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China's Breakthrough in HBM Technology

General Report November 6, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Current Landscape of HBM Production in China
  3. Huawei's Initiative and Collaborations
  4. Technical Challenges and Market Position
  5. Implications of U.S. Sanctions on HBM Development
  6. Current Status of China’s HBM Sector
  7. Conclusion

1. Summary

  • Amidst escalating U.S. sanctions, China, led by Huawei, is making noteworthy strides in producing high bandwidth memory (HBM) chips, aiming to establish domestic production by 2026. This initiative is critical for supporting artificial intelligence chip capabilities in China, closing the technological gap with established global players like SK hynix and Samsung. HBM, recognized for its superior processing capabilities compared to traditional memory, is essential for advanced AI applications. However, it is typically more costly and complex to produce. Huawei spearheads a consortium of Chinese semiconductor firms, including ChangXin Memory Technologies (CXMT) and Fujian Jinhua Integrated Circuit, focusing on overcoming technical challenges and U.S. trade restrictions. Despite technological setbacks and limited access to advanced equipment, these firms are collaborating to create and optimize HBM chips tailored for Huawei products, reflecting a larger strategy to enhance self-sufficiency in the semiconductor sector.

2. Current Landscape of HBM Production in China

  • 2-1. Overview of HBM technology and its significance

  • High Bandwidth Memory (HBM) is a DRAM standard that was introduced in 2013, designed to meet the substantial processing demands of advanced artificial intelligence applications. HBM provides significantly greater bandwidth compared to traditional GDDR6 memory, making it ideal for high-margin GPUs and AI processors particularly in data centers. Despite its advantages, HBM is more expensive to produce than GDDR6, which presents challenges for extensive adoption. The urgency for HBM is growing, especially within the AI chip sector, as companies strive to enhance their technological capabilities amidst U.S. sanctions and limited access to high-performance memory solutions.

  • 2-2. Leading companies in the HBM market and their roles

  • Currently, SK hynix, Samsung, and Micron dominate the global HBM market. SK hynix and Samsung lead the market due to their advanced production techniques and R&D capabilities. These established players are progressing towards delivering fifth-generation HBM (HBM3E) by 2024, reflecting their commitment to innovation. In contrast, Chinese companies, including Huawei, ChangXin Memory Technologies (CXMT), and Wuhan Xinxin, are making strides to catch up and establish domestic HBM production. Huawei is spearheading a consortium with domestic semiconductor firms, focusing on initiating HBM production by 2026. Despite the difficulties posed by U.S. sanctions, Chinese companies are resiliently advancing, with CXMT showing promising progress in HBM development and Wuhan Xinxin planning to construct a factory capable of producing significant quantities of HBM wafers.

3. Huawei's Initiative and Collaborations

  • 3-1. Huawei's plans for domestic HBM production

  • Huawei and a consortium of Chinese semiconductor firms are reportedly aiming to establish domestic production of high bandwidth memory (HBM) by 2026. This initiative is seen as a substantial step toward achieving self-sufficiency in the semiconductor sector despite the challenges posed by U.S. sanctions. The group has begun experimenting with at least two production lines to determine the potential of different manufacturing approaches. Furthermore, the HBM chips being developed are expected to be optimized for Huawei's own products, highlighting Huawei's leadership role in this consortium.

  • 3-2. Collaboration with local semiconductor firms and government support

  • The initiative to produce HBM is supported by multiple local semiconductor firms and the Chinese government. This collaboration aims to enhance supply capabilities for China's growing AI processor industry, following the increasing demand for memory in high-end AI applications. Companies such as Fujian Jinhua Integrated Circuit are involved in this project, which focuses on tailoring HBM chips for use in Huawei-designed AI processors and related technology. This collective effort illustrates China's broader strategy to reduce reliance on foreign technology and enhance domestic production capabilities in the face of international trade restrictions.

4. Technical Challenges and Market Position

  • 4-1. Technical complexities in HBM production

  • The production of high bandwidth memory (HBM) presents significant technical complexities, particularly in the context of HBM2 chip production. According to various reports, the research and manufacturing processes involve intricate techniques, including wafer-level packaging, testing technology, and design compatibility. CoWoS (Chip-on-Wafer-on-Substrate) technology, which is now the mainstream packaging solution for AI processors, incorporates HBM in its design. Key processes within this technology, such as TSV (Through-Silicon Via), bumps, microbumps, and Redistribution Layer (RDL), contribute to the overall production costs. Notably, TSV accounts for approximately 30% of the 3D packaging cost of HBM. These complexities have resulted in substantial challenges for Chinese companies as they seek to advance their HBM production capabilities amid ongoing US sanctions that have limited access to necessary technologies.

  • 4-2. Current capabilities of Chinese firms compared to global leaders

  • As of now, Chinese firms, particularly CXMT and Wuhan Xinxin, are in the early stages of developing HBM technology while facing considerable competition from leading global players such as SK hynix and Samsung Electronics. Industry insights indicate that SK hynix successfully developed the second-generation HBM2 chips in 2016, highlighting a significant technological gap of nearly a decade that Chinese firms must overcome. Reports suggest that despite substantial government backing and funding for domestic semiconductor growth, industry experts believe it will be challenging for Chinese companies to catch up quickly. Furthermore, Huawei's collaboration with local firms to produce HBM2 chips by 2026 is part of a broader strategy to achieve self-sufficiency, although current advancements remain modest compared to the progress established players have made in the HBM sector.

