Nvidia in demand and an AI chip boon for Japan

Hello everyone, this is Lauly from Taipei.

I’m writing this newsletter on my way back from Foxconn’s year-end festival for employees and their families. I have been covering this event for 10 years and in all that time I’ve never attended one as crowded as this! The iPhone assembler booked the first and the fourth floors of the Nangang Exhibition Hall — the biggest exhibition venue in Taiwan — and that was still barely enough room for the nearly 30,000 people who showed up. I could hardly move when I tried to pick up my press pass from the counter.

Events like these, held just before the lunar new year holidays, are an important tradition for Chinese-speaking tech suppliers, particularly for device assemblers. Companies such as Foxconn, fellow iPhone assembler Pegatron and AI server maker Quanta Computer often hold big banquets and hire Taiwan’s most popular singers and rock stars to perform for their thousands of employees. They also give away hundreds of millions of New Taiwan dollars in drawings to express their gratitude towards employees over the past year. For instance, Foxconn gave away 52 of its self-designed electric vehicles and 21 people each won NT$1mn ($31,871) in prizes. Pegatron gave away prizes worth NT$160mn during its party.

But while the events were joyful, most of the bosses from these companies warned their employees that 2024 is likely to be another challenging year.

“The explosive demand for AI servers will continue in 2024, but the prospects of consumer electronics goods — a key pillar of the tech industry — will depend on continued market uncertainties,” Foxconn Chairman Young Liu said.

Liu’s view is shared by other suppliers. Simon Lin, chair of Wistron, a contract notebook and server maker, said AI is helping the tech industry, but in light of geopolitical uncertainties, the trade war, inflation and the macroeconomy, 2024 doesn’t bode well. “This year we probably won’t see big growth,” Lin said.

Continued supply chain diversification is another point tech suppliers agreed on this year. I recently attended the opening of a factory by Austria-based chip substrate supplier AT&S in Kulim, Malaysia. In addition to visiting the first-ever substrate facility in south-east Asia, I also visited three other tech suppliers that had all expanded in Malaysia in the past few years.

“We made a mistake when we thought the trade war would end quickly. We were so wrong,” an executive whose company recently built plants in Malaysia and Vietnam told Nikkei Asia.

“We have to prepare ourselves, as US-China relations now seem like they will never go back to what they used to be,” the executive said. I think he is probably right this time.

Sold out

Nvidia’s RTX 4090 graphic cards, beloved by video gamers and PC hobbyists, have been flying off of store shelves across south-east Asia and Taiwan since the US tightened export controls of advanced chips to China.

This has led to widespread shortages and steep price increases of the RTX 4090, and several retailers say the buyers are snapping them up to resell in China and Hong Kong, according to an investigation by Nikkei Asia’s Pak Yiu, Lauly Li, Cheng Ting-Fang, Lien Hoang, Dylan Loh and Kim Jaewon.

These reporters spent weeks visiting local DIY shops and electronics markets in Shenzhen, Hong Kong, Taipei, Ho Chi Minh City, Singapore and Seoul, and they all found the RTX 4090 graphic cards in short supply and prices as much as 60 per cent higher than when the chip was launched in 2022.

The RTX 4090 is designed for rendering images, particular for video games, but because its computing capability can also be used to train artificial intelligence tasks, it was included in the updated export controls released by Washington in October. Since then, the graphic card has become a hot commodity in Hong Kong and China.

“They are buying these to later resell them to areas that faced US restrictions at a much higher price,” one store owner in Taipei said, adding that graphics cards can be resold for three times the price across the strait. “They can just carry them to Hong Kong or other Chinese cities.”

In addition to breaking gamers’ hearts, the brisk trade in the RTX 4090 underlines the difficulty the US faces in stemming the flow of advanced chips into China.

Material concerns

A multibillion-dollar patent fight has broken out between the State University of New York and a company that is soon to be owned by a Japanese government-backed fund over a technology that could transform the future of chipmaking, writes Kana Inagaki for the Financial Times.

