This is an overview of the topics covered in episode 34 of The Circuit hosted by Ben Bajarin and Jay Goldberg.

Here is an expanded summary report on the key semiconductor stories discussed in the podcast:

Arm IPO

Arm, the leading licensor of processor architectures, successfully completed its initial public offering (IPO) on September 13, 2022. The IPO priced at $51 per share, at the high end of the expected range. On the first day of trading, Arm’s share price rose over 10% to close at $56.28, valuing the company at around $60 billion.

The successful IPO is a positive sign for Arm and validates the company’s business model of licensing IP rather than manufacturing chips directly. Arm licenses its processor designs to customers like Apple, Qualcomm, Samsung, and others who then manufacture the chip designs. As new technologies like AI, 5G, and autonomous driving take hold, demand for Arm-based chips is expected to grow.

The IPO was oversubscribed, indicating strong demand. However, Arm only sold a small portion of its total shares, so trading volume is expected to be limited initially. The first real test will come when Arm reports its first earnings results as a public company within the next couple of months. This will provide more transparency into Arm’s financial performance.

Apple A17 Pro Chip

Apple announced its latest A17 Pro chip which will power the new iPhone 15 Pro models. As is tradition, there was controversy around Apple’s claimed performance gains. The A17 Pro  features an approximately 10% increase in instructions per cycle (IPC) versus the prior A16 chip. This was lower than the gain Apple achieved in a previous chip upgrade.

Some speculate that the lower gain indicates TSMC’s 3nm manufacturing process used for the A16 is not as big of an advancement as expected. However, others note Apple allocated more transistor budget to the chip’s graphics and neural engine portions, not the CPU cores, which impacted the IPC metric. The GPU gains are more significant at up to 40% higher performance and the neural engine doubled in size to 35 TOPs.

Apple’s chip performance and TSMC’s execution on leading-edge nodes will continue to be closely watched and hotly debated with each new generation. The increased focus on specialized processing like graphics and AI workloads is a growing trend in the industry.

Apple-Qualcomm Modem Agreement

Apple and Qualcomm announced a new multiyear agreement for Qualcomm to supply modems for Apple products through 2026, including for the iPhone. This indicates Apple will not have its own internally developed modem ready for iPhones until at least 2027.

Bringing modem design in-house has been an aim for Apple, as it currently relies on Qualcomm as its sole external supplier. However, developing a world-class cellular modem is challenging, as Intel struggled to compete in this market. The new Qualcomm agreement gives Apple continuity of supply as it continues its modem development efforts.

By 2026, 5G networks will be mature and the industry will be gearing up for 6G. Qualcomm is sure to lead 6G research and standard-setting, so Apple may be