Hi everyone, this is Lauly, waving hello from drizzly Tokyo, where I am on a short business trip.
It’s been a while since I last visited this vibrant city. That was in spring 2023, shortly after the lifting of Covid quarantine controls. We had a company team-building event that almost every overseas correspondent attended. We took a dinner cruise on a traditional boat in Tokyo Bay and later sang karaoke. Touching down in Haneda Airport yesterday reminded me how joyful it is to see colleagues that you work closely with despite living far away.
I am hosting this week’s #TechAsia from Tokyo just as our special visual project about extreme ultraviolet lithography machines, the world’s most complicated chipmaking equipment, goes online.
The idea for the story actually emerged roughly two years ago from discussion with my colleague Annie Cheng Ting-Fang. We decided we should dissect China’s efforts to build its own ASML, the Dutch company that is the exclusive maker of EUV machines. However, we were sidetracked by other big projects and major news developments, such as the great nanometre chip race, China’s subsea cable drive, Huawei’s mission to boost China’s tech prowess, not to mention the industry-wide earthquake set off by Trump’s tariff war since April.
Looking back, however, all these projects are linked to one another, and together they build a sweeping tale about China’s tech capabilities under the pressure of US restrictions. Our years of accumulated industry knowledge and the latest scoopy details about little-known Chinese players all became part of this latest story.
I am very happy that we finally told this story, with massive help from our industry sources and analyst friends, as well as our editors and designers. This is a very good read that I’m sure you will enjoy.
Separately, the tech supply chain has been waiting anxiously for the final results of the Trump administration’s tariff policy. Without further details, it is impossible for companies to make their next moves.
“The clients have not yet told us what to do or made any order adjustments, as there are so many details not yet disclosed,” Jeff Lin, CEO of Wistron, a maker of Nvidia servers and HP and Dell notebooks, told reporters this week. “The market for AI servers would be less impacted due to the continued robust demand, but it is hard to say for consumer electronics products like personal computers and notebooks.”
The last, greatest challenge
Ever since Chinese tech champion Huawei was blacklisted by the US, China has stepped up efforts to boost its self-sufficiency in tech, particularly in chipmaking equipment, a segment dominated by suppliers from the US, the Netherlands and Japan.
Semiconductor Manufacturing International Corp, China’s top contract chipmaker, is aggressively expanding the output of 14-nanometer and even 7-nm chips in Beijing, with a mission to even build them entirely with Chinese chipmaking equipment, according to this special project by Nikkei Asia’s Cheng Ting-Fang and Lauly Li.
But while China has made progress in almost every chipmaking machine over the past few years, one daunting challenge remains: lithography. This essential step in the manufacturing process determines the ultimate performance of the chip.
The Chinese central government, local governments and top national research institutes are supporting the creation of the country’s own supply chain ecosystem for lithography machines, including the development of critical components, optical parts and light sources. Huawei-linked chipmaking equipment supplier SiCarrier, as well as Shanghai Yuliangsheng and Shanghai Micro Electronics Equipment, are among the most eager to see the effort succeed, with the trio’s ultimate goal being to build the extreme ultraviolet (EUV) lithography machines.
“It could be in five years, it could be in 10 years, it could be in 15 years. We don’t really know,” said Didier Scemama, head of Emea IT hardware research at BofA Global Research. “Is that going to be competitive with what ASML does? [That is] highly unlikely. But it’s good enough for China.”
Nvidia’s aims for China
Nvidia chief Jensen Huang said it would “accelerate the recovery” of its China sales, after a détente between Beijing and Washington allowed the AI chipmaker to resume shipments of a key processor specifically designed for the Chinese market, writes the Financial Times’ Eleanor Olcott.
Huang told a press conference in the Chinese capital on Wednesday the company had not yet received export licenses from Washington to restart shipments of its H20 product, but he expected them “to come through very shortly”.
Nvidia had reported a $4.5bn write-down in its April quarter, as the Trump administration tightened export restrictions on advanced chips and it was left with a huge H20 inventory it could no longer ship.
“Some of what we wrote off is hard to recover, but what we put on reserve will not be scrapped permanently,” said Huang. The company would make a final decision about whether it needed to restart production of its previous Hopper generation, of which the H20 was part, once customer orders came through, he said.
Huang has met President Donald Trump and policymakers this month, as part of intense lobbying in the US and Chinese capitals by the $4tn company. He has warned that America risks forfeiting its leadership in AI to Chinese companies, including Huawei, if it cuts off exports of critical technology.
Beyond tech ties
India, the world’s most populous country, is looking to forge deeper economic ties with Taiwan on top of the tech-oriented island’s growing manufacturing presence in the South Asian subcontinent, Nikkei Asia’s Cheng Ting-Fang and Lauly Li write.
The country sent a ministerial-level delegation to Taipei this week to promote the building of an international financial services hub, the Gujarat International Finance Tech-City. Also nown as GIFT City, the project would, among other things, enable flexibility in financing domestic tech projects.
“We are here to expand the India-Taiwan business relationship, which is very important in this new world order,” said K Rajaraman, the head of the delegation and chair of the International Financial Services Centers Authority (IFSCA), the body that is overseeing the hub’s development and regulation.
“In the Prime Minister [Narendra Modi]’s vision of 2047, one of the most important pillars is technology, and I think Taiwan is the place to be . . . This partnership is completely complementary,” Rajaraman said.
There are already more than 250 Taiwanese tech suppliers invested in India, and “all” of them are expanding their footprints, making India one of the key beneficiaries of the supply chain diversification amid the US-China tensions.
China’s food fight
China’s price war in the food delivery industry continues to spiral out of control, with the three main platforms — Alibaba Group, Meituan and JD.com — competing head-to-head to become the ultimate gateway for consumer spending in the world’s second-largest market, writes Nikkei Asia’s Cissy Zhou.
The battle, ignited by JD, intensified further over the weekend as platforms announced heavier subsidies to woo users, with Alibaba’s Taobao pledging to distribute a limited number of coupons worth up to Rmb188 and Meituan trying to match Taobao’s offer. JD offered 100,000 servings of premium crayfish for Rmb16.18, around $2, each to users across the country.
But with the subsidy war lasting longer than expected, it is set to hamper platforms’ profits for the second quarter as well as the full fiscal year, analysts warn.
Morgan Stanley, for instance, last week lowered its target price for Alibaba’s American depositary receipts (ADR) to $150 from $180. The bank noted that Alibaba invested approximately Rmb10bn ($1.4bn) in food delivery and instant retail services in the April-June quarter, saying the move has put its short-term profitability under pressure.
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