Chinese tech giants boost Samsung chip stocks ahead of US lockdown

Chinese technology companies including Huawei and Baidu, as well as various startups, are actively stockpiling high-bandwidth memory (HBM) semiconductors from Samsung Electronics in anticipation of potential export restrictions from the U.S., according to three sources familiar with the matter. The surge in purchases, which began earlier this year, has helped China contribute about 30% of Samsung’s revenue from HBM chips in the first half of 2024, one of the sources said.

The proactive stockpiling shows China’s commitment to developing its technological capabilities amid escalating trade tensions with the United States and other Western nations. Those tensions are weighing on the global semiconductor supply chain. Reuters reported last week that U.S. authorities are set to introduce a package of export controls later this month aimed at imposing new restrictions on semiconductor shipments to China.

The expected package is likely to set specific parameters for restricting access to HBM chips, which are key to the development of advanced processors such as Nvidia’s graphics processing units used in generative AI applications. The U.S. Commerce Department declined to comment directly, but said it continually assesses evolving threats and updates export controls to protect national security and the technology ecosystem. The exact details of the proposed HBM restrictions and how they would affect China remain unspecified.

HBM chips are essential for the development of advanced processors, and only three major manufacturers make them: South Korea’s SK Hynix and Samsung, and U.S.-based Micron Technology. Chinese demand has focused mostly on the HBM2E model, which is two generations behind the latest HBM3E, sources say. The global AI boom has strained supply of advanced models.

Nori Chiou, chief investment officer at Singapore-based White Oak Capital Partners, explained that due to the immaturity of domestic technology development in China, demand for Samsung’s HBM chips has surged as other manufacturers’ production capacity is fully booked by U.S. AI companies. While it’s difficult to estimate the volume or value of HBM chips stockpiled in China, a wide range of companies, including satellite manufacturers and technology companies such as Tencent, are buying them. One source noted that chip design startup Haawking recently ordered HBM chips from Samsung. In addition, Huawei uses Samsung’s HBM2E semiconductors for its advanced Ascend AI chip, according to the source.

Samsung and SK Hynix declined to comment, while Micron, Baidu, Huawei, Tencent and Haawking did not respond to requests for comment. The sources requested anonymity due to the sensitivity of the information.

Chinese companies have made some progress in developing HBM, with Huawei and memory chip maker CXMT focusing on HBM2 chips, which are three generations behind the HBM3E model, Reuters previously reported. But those efforts could be hampered by new U.S. regulations.

The restrictions on HBM sales to China could have a bigger impact on Samsung than on its competitors, which rely less on the Chinese market. Micron has avoided selling its HBM products to China since last year, and SK Hynix, whose main HBM customers include Nvidia, is focusing more on advanced HBM chip production. SK Hynix announced earlier this year that it was adjusting production to increase HBM3E production, as its HBM chips were already sold out this year and nearly sold out by 2025.

Featured image courtesy of THE INVESTOR

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