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China Must Prepare for ‘Long Tech March’ Following US Restrictions on SMIC: State Media

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By Reuters | Updated: 28 September 2020 10:31

China must engage in a new “long march” in the technology sector now that the US has imposed export restrictions on Semiconductor Manufacturing, the country’s largest chip manufacturer, Chinese state-backed tabloid the Global Times wrote on Sunday.

The unnamed author of an op-ed in the paper argues that the US’ dominance of the global semiconductor industry supply chain is a “fundamental threat” to China.

“It now appears that China will need to control all research and production chains of the semiconductor industry, and rid itself of being dependent on the US,” the author wrote.

On Saturday, Reuters reported that the US had sent letters to companies informing them that they must obtain a license to supply SMIC.

The letter stated that SMIC and its subsidiaries “may pose an unacceptable risk of diversion to a military end use.” SMIC has denied any ties to China’s military.

The restrictions against SMIC, and earlier ones against Huawei, the op-ed author argues, illustrate that the US is leading a protracted battle of “high-tech suppression” against China.

Although companies such as Tencent and Beijing ByteDance have made some tech breakthroughs, they are based on US chip technology, the op-ed argues.

“The foundation of the entire industry is still in Americans’ hands. For now at least. China must leap from zero to one to provide solid support for the country’s competition with the US,” the author wrote.

The Global Times is a tabloid published by the People’s Daily, the official newspaper of China’s ruling Communist Party, but does not speak on behalf of the party and government, unlike its parent publication.

© Thomson Reuters 2020

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AMD to Buy Xilinx in All-Stock Deal Valued at $35 Billion

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By Associated Press | Updated: 27 October 2020

AMD is buying Xilinx for $35 billion (roughly Rs. 2,57,900 crores) in an all-stock deal that will combine the two Silicon Valley chip makers.

The deal announced Tuesday puts AMD in a place it wants to be; competing more fiercely with Intel.

Xilinx stockholders will receive 1.7234 shares of AMD stock for each Xilinx share they hold, or approximately $143 (roughly Rs. 10,500) per share of Xilinx stock.

AMD stockholders will own about 74 percent of the combined company, with Xilinx stockholders owning approximately 26 percent.

The transaction will give AMD a strong portfolio of high performance processor technologies, combining CPUs, GPUs, FPGAs, Adaptive SoCs and deep software expertise to enable leadership computing platforms for cloud, edge and end devices.

“Joining together with AMD will help accelerate growth in our data center business and enable us to pursue a broader customer base across more markets,” Xilinx CEO Victor Peng said in a prepared statement.

AMD CEO Dr. Lisa Su will lead the combined company as CEO. Peng will join AMD as president, responsible for the Xilinx business and strategic growth initiatives. At least two Xilinx directors will join the AMD’s board once the transaction is complete.

The deal is expected to close by the end of next year. It still needs approval from shareholders of both companies.

Shares of Xilinx fell nearly 2 percent before the market open on Tuesday, while AMD’s stock rose slightly.

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Intel to Sell NAND Flash Memory Business to SK Hynix for $9 Billion

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By Agence France-Presse | Updated: 20 October 2020

The world’s second-largest chipmaker, South Korea’s SK Hynix, on Tuesday announced a $9 billion (roughly Rs. 66,000 crores) deal to buy Intel’s flash memory chip operation as it seeks to bolster its position against rival behemoth Samsung Electronics.

SK Hynix is already the world number two maker of DRAM chips, used in computers and servers, and the second-largest chipmaker overall.

But it has lagged in the market for flash memory, or NAND chips, which are used in everyday devices such as smartphones and USB storage drives, as well as industrial and medical equipment.

In a regulatory filing, SK Hynix said it will acquire Intel’s “entire NAND business division excluding the Optane division” for KRW 10.3 trillion (roughly Rs. 66,300 crores), with Intel’s factory in Dalian, China, included in the deal.

SK Hynix ranked fourth by global NAND sales in the second quarter this year, according to market researcher Trendforce. Intel was sixth.

Their combination will see SK Hynix leapfrog Japan’s Kioxia and Western Digital of the United States into second place with a market share of more than 23 percent, the Trendforce numbers showed.