The university’s research foundation has alleged that Inpria, a US subsidiary of Japan’s JSR, has been selling chip materials products that are based on technology invented by one of its professors, according to a recent filing. It could seek damages of up to $4.3bn for alleged infringement of its intellectual property.

JSR said it considered the lawsuit without merit and internal investigations it conducted had not uncovered any improper activities involving Inpria or implicating JSR.

The legal battle comes at a sensitive time. JSR is seeking a buyout by a state-backed fund in a controversial deal that has raised questions about whether Japan is entering a new era of state interventionism to protect technologies of strategic importance.

At the heart of the intellectual property dispute is technology commercialised by Inpria involving metal-containing photoresists, which researchers see as a potential game changer for developing highly sophisticated and cost-effective extreme ultraviolet lithography machines, critical to the production of high-end chips.

A helping of chips

Towa, a Japanese chip equipment supplier, has seen its share price surge as the company rides a wave of robust demand for artificial intelligence chips, Nikkei Asia’s Ryohtaroh Satoh writes.

Towa is a key equipment supplier for producers of high-bandwidth memory (HBM) chips, a crucial component used along with chips like Nvidia’s H100 for enabling AI training. The market for HBM chips is dominated by South Korea’s SK Hynix and Samsung, while American memory chip giant Micron also has offerings of HBM chips. China’s CXMT is also pushing to produce the country’s first domestically-made HBM chips.

Hirokazu Okada, president and CEO of Towa, told Nikkei Asia in an exclusive interview that the company expects to receive its biggest order for machines from “major South Korean makers”.

“We are expecting a total of more than 20 machine orders from South Korean chipmakers this fiscal year [ending this March],” Okada said. These specific machines are mainly used for HBM solutions, though they also have other uses, the company said.

This is easily Towa’s biggest order for these machines, as the Japanese company has normally sold just one or two a year until now.

Make tech in India

Taiwan’s Acer and Asustek Computer, two of the world’s biggest PC companies, are stepping up manufacturing efforts in India as the country weighs import restrictions to boost the local tech supply chain, Nikkei Asia’s Lauly Li writes.

“Our collaboration with [an] Indian supplier that began in 2023 works very well and now they want more models and more volume,” said Acer Chairman Jason Chen. “The Indian market grows so fast that its potential can’t be neglected.”

Wistron, a contract notebook manufacturer that counts Acer, HP and Dell as its clients, also said it is buying a plot of land in Karnataka, India, to build a facility for PC maintenance and aftersales service and does not rule out turning it into production lines.

The plans by the tech companies come amid dramatic policy shifts in the country.

Last August, the government introduced rules that would have required licenses for the import of several tech products, including notebooks, tablets, all-in-one PCs and servers, with immediate effect. The move was widely seen as an attempt to support the country’s “Make in India” initiative. However, the sudden announcement sent shockwaves through the tech industry, leading the government to introduce a compromise. Instead of requiring licenses for imports, the government began requiring companies to use a new import management system from last November. Licensing requirements could still be introduced down the road, however.

Suggested reads

1. Singapore’s DBS slashes CEO’s 2023 pay by $3mn (Nikkei Asia)

2. Australia to propose green mining standards amid slump in EV metals (Nikkei Asia)

3. China on cusp of next-generation chip production despite US curbs (FT)

4. Shein battles counterfeiting lawsuits as online retailer pursues US IPO (FT)

5. TSMC’s second Japan plant advances Tokyo ambitions on chip supply (Nikkei Asia)

6. Samsung chair acquitted of stock manipulation and fraud charges (FT)

7. Lawson, KDDI to fuse physical and digital to challenge 7-Eleven (Nikkei Asia)

8. SK Hynix to build advanced plant in Indiana in boost to US chip self-sufficiency (FT)

9. Apple’s revenue growth clouded by worries about China slowdown (FT)

10. AI ‘work-free society’ may not be happier, says Banerjee of MIT (Nikkei Asia)

#techAsia is co-ordinated by Nikkei Asia’s Katherine Creel in Tokyo, with assistance from the FT tech desk in London.

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