Chinese Tech Firms Stockpile Samsung HBM Chips Ahead of Anticipated U.S. Export Curbs

Chinese tech giants Huawei and Baidu, along with startups, are stockpiling Samsung's high-bandwidth memory (HBM) chips in anticipation of upcoming U.S. export restrictions. These actions underscore China's preparation to maintain its technological objectives amid rising trade tensions.

Chinese Tech Giants Stockpile Samsung HBM Chips as U.S. Prepares New Export Restrictions

Three sources have reported that Chinese tech titans, such as Huawei and Baidu, and startups are stockpiling high bandwidth memory (HBM) semiconductors from Samsung Electronics in anticipation of U.S. restrictions on the export of the chips to China.

One of the sources stated that the companies have increased their purchasing of semiconductors capable of artificial intelligence (AI) since early this year, which has contributed to China accounting for approximately 30% of Samsung's HBM chip revenue in the first half of 2024.

The actions demonstrate that China is preparing to maintain its technological objectives in the face of intensifying trade tensions with the United States and other Western nations. Additionally, they illustrate the extent to which the tensions are affecting the global semiconductor supply chain.

Reuters reported last week that U.S. authorities are preparing to introduce an export control package this month that will impose new restrictions on shipments for China's semiconductor industry, citing sources.

Those sources also stated that the program is anticipated to establish parameters for restricting access to high-bandwidth memory chips. The U.S. Department of Commerce declined to comment. Still, it had previously stated that it is constantly evaluating the changing threat environment and updating export controls "to protect U.S. national security and safeguard our technological ecosystem."

Reuters needed help to ascertain the specifics of the proposed HBM restrictions and their potential impact on China.

HBM circuits are essential in developing advanced processors, such as Nvidia's graphics processing units, which can support generative AI work.

HBM chips are manufactured by only three main chipmakers: Samsung and SK Hynix, both based in South Korea, and Micron Technology, headquartered in the United States.

China's Demand for Samsung's HBM2E Chips Surges Amid AI Growth and Limited Advanced Supply

According to sources knowledgeable about China's interest in HBM, the HBM2E model has been the primary focus of semiconductor demand despite being two generations behind the most advanced version, HBM3E. The advanced model is in short supply due to global AI growth.

"Given that its domestic technology development is not yet fully mature, China's demand for Samsung's HBM has become exceptionally high, as other manufacturers’ capacities are already fully booked by American AI companies," said Nori Chiou, investment director at Singapore-based White Oak Capital Partners.

The sources stated that businesses varying from satellite manufacturers to tech firms such as Tencent have been purchasing the stockpiled HBM chips in China despite the difficulty in estimating their volume or value. According to one of the sources, a semiconductor design startup recently acquired HBM chips from Samsung.

In contrast, according to one of the sources, Huawei has been employing Samsung HBM2E semiconductors to develop its sophisticated Ascend AI processor.

Samsung and SK Hynix declined to comment. Hawking, Huawei, Baidu, and Tencent did not respond to inquiries for comment. The sources declined to provide their names due to the subject matter's sensitivity.

U.S. Regulations Threaten China's HBM Production Progress as Samsung Faces Potential Sales Impact

Reuters reported on August 6 that Huawei and memory chipmaker CXMT have made some progress in producing HBM. They are concentrating on developing HBM2 chips, three generations behind the HBM3E model.

However, the new U.S. regulation may affect those endeavors.

According to sources who were informed about the sales, Samsung may be more affected by restrictions on HBM sales to China than its primary competitors, who depend less on the Chinese market.

Micron has refrained from selling its HBM products to China since last year, while SK Hynix, whose main HBM customers include Nvidia, concentrates on producing advanced HBM chips, according to the source.

SK Hynix announced earlier this year that it is adjusting production to increase the output of HBM3E. The company's HBM processors were sold out for the current year and are nearly sold out for 2025.