In a rapidly evolving global landscape of technology and geopolitics, Chinese technology firms have accelerated their efforts to stockpile Samsung’s high-bandwidth memory (HBM) chips, essential components in the burgeoning field of artificial intelligence (AI). This move comes in anticipation of looming U.S. export restrictions that could cut off China’s access to these crucial chips. As tensions between the United States and China intensify over technological supremacy, the implications of this stockpiling effort are profound, affecting global markets, innovation trajectories, and the strategic balance of power in AI technology.

HBM chips, particularly those produced by South Korea’s tech giants Samsung and SK Hynix, have become a critical resource for AI development. These chips are designed to provide rapid data access speeds and high efficiency, making them indispensable for AI accelerators and other advanced computing tasks. As AI becomes an increasingly vital sector, the demand for HBM chips has skyrocketed.

In 2023, the global HBM market saw an exponential growth trajectory, driven by AI’s expanding footprint across industries. According to a report by the Yole Group, a France-based research institute, global HBM market revenue could rise to $14 billion in 2024, up from $2.7 billion in 2022. By 2029, the market is projected to reach a staggering $37.7 billion, with a compound annual growth rate of 38% from 2023 to 2029. This explosive growth underscores the critical role that HBM chips play in the future of AI and advanced computing.

China’s Preemptive Stockpiling

In response to potential U.S. sanctions, Chinese technology companies have ramped up their acquisition of HBM chips from Samsung, reportedly accounting for 30% of Samsung’s HBM revenue in the first half of 2024. Major players like Huawei and Baidu, alongside a slew of new Chinese startups, have been at the forefront of this stockpiling effort.

Sources cited by Reuters revealed that Chinese firms have been particularly interested in the HBM2E chip, a generation behind the cutting-edge HBM3 and two generations behind the HBM3E. This preference for the slightly older model highlights the urgency and pragmatism in China’s approach, as it aims to secure as many chips as possible before new export controls are enforced.

However, this race against time also reflects a broader strategy: China is not merely a consumer of foreign technology but is also making strides toward self-sufficiency in HBM chip production. The country plans to produce the HBM2 chip domestically, a less advanced but mature model, which would help mitigate the impact of any potential embargo.

The aggressive stockpiling by Chinese firms has had a ripple effect on the global semiconductor market. According to Taiwan’s DigiTimes, this surge in demand for Samsung’s HBM chips has significantly contributed to the growth of China’s overall chip imports in the first seven months of 2024. Data from Chinese Customs corroborate this trend, showing a 14.5% increase in integrated circuit imports, amounting to 308.2 billion units, valued at $212.1 billion.

However, this uptick in imports has sparked debate among analysts. Li Yali, a columnist at Guancha.cn, argued that the rise in chip imports might be more closely linked to a rebound in global demand for Chinese consumer electronic products, rather than the stockpiling of HBM chips alone. This perspective introduces a nuanced understanding of the current market dynamics, suggesting that while stockpiling is a significant factor, it is not the sole driver of the increase in imports.

U.S. Response: Escalating Tensions

The U.S. government, acutely aware of the strategic importance of HBM chips, has been proactive in its efforts to curtail China’s access to these technologies. In June 2024, Bloomberg reported that Alan Estevez, the head of the U.S. Commerce Department’s Bureau of Industry and Security (BIS), visited the Netherlands and Japan. His mission was clear: to persuade the governments of these key allies to prevent their companies, notably ASML and Tokyo Electron, from selling HBM chip-making equipment to China.

Moreover, the U.S. may resort to the Foreign Direct Product Rule (FDPR), a tool it previously employed to restrict Huawei’s access to advanced semiconductors. This rule would extend U.S. export controls to cover HBM chips manufactured by foreign companies using U.S. technology, such as South Korea’s SK Hynix and Samsung Electronics. A new round of export controls is anticipated by the end of August, which could further complicate China’s efforts to secure a steady supply of these crucial components.

China’s Domestic Efforts: A Push for Self-Sufficiency

In response to these external pressures, China has intensified its efforts to develop and mass-produce HBM chips domestically. A significant milestone in this endeavor was reported by Tom’s Hardware on August 4, 2024, which cited a DigiTimes report claiming that China’s ChangXin Memory Technologies (CXMT) had begun mass production of HBM2 chips. This development marks a critical step in China’s broader strategy to reduce its reliance on foreign semiconductor technology.

While CXMT has yet to publicly disclose details about its HBM chip production, reports suggest that the company developed sample HBM chips in collaboration with Tongfu Microelectronics, a Chinese chip packaging and testing firm. This partnership has reportedly yielded promising results, with clients already being shown prototypes.

Nonetheless, the path to full-scale domestic production is fraught with challenges. Industry experts note that while Chinese companies like JCET Group, Tongfu Microelectronics, and Huatian Technology have the potential to produce HBM chips, they still face significant technical and logistical hurdles. Tongfu Microelectronics, for instance, has made notable strides, including the construction of a new factory in Nantong, Jiangsu province, and the acquisition of advanced packaging equipment. However, the company has acknowledged that the HBM market is still dominated by international chipmakers, indicating that it may take some time before China can fully meet its domestic demand for HBM chips.

Global AI Arms Race

The stockpiling of HBM chips by Chinese firms and the subsequent U.S. response highlight a broader trend: the global race for AI supremacy. AI is increasingly seen as a critical factor in economic and military power, and HBM chips are at the heart of this race. As AI systems grow more complex and demand greater computational power, the need for high-performance memory like HBM will only intensify.

Nvidia, a key player in the AI chip market, is projected to consume 58% of all HBM chips globally in 2024, according to analysts at Fangzheng Securities. Google and AMD follow with 15% and 14% shares, respectively, while Chinese firms are expected to account for 7% of the global demand. The remaining 6% will be distributed among other technology companies.

This distribution underscores the dominance of U.S. companies in the AI sector, but it also highlights the growing ambitions of Chinese firms. By securing a substantial stockpile of HBM chips, China is positioning itself to compete more effectively in the global AI market, even as it faces increasing external pressures.

As the geopolitical landscape continues to shift, the future of HBM chip production and distribution remains uncertain. The ongoing U.S.-China tech rivalry is likely to result in further restrictions and countermeasures, which could disrupt supply chains and alter market dynamics. For China, the immediate challenge lies in ensuring a steady supply of HBM chips while accelerating domestic production capabilities.

The broader implications of this race extend beyond China and the United States. Countries around the world are closely watching these developments, recognizing that access to advanced semiconductors like HBM chips will be a key determinant of future economic and technological leadership. As AI continues to evolve and expand its influence across industries, the importance of securing a reliable supply of these critical components cannot be overstated.

The ongoing efforts by Chinese technology firms to stockpile HBM chips, coupled with the U.S. push to restrict China’s access to these vital components, underscore the high stakes of the global race for technological supremacy. As AI becomes increasingly central to economic and military power, the competition over HBM chips and other advanced semiconductors is set to intensify.

For China, the race is not just about securing the necessary hardware for its AI ambitions but also about achieving technological self-sufficiency in the face of mounting external pressures. As the global market for HBM chips continues to grow, the actions of Chinese and U.S. firms and governments will have far-reaching consequences for the future of AI and global technology leadership.

In this high-stakes environment, the balance of power could shift rapidly, with profound implications for the global economy and the technological landscape. As China and the U.S. continue to vie for dominance in the AI space, the world will be watching closely, aware that the outcome of this race could shape the future of innovation and international relations for years to come.