Samsung Cuts 7nm Chip Supply to China

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Recent developments have cast a long shadow over the semiconductor landscape, particularly affecting the intricate web of global supply chains tied to Chinese customersThe United States has decisively tightened restrictions on the provision of advanced 7nm chips, significantly impacting outsourcing factories, notably Taiwan's TSMC, a frontrunner in the semiconductor foundry industryThis new wave of regulations stems from a series of stringent measures aimed at curbing technology transfer and altering the dynamics of international trade in sensitive tech sectors.

On November 12, reports surfaced indicating that TSMC has no choice but to suspend all supplies of 7nm and newer technology chips to AI and GPU clients in mainland China, a direct consequence of compliance with U.S. sanctionsTSMC, with its intricate ties to U.S. businesses, finds itself in a dilemma where defiance is not an optionAs the leading foundry in the semiconductor industry, this pause in service reveals the drastic measures large corporations must take in light of increasingly stringent government policiesFollowing suit, rumors emerged that another semiconductor giant, Samsung, is also affected by these regulations, reportedly notifying its customers in mainland China that it cannot provide similar wafer foundry services anymore.

Despite these alarming reports, a Samsung spokesperson has refrained from commenting on the market rumors.

There are speculations within the industry that Intel, the U.S.-based semiconductor manufacturer, could also align itself with these new guidelinesSuch moves are seen as almost inevitable in the current geopolitical climate, potentially stalling China's ambitions to develop its own advanced AI chips.

With reports indicating that South Korea’s Samsung semiconductor division is experiencing substantial operational challenges, the company has opted for significant production cuts to cope with dwindling orders

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Reports from local media highlight that its P2 and P3 factories in Pyeongtaek have quietly shut down over 30% of their production lines for 4nm, 5nm, and 7nm chipsThe management is reportedly exercising intense scrutiny on customer orders, with plans to possibly incrementally halt additional operations, to the point of closing down about 50% of its facilities by the year's endSuch extensive production reductions underline Samsung's helplessness amidst the complexities of today’s semiconductor market dynamics, as well as the broader challenges of supply and demand imbalances globally.

Industry analysts, leveraging detailed data and comprehensive market research, have projected that Samsung's foundry business was severely hit in the third quarter, suffering losses amounting to approximately 1 trillion Korean wonThis staggering loss hangs over the company like the Sword of Damocles, compelling Samsung to adopt drastic measures, such as shutting down production lines, as a survival strategy motivated by critical cost-cutting imperatives.

If these accounts are accurate, it suggests that the technological gap between Samsung and TSMC in the domain of logic chip foundry services could be wideningYet, on a more optimistic note, Samsung appears to be making headway with its 2nm technology, targeting mass production by 2025. The company has inked contracts with Japan’s Preferred Networks for AI chips and is actively developing the 2nm Exynos chips.

The halt in supply of 7nm chips is poised to create a significant roadblock for China's domestic AI chip development in the short termVarious enterprises focused on AI chip development had initially strategized to leverage advanced process technologies for iterative product improvementsNow, however, they face the disheartening need to readjust their research and development timelines and may have to rely on imports of AI chips from American firms like NVIDIA or AMD due to the stringent U.S. regulations

Samsung Cuts 7nm Chip Supply to China

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