Daily: Trump proposes chip tariffs; Questions around DeepSeek's chips; SK Hynix and Samsung stock slides
7.5 min read.
Housekeeping: This newsletter is a little longer than usual as I’m returning from the Lunar New Year break. Plus, there is a lot to catch up on.
There was a big influx of subscribers from the previous article on DeepSeek, so if that is you, welcome. Chip Briefing is a daily curation of semiconductor-related news items and a weekly one of opinions and analysis. Plus, some of my own commentary too. If you find this newsletter helpful, please share it with friends and colleagues. I’d really appreciate it.
Separately, there has been a lot going on with DeepSeek and other AI stuff (OpenAI x SoftBank, Meta/Microsoft investments etc.), but there’s such a flood of that already, so I’ll stick to semiconductors and the semiconductor angle to AI. Chip Briefing, as its name suggests, will be brief and about chips.
Thanks for reading.
Highlights
On the chip export controls debate, Washington seems to double down on more restrictions. US officials suggested stronger restrictions on chips and an investigation into Singapore as a possible channel that DeepSeek may have used to circumvent chip controls. Plus, earlier in the week, Trump said he would announce new tariffs on semiconductors, suggesting numbers from 25-100%.
Like I discussed last time, there’s a lot of speculation and rumour around whether the chip controls worked re: DeepSeek. My general take is that the US-China tech competition would be even fiercer in the counterfactual (where there are no export restrictions).
On DeepSeek more specifically, some are saying that DeepSeek had tens of thousands of H100 GPUs. Others are saying that DeepSeek more or less complied with the restrictions as they developed. There doesn’t seem to be much evidence to the former, so I’m inclined to think the latter, until more evidence can be found.
SK Hynix and Samsung stocks tumble ~11% and ~4% respectively, as South Korea’s markets respond to DeepSeek. The markets were closed for the Lunar New Year break and opened today, for the first time this week.
Samsung’s losses are also driven by a forecast for limited earnings growth, sluggish demand, and increased competition.
Speaking of increased competition, China’s leading DRAM producer, CXMT has made more technological advances in the DDR5 memory chips.
I still don’t think the rapid growth in China’s memory chip space is getting enough attention in the West. A reader recently pointed out that the DeepSeek news in my last briefing was overshadowing the YMTC update.
1. Policy and Geopolitics
1.1
WaPo (01/28): Trump says new tariffs on computer chips, semiconductors are coming soon
President Donald Trump said he would soon announce new tariffs on computer chips, repeating a campaign promise that if enacted could have deep impacts on the global tech industry and the geopolitical battle over AI with China.
“They’re not going to want to pay a 25, 50 or even 100 percent tax,” Trump said. “If you want to stop paying the taxes or the tariffs, you have to build your plant right here in America.”
1.2
WSJ (01/30): Nvidia Chip Flow to China Should be Throttled Post-DeepSeek, U.S. Lawmakers Say
Nvidia chips should be hit with tighter U.S. export controls following revelations the company’s technology was used by Chinese artificial intelligence startup DeepSeek, the bipartisan leaders of an influential congressional committee said.
President Trump’s administration should consider putting export controls on Nvidia’s H20 chip, which DeepSeek reportedly used extensively.
The two also called for a potential crackdown on chip shipments to Singapore, saying the technology is apparently being diverted elsewhere.
1.3
Bloomberg (01/31): US Probing If DeepSeek Got Nvidia Chips From Firms in Singapore
US officials are probing whether Chinese AI startup DeepSeek bought advanced Nvidia Corp. semiconductors through third parties in Singapore, circumventing US restrictions on sales of chips used for artificial intelligence tasks, people familiar with the matter said.
1.4
Bloomberg (01/30): Lutnick Pledges Chips Act Review, Demurs on Honoring Contracts
President Donald Trump’s pick to lead the agency in charge of a $52 billion semiconductor subsidy program declined to give it unqualified support, raising questions about the disbursement of funds to companies like Intel Corp. and Taiwan Semiconductor Manufacturing Co.
“I can’t say that I can honor something I haven’t read,” Howard Lutnick, Trump’s nominee for commerce secretary, said of the binding Chips Act awards in a confirmation hearing Wednesday.
Still, Lutnick signaled a commitment to the program overall. He told senators that the Chips Act is an “excellent down payment” and repeatedly emphasized the importance of revitalizing American semiconductor manufacturing.
1.5
Bloomberg (01/29): Arm China Picks New CEO to Navigate Chip Geopolitics in Trump Era
Arm China plans to tap Chen Feng, a former executive at Fuzhou, Fujian-based chipmaker Rockchip Electronics Co., according to people familiar with the matter.
Liu Renchen and Eric Chen will resign their posts as co-CEOs, the people said. Fang Fenglei, founder of joint venture partner Hopu Investment Management, is Arm China’s chairman, one of the people said.
2. Economy, Finance, and Business
2.1
Bloomberg (01/31): SK Hynix Shares Slide on DeepSeek Worry as Korea Market Reopens
Shares of SK Hynix Inc., a key supplier to Nvidia Corp., tumbled more than 11% in post-holiday catchup trading after Chinese startup DeepSeek shocked the AI world.
Shares of Samsung Electronics slid as much as 3.7% Friday in Seoul, stung by the DeepSeek news as well as its report of smaller-than-expected profit for the December quarter.
