China’s AI Accelerator Industry Relies on Foreign HBM Access, Domestic Firms Dependent on Pre-Export Control Stockpiles

China faces significant challenges in ramping up its AI chip production capabilities, notably stemming from limitations in domestic High Bandwidth Memory (HBM) technology rather than just manufacturing capacity issues associated with companies like SMIC.

China’s HBM Production Challenges and Implications of US Export Controls

In an effort to enhance its domestic technological landscape, Beijing is facilitating a shift among local enterprises toward self-reliant tech ecosystems, emphasizing platforms from major players like Huawei and Cambricon. However, a critical concern arises: can China meet the immense demand for HBM? While discussions often center on semiconductor manufacturing constraints, a recent report by SemiAnalysis highlights that the reliance on imported HBM is a crucial factor in the current AI development landscape.

The report indicates that China is grappling with an ‘HBM bottleneck, ’ underscoring its dependence on a stockpile of HBM accumulated prior to the imposition of US export restrictions. Notably, Samsung emerged as a significant supplier, having dispatched around 11.4 million HBM stacks to China, constituting a substantial portion of the nation’s existing inventory. Although there may be avenues to acquire foreign HBM through ‘grey channels, ’ the overall volume of HBM flowing from other countries into China has seen a pronounced decrease.

Image Credits: SemiAnalysis

Huawei has the potential to manufacture 805, 000 units of its Ascend 910C chips, leveraging capabilities from TSMC and SMIC. However, the lack of sufficient HBM to satisfy this production demand illustrates the critical role that memory technologies play in Beijing’s aspirations to assert its presence in the AI computing sector. Without adequate access to domestic HBM, China’s AI chip initiatives may falter, granting a competitive edge to Western enterprises such as NVIDIA and AMD.

HBM Market analysis indicating a price surge up to 10% by 2025 as demand is set to double next year.

Examining China’s advancements in HBM production reveals that companies like CXMT are grappling with substantial limitations surrounding the equipment necessary for transforming standard DRAM into HBM technology. In response, Beijing is advocating for regulatory relaxations in this area. Nonetheless, given the ongoing investments in domestic HBM production and the ambiguities surrounding current sanctions, projections by SemiAnalysis posit that China could transition to HBM3E by 2026, thereby alleviating the HBM bottleneck—provided no additional measures are enforced.

It will be fascinating to observe the trajectory of China’s AI chip sector amid US export controls, especially as local firms intensify efforts to diminish their dependency on Western technologies. However, they are still working to establish a reliable supply chain capable of addressing the burgeoning demands of the Chinese AI market.

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