The NAND and DRAM markets are both dominated by Samsung Electronics, and global chip demand has boosted profits for the two South Korean firms in recent years.

The pair compete to supply chips to American giants such as Apple, Dell and HP, as well as Chinese companies.

The Intel acquisition would strengthen the NAND operations of SK Hynix, which have “not been as strong as its other businesses”, said Ahn Ki-hyun, vice-president of the Korea Semiconductor Industry Association.

“With the deal, the company has firmly cemented its second-largest position in the global semiconductor industry,” he added.

“In the long run, the deal paves a way for it to become more competitive against Samsung.”
Shares down

The founding company of SK Hynix was originally part of the Hyundai group, one of the family-controlled conglomerates known as chaebol that dominate business in the world’s 12th-largest economy.

In 2012, a multi-billion-dollar merger saw it become part of the SK Group, the third-largest of the chaebols, headed by Chey Tae-won, who is currently married to the daughter of late South Korean president Roh Tae-woo.

SK Hynix has grown to become a major company in its own right and is the second most valuable company listed on Seoul’s KOSPI stock market with a market capitalisation of KRW 62 trillion (roughly Rs. 3,99,220 crores), behind only Samsung Electronics.

But SK Hynix shares were down more than two percent on the announcement in morning trade.

Its CEO Seok-Hee Lee said in a statement that the Intel acquisition will enable the firm to “proactively respond to various needs from customers and optimise our business structure”, and make its NAND flash market position “comparable with what we achieved in DRAM”.

The statement cited Intel CEO Bob Swan saying the deal allows the US firm to focus on “differentiated technology where we can play a bigger role in the success of our customers”.

The acquisition will be paid for in cash, funded through existing reserves and borrowing, SK Hynix said.

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Microsoft to Let Some Employees Work From Home Permanently

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By Agence France Press | Updated: 10 October 2020

Software giant Microsoft will let employees work from home permanently if they choose to, US media reported on Friday, becoming the latest employer to expand work-from-home provisions prompted by the COVID-19 pandemic.

US tech news website The Verge said most Microsoft employees are still at home as the health crisis drags on, and the company doesn’t expect to reopen its US offices until January of next year at the earliest.

But when it does, workers can chose to work from home permanently with their manager’s approval, although they will have to give up their office space.

“The COVID-19 pandemic has challenged all of us to think, live and work in new ways,” human resources head Kathleen Hogan said in a note to employees obtained by The Verge.

“We will offer as much flexibility as possible to support individual work styles, while balancing business needs and ensuring we live our culture.”

In a public blog post later in the day, Hogan said the company views employees spending less than 50 percent of their time working from home as “standard,” but wasn’t abandoning office work entirely.

“We are not committing to having every employee work from anywhere, as we believe there is value in employees being together in the workplace,” Hogan wrote.

The Verge reported some employees won’t be eligible for remote-work arrangements, such as those who work in Microsoft’s labs or train other employees.

In its memo, the company co-founded by Bill Gates said it is possible for its workers to relocate across the United States or perhaps overseas, The Verge said.

Those that relocate may see their salaries change depending on where they go, and while the company will cover expenses for employees’ home offices, it won’t cover relocation expenses.

As of the end of June, Microsoft employed 163,000 people, 96,000 of them in the US, according to a securities filing.

Some major tech firms have already allowed permanent work-from-home arrangements including Facebook, whose boss Mark Zuckerberg said half of the social network’s staff could be permanently working remotely within five to 10 years.

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SMIC Has Had ‘Preliminary Exchanges’ With US Over Export Restrictions, Company Says

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By Reuters | Updated: 5 October 2020

Chinese chipmaker Semiconductor Manufacturing has undertaken “preliminary exchanges” with the US Bureau of Industry and Security regarding export restrictions, the company said on Sunday in a filing.

“The Company is conducting assessments on the relevant impact of such export restrictions on the company’s production and operation activities,” the filing to the Hong Kong Stock Exchange said.

SMIC also said it has been operating in compliance with the relevant laws and regulations of all jurisdictions where it performs its businesses.