Meanwhile, Korean internet companies that could potentially benefit from cheaper AI-related costs saw a boost. Shares of Kakao Corp. climbed as much as 9.1% while Naver Corp. gained 7.1%.
2.2
WSJ (01/30): Samsung Expects Limited Earnings Growth Amid Chip Woes
Samsung Electronics forecast limited earnings growth in the current quarter after better-than-expected net profit for the fourth quarter, as profitability at its core semiconductor business continued to weaken.
The world’s largest maker of memory chips and smartphones has said it faces challenges from sluggish demand for conventional chips and information-technology devices amid intensified market competition.
Net profit for the October-December period rose 22% from a year earlier to 7.754 trillion won, equivalent to $5.36 billion, beating a FactSet-compiled consensus estimate of 6.353 trillion won. Profit, however, fell 23% from the previous quarter, the company said.
2.3
Bloomberg (01/31): Intel’s Push to Revive Sales Pays Off in Fourth Quarter Results
Intel Corp. reported better-than-projected fourth-quarter revenue, while the semiconductor maker cautioned that its push to become more competitive is still a work in progress.
While the $14.3 billion in fourth-quarter sales beat estimates, part of that was from customers in Asia ordering ahead of possible US tariffs, executives said. First-quarter sales will fall short of analysts’ projections because of weaker demand and market share loss to rivals.
2.4
WSJ (01/30): AI Needs a Lot of Computing Power. Is a Market for ‘Compute’ the Next Big Thing?
Compute Exchange, a startup that announced its launch on Wednesday, plans to conduct auctions where data-center operators and cloud providers can sell their computing capacity—or “compute” in tech-industry jargon. Buyers such as AI companies can use the auctions to buy chunks of processing time for arrays of chips, such as Nvidia’s H100 and H200 systems.
The trading platform’s co-founder and best-known investor is Donald Wilson Jr., founder of high-frequency trading firm DRW Holdings and a veteran Chicago trader.
Skeptics also question whether computing power can truly be considered a commodity. An oil refiner might buy crude from Saudi Arabia, West Africa or the U.S. But compute comes in a diverse array of underlying chips and configurations, without a commonly agreed upon standard.
2.5
WSJ (01/29): ASML Shares Surge After Orders Beat Forecasts as AI Chip Demand Remains Strong
ASML Holding shares jumped after orders surpassed analysts’ expectations for the fourth quarter as chip makers scrambled to get their hands on machinery to produce increasingly sophisticated semiconductors amid booming demand for artificial intelligence.
The Dutch supplier of semiconductor-making equipment booked 7.09 billion euros ($7.40 billion) in orders for the quarter, down from 9.19 billion euros a year earlier, but above analysts’ forecast of 3.99 billion euros, according to consensus estimates by Visible Alpha.
The company said that 3 billion euros in orders were for its high-end extreme ultraviolet lithography systems that are used to print the most intricate layers on chips.
2.6
Reuters (01/31): KLA forecasts upbeat third quarter on strong demand for chipmaking tools
Chipmaking equipment supplier KLA Corp forecast its third-quarter revenue and profit above Wall Street estimates on Thursday, betting on robust demand for high-end chips that support artificial intelligence workload.
Shares of the Milpitas, California-based company rose 3.9% in extended trading.
2.7
Reuters (01/30): Western Digital expects third-quarter revenue below estimates on weak demand
Data storage products maker Western Digital Corp forecast third-quarter revenue below Wall Street estimates on Wednesday, as it expects decreased demand from cloud and corporate customers.
High borrowing costs and economic uncertainty have forced businesses to reduce investments, significantly impacting demand for memory chips after a pandemic-driven boom, hurting companies such as Western Digital.
2.8
Bloomberg (01/31): Supply Chain Linchpin JSR Sees DeepSeek Boosting Chip Sales
JSR Corp., the leading supplier of photoresists used to make semiconductors, sees the arrival of DeepSeek’s low-cost artificial intelligence model as a boon to the industry.
The Japanese company supplies photoresists for ASML Holding NV’s extreme ultraviolet light lithography machines, now deemed essential for making the most advanced chips, but its materials are used in other parts of the semiconductor supply chain.
3. Technology
3.1
Bloomberg (01/31): Samsung Gets Nvidia’s Nod to Supply Less Advanced AI Memory
Samsung Electronics Co. has obtained approval to supply its high-bandwidth memory chips to Nvidia Corp., according to people familiar with the matter.
The South Korean chipmaker’s 8-layer HBM3E — less advanced than cutting-edge 12-layer parts — was cleared by Nvidia in December, said the people who asked not to be named as the information is private. Those chips are going into Nvidia’s less powerful AI processors tailored for the Chinese market, one of the people said.
3.2
SCMP (01/30): China’s top memory chip maker CXMT narrows tech gap with leaders Samsung, Hynix, Micron
ChangXin Memory Technologies (CXMT), China’s leading producer of dynamic random access memory (DRAM) chips, has advanced its manufacturing technology to 16 nanometres, narrowing the gap with industry giants Samsung Electronics, SK Hynix and Micron Technology.
The new 16-gigabit (Gb) chip employs DDR5 technology, which is expected to dominate the DRAM market through 2027.
3.3
Bloomberg (01/30): China Years Behind ASML’s Chipmaking Machines, CFO Dassen Says
It will take China years to catch up with ASML Holding NV’s chipmaking technology, according to a senior executive at the Dutch firm.