5. Implications of U.S. Sanctions on HBM Development

  • 5-1. Impact of U.S. trade restrictions on Chinese HBM production

  • U.S. sanctions have significantly affected Chinese companies' efforts to produce high bandwidth memory (HBM) by limiting their access to advanced semiconductor technology. As outlined in several documents, these restrictions complicate procurement for companies such as Huawei, Biren, and Moore Threads, which are vital in the race to develop AI chips that rely heavily on HBM for performance. Although HBM chips themselves are not directly restricted, they utilize American-designed technologies that these companies are barred from accessing due to the sanctions. The combination of limited access to essential technology and intensified competition from established global players such as SK hynix and Samsung has created a difficult environment for China's domestic semiconductor firms trying to establish a foothold in the HBM market.

  • 5-2. Strategies employed by Chinese firms to overcome sanctions

  • In response to the challenges posed by U.S. sanctions, Chinese semiconductor firms have adopted various strategies to enhance their HBM production capabilities. Notably, Huawei is at the forefront of a consortium that includes other Chinese firms, aiming to produce HBM by 2026. This collaboration involves leveraging domestic resources and tapping into government support to establish production lines and facilities. Additionally, companies like ChangXin Memory Technologies (CXMT) have developed sample HBM chips and are working on scaling up production facilities to meet domestic demands. Reports indicate that CXMT is in discussions with semiconductor equipment suppliers from South Korea and Japan to acquire the necessary manufacturing equipment. Furthermore, Wuhan Xinxin plans to start its HBM production, with a capacity goal of 3,000 12-inch HBM wafers monthly, showing significant progress despite the sanctions. This drive for self-sufficiency reflects a broader strategic push from the Chinese government to develop a localized semiconductor industry that can withstand external pressures.

6. Current Status of China’s HBM Sector

  • 6-1. Potential for self-sufficiency in HBM production

  • China is aggressively pursuing self-sufficiency in high bandwidth memory (HBM) production, particularly for artificial intelligence (AI) chips. The Chinese government is heavily investing in domestic semiconductor development to mitigate reliance on foreign technologies, especially due to the stringent U.S. trade restrictions on advanced semiconductor technologies. A consortium led by Huawei aims to produce HBM2 chips by 2026. Despite significant support from the government, industry experts assert that Chinese firms, including Huawei, face substantial challenges in catching up to established players in the HBM market, which have developed advanced technologies over the past decade.

  • 6-2. Challenges in achieving competitive technology levels

  • Chinese companies are confronted with a daunting technological gap in HBM production. The leading South Korean firms, SK hynix and Samsung Electronics, have been engaged in HBM technology development since 2012, successfully introducing HBM2 chips in 2016. In contrast, the Chinese consortium is currently focusing on developing HBM2 technology but is believed to be a decade behind the technological curve. The obstacles include limited access to advanced chipmaking equipment due to U.S. sanctions, as well as difficulties in securing the necessary technology and expertise from international partners. Industry analysts suggest that without accelerated advancements and sustained collaboration within the domestic semiconductor sector, achieving competitiveness in HBM production may remain elusive for Chinese firms.

Conclusion

  • Huawei's leadership in China's drive for high bandwidth memory production demonstrates a pivotal move towards semiconductorial independence in a landscape pressured by U.S. sanctions. The strategic goal to achieve self-sufficiency by 2026 is promising but is challenged by the notable technological divide between Chinese firms like CXMT and global leaders such as SK hynix and Samsung. For Huawei and its partners, bridging this gap requires intensified government support and consistent technological innovation. The report underscores the importance of Huawei’s collaboration with notable local companies, like Fujian Jinhua Integrated Circuit, to ensure advancements in AI chip production. However, significant limitations persist due to technological dependencies on foreign expertise and equipment. Moving forward, China’s success in localizing the semiconductor industry could redefine its standing in the global technology arena, though sustained efforts and developments are crucial. Practical applications of this initiative could revolutionize AI processing and mitigate external sanctions' impacts.

Glossary

  • Huawei [Company]: Huawei is a leading Chinese technology company that is spearheading efforts to produce high bandwidth memory (HBM) chips in collaboration with local firms. Its involvement is crucial for enhancing China's capabilities in AI chip production, especially in the context of U.S. sanctions that limit access to advanced semiconductor technology.
  • CXMT [Company]: ChangXin Memory Technologies (CXMT) is a Chinese semiconductor manufacturer that has been developing its own HBM chips. Its progress is significant as it represents China's attempts to catch up in the memory market and is positioned to potentially collaborate with Huawei in HBM production.
  • Fujian Jinhua Integrated Circuit [Company]: Fujian Jinhua Integrated Circuit is a memory chip maker involved in the consortium led by Huawei, aiming to produce HBM chips. Its participation is vital as it adds to the domestic capabilities for HBM production within the context of U.S. sanctions.

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