The company also advised shareholders and potential investors “to exercise caution when dealing in the securities of the Company.”

In September, Reuters reported that the Bureau of Industry and Security under the Department of Commerce had issued letters informing certain companies they must henceforth obtain a license before continuing to supply goods and services to SMIC.

The letter stated that exports to SMIC “may pose an unacceptable risk of diversion to a military end use” to China.

Such measures recalled those imposed by the Department of Commerce on Huawei, the Shenzhen-based maker of smartphones and networking equipment.

At the time of the reports, SMIC said it had not received any notice from the Department of Commerce regarding the reported restrictions and said it had no relationship with China’s military.

SMIC is China’s largest semiconductor foundry, though it trails behind Taiwan Semiconductor Manufacturing, the global market leader.

Both companies rely heavily on equipment from companies based in the United States or US-allied countries to produce chips for clients.

Earlier this year, SMIC raised $6.6 billion (roughly Rs. 48,262 crores) in a listing in China’s tech-centric STAR Market, aiming to use the cash to kickstart manufacturing into more advanced technology.

© Thomson Reuters 2020

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Arm-Nvidia Deal: Britain Assessing Impact of Sale, Minister Says

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By Reuters | Updated: 22 September 2020

Britain is assessing the impact of the sale of chip designer Arm to US company Nvidia, including commitments to keep its head office and staff in Cambridge, Eastern England, digital minister Caroline Dinenage said.

“We are currently working very hard to understand the full impact of this move and what potential impact it may have on the future, and from there we are able to consider what steps we may wish to take,” she told lawmakers early on Tuesday.

Nvidia, the biggest US chip company by market capitalisation, has agreed to buy Arm from Japan’s SoftBank for $40 billion (roughly Rs. 2,93,572 crores).

Dinenage said ministers would consider commitments made by SoftBank and Nvidia to maintain Arm as a successful British business “incredibly carefully”, and the government had already had discussions with the parties involved.

The decision whether to intervene in the deal would be taken by the secretary of state for digital, culture, media and sport after considering the relevant information, she said.

Arm, the leading tech company in Britain, lost its independence in 2016 when it was sold to SoftBank after the Japanese conglomerate pledged to retain the company’s headquarters in Cambridge, England, and increase jobs.

Nvidia’s CEO Jensen Huang has made similar commitments.

Arm’s energy-efficient architecture underpins processors made by Apple, Samsung, Qualcomm and others, making the technology ubiquitous in smartphones as well as present in a host of other devices.

© Thomson Reuters 2020

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SMIC Asks for US Approval to Continue Supplying Huawei: Report

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By Reuters | Updated: 16 September 2020

China’s Semiconductor Manufacturing International Corp (SMIC) has asked for approval from the United States to continue supplying Huawei, state media outlet Beijing News reported on Tuesday, citing the company.

The company told the newspaper that it had, in accordance with regulations, it applied in the United States to continue supplying Huawei, and reiterated that it will abide by relevant laws and regulations in all countries and regions.

SMIC did not immediately respond to a request for comment from Reuters.

The restrictions imposed by Washington in May on Huawei barring major semiconductor equipment vendors from supplying or service Huawei go into effect on Tuesday.

Companies hoping to continue doing business with the smartphone maker must now first receive a licence from Washington.

Taiwan Semiconductor Manufacturing, the most important manufacturer for Huawei’s high end mobile phone chipsets, said in July it would cease supplying Huawei come the deadline.

Micron, a maker of DRAM memory chips, also said it will no longer supply Huawei. Taiwanese chip designer MediaTek said last month it had applied for US permission to continue supplying Huawei.

Huawei is a major customer for SMIC and generates 20 percent of the foundry’s revenue, according to an analysis from Bernstein research.

The foundry is incapable of producing the most advanced chips in Huawei’s Kirin mobile chipsets, however, and still relies of equipment from US companies who may also cease servicing Huawei as the restrictions take effect.

SMIC itself has fallen under scrutiny from Washington. Earlier this month Reuters reported that the Trump administration is considering placing restrictions on the company similar to those it placed on Huawei, barring US companies from servicing and supplying it.

© Thomson Reuters 2020

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