and software ecosystems, which has yet to come to fruition.

Liu Qingfeng, the founder and chairman of Chinese AI firm iFlytek (or HKUST Xunfei according to ITHome) shared his opinions of incoming Huawei GPU technology at this year's Yabuli Entrepreneurs Forum. His team has been collaborating with key figures at the multinational technology corporation on a product that he reckons is just as capable as NVIDIA's very mature A100 tensor core accelerator. Liu referred to the model as a "compute GPU" which implies that this is an all-new product—Huawei has kept quiet on the AI hardware front since the 2019 launch of its Ascend 910 AI accelerator, so the iFlytek presentation has hinted about Huawei's ambitions to take on Team Green within the Chinese deep learning and artificial intelligence market sector.

The escalating challenges in acquiring high-performance x86 servers have prompted Chinese data center companies to accelerate the shift to Arm-based system-on-chips (SoCs). Investment banking firm Bernstein reports that approximately 40% of all Arm-powered servers globally are currently being used in China. While most servers operate on x86 processors from AMD and Intel, there's a growing preference for Arm-based SoCs, especially in the Chinese market. Several global tech giants, including AWS, Ampere, Google, Fujitsu, Microsoft, and Nvidia, have already adopted or developed Arm-powered SoCs. However, Arm-based SoCs are increasingly favorable for Chinese firms, given the difficulty in consistently sourcing Intel's Xeon or AMD's EPYC. Chinese companies like Alibaba, Huawei, and Phytium are pioneering the development of these Arm-based SoCs for client and data center processors.

However, the US government's restrictions present some challenges. Both Huawei and Phytium, blacklisted by the US, cannot access TSMC's cutting-edge process technologies, limiting their ability to produce competitive processors. Although Alibaba's T-Head can leverage TSMC's latest innovations, it can't license Arm's high-performance computing Neoverse V-series CPU cores due to various export control rules. Despite these challenges, many chip designers are considering alternatives such as RISC-V, an unrestricted, rapidly evolving open-source instruction set architecture (ISA) suitable for designing highly customized general-purpose cores for specific workloads. Still, with the backing of influential firms like AWS, Google, Nvidia, Microsoft, Qualcomm, and Samsung, the Armv8 and Armv9 instruction set architectures continue to hold an edge over RISC-V. These companies' support ensures that the software ecosystem remains compatible with their CPUs, which will likely continue to drive the adoption of Arm in the data center space.

Huawei announced they will launch a complete set of commercial 5.5G network equipment in 2024 at the 5G Advanced Forum during MWC Shanghai 2023. Huawei's Director and President of ICT Products & Solutions Yang Chaobin who made the announcement said the company intends for this launch to mark the beginning of the 5.5G era for the ICT industry.

5G deployment progressed rapidly over the past four years and is already yielding significant financial gains. Today, there are more than 260 commercial 5G networks worldwide, serving over 1.2 billion users, and there are already 115 million gigabit F5G users. With service models and content continuously evolving, breakthroughs in technologies like glasses-free 3D are creating unprecedented immersive experiences for users. However, these new services continue to require stronger 5G network capabilities. The industry has widely agreed that 5.5G will be a key milestone in 5G evolution, and that it is fast approaching.

US authorities have imposed a $300 million penalty on Seagate Technology Holdings plc, a market leader in data storage solutions, for an alleged violation of export controls. The US Commerce Department has investigated the California-based company's business dealings with Chinese hardware firm Huawei Technologies Co. Limited, specifically for the sale of hard disk drives to operations within mainland China. It has found that Seagate has broken the "foreign direct product (FDP) rule" that was established by the US Government back in 2020. Seagate is said to have sold approximately 7.4 million hard drive units to Huawei after the period in which the new rulings took effect - the total value of these shipments was estimated in the region of $1.1 billion.

The US government's serving of a civil penalty to Seagate appears to be part of a larger drive to prevent North American tech companies from selling advanced computer equipment to Chinese firms. Two other suppliers (not named) of storage solutions had agreed to the government imposed terms and ceased trade with Huawei in 2020. In contrast, Seagate has seemingly become a record breaking heretic according to a statement released yesterday by the Bureau of Industry (BIS) and Security: "This historic foreign direct product enforcement case and settlement represents the largest standalone administrative penalty in BIS history. Today's resolution also includes a multi-year audit requirement and a five-year suspended Denial Order. In August 2020, the Bureau of Industry and Security imposed controls over certain foreign-produced items related to Huawei. Despite this, in September 2020, Seagate announced it would continue to do business with Huawei. Seagate did so despite the fact that its only two competitors had stopped selling HDDs to Huawei, resulting in Seagate becoming Huawei's sole source provider of HDDs."

