UBS: "US Regulations Overcome, China's 'Semiconductor Rise' Should Not Be Underestimated"

"US Regulations Limited on Mature Processes... Market Recovery Expected"

While the United States is trying to curb China's "semiconductor rise" through export controls on semiconductor equipment and other sanctions, analysts at Swiss investment bank UBS have warned against underestimating China's capabilities.

According to the Hong Kong South China Morning Post (SCMP) on the 10th, UBS analysts made these remarks during a company webinar held the previous day.

[Image source=Pixabay]

UBS analysts stated that despite U.S. semiconductor regulations, China is pushing forward with the development of large language models (LLM) and generative AI systems used to train AI models like ChatGPT this year.

Nicholas Gauduis, UBS Head of Asia-Pacific Technology Research, said, "China will strive to advance under U.S. sanctions by utilizing its domestic AI accelerator programs and economically using computing resources. Although U.S. export controls have made it difficult to secure NVIDIA chips used in AI projects, we should not underestimate China's ability to overcome these challenges."

Randy Abrams, UBS Head of Taiwan Research, said, "U.S. regulations are very limited when it comes to mature semiconductor processes (older generation semiconductor processes). China is putting more effort into investing in mature processes. We expect to see steady market recovery in mature process semiconductors such as camera image sensors, microcontrollers, analog chips, and individual semiconductor devices for electric vehicles." The semiconductor industry generally classifies processes below 14 nanometers as advanced processes and those above as mature processes.

Additionally, Abrams forecasted that global semiconductor demand recovery will begin once inventory pressures ease and foundry (semiconductor contract manufacturing) procurement improves.

SCMP also evaluated that China actually overcame the pressure of U.S. export controls last year. Chinese telecommunications equipment maker Huawei was unable to release 5G smartphones since 2020 due to U.S. export restrictions preventing access to the latest chips. However, last year, it surprised the industry by launching 5G smartphones equipped with domestically produced 7-nanometer chips. Chinese state-owned semiconductor company Shanghai Micro Electronics Equipment (SMEE) announced at the end of last year that it had developed 28-nanometer lithography equipment.