Amid the US sanctions, Chinese technology giant Huawei has reportedly developed tools to create processors with 14 nm and above lithography. According to Chinese media Yicai, Huawei and its semiconductor partners have teamed up to create replacement tools in place of US chip toolmakers like Cadence, Synopsys, and Mentor/Siemens. These three companies control all of the world's Electronic Design Automation (EDA) tools used for every step of chip design, from architecture to placement and routing to the final physical layout. Many steps need to be taken before making a tapeout of a physical chip, and Huawei's newly developed EDA tools will help the Chinese industry with US sanctions which crippled Huawei for a long time.

Having no access to US-made chipmaking tools, Huawei has invested substantial time into making these EDA tools. However, with competing EDA makers supporting lithography way below 14 nm, Huawei's job still needs to be completed. Chinese semiconductor factories are currently capable of 7 nm chip production, and Huawei itself is working on making a sub-7 nm EUV scanner to aid manufacturing goals and compete with the latest from TSMC and other. If Huawei can create EUV scanners that can achieve transistor sizes smaller than 7 nm, we expect to see their EDA tools keep pace as well. It is only a matter of time before they announce adaptation for smaller nodes.

NVIDIA's presence in high-performance computing has steadily increased, with various workloads benefiting from the company's AI and HPC accelerator GPUs. One of the important markets for the company is China, and export regulations are about to complicate NVIDIA's business dealing with the country. NVIDIA's major partners in the Asia Pacific region are Inspur and Huawei, which make servers powered by A100 and H100 GPU solutions. Amid the latest Biden Administration complications, the US is considering limiting more export of US-designed goods to Chinese entities. Back in 2019, the US blacklisted Huawei and restricted the sales of the latest GPU hardware to the company. Last week, the Biden Administration also blacklisted Inspur, the world's third-largest server maker.

In the Morgan Stanley conference, NVIDIA's Chief Financial Officer Colette Cress noted that: "Inspur is a partner for us, when we indicate a partner, they are helping us stand up computing for the end customers. As we work forward, we will probably be working with other partners, for them to stand-up compute within the Asia-Pac region or even other parts of the world. But again, our most important focus is focusing on the law and making sure that we follow export controls very closely. So in this case, we will look in terms of other partners to help us." This indicates that NVIDIA will lose millions of dollars in revenue due to the inability to sell its GPUs to partners like Inspur. As the company stated, complying with the export regulations is the most crucial focus.

Huawei, the Chinese technology giant, has reportedly filed patents that it is developing extreme ultraviolet (EUV) scanners for use in the manufacturing process of semiconductors. This news comes amid increasing tensions between Huawei and the US government, which has imposed a series of sanctions on the company in recent years. According to UDN, Huawei has filed a patent that covers the entire EUV scanner with a 13.5 nm EUV light source, mirrors, lithography for printing circuits, and proper system control. While filing a patent is not the same as creating an accurate EUV scanner, it could enable China to produce a class of chips below 7 nm and have a homegrown semiconductor production, despite the ever-increasing US sanctions.

The development of EUV scanners is a significant milestone for Huawei and the semiconductor industry. However, the company's progress in this area may be hindered by the US government's sanctions, which have limited Huawei's access to certain technologies and markets. It is important to note that Chinese SMIC wanted to develop EUV fabrication based on third-party EUV tools; however, those plans were scrapped as the Wassenaar agreement came into action and prohibited the sales of advanced tools to Chinese companies. Huawei's development could represent a new milestone for the entire Chinese industry.

According to TrendForce's latest research, global smartphone production totaled around 289 million units for 3Q22, showing a slight QoQ drop of 0.9% and a YoY drop of 11%. The smartphone market thus exhibited an extremely weak demand situation as the "iron law" of positive growth in the third quarter was broken after being in effect for years. The contraction of smartphone production during this year's peak season was mainly attributed to smartphone brands giving priority to consumption of channel inventory for whole devices and maintaining a fairly conservative production plan for 3Q22. Moreover, they had kept lowering their production targets due to strong global economic headwinds.

Regarding the performances of the major smartphone brands in 3Q22, Samsung posted around 64.2 million units in device production, showing a QoQ increase of just 3.9%. This was the result of the brand scaling back production since 2Q22 and maintaining a conservative outlook on the future market situation. Due to persistent inventory pressure, Samsung is expected to again post a QoQ decline for 4Q22. In the aspect of product development, Samsung has been the leader in foldable smartphones. This year, the global market share of foldable smartphones is estimated to reach 1.1%; and within this segment, Samsung is expected to hold a market share of almost 90%. As for 2023, the global market share of foldable smartphones is forecasted to climb to 1.5%, and Samsung is forecasted to retain a market share of almost 80% in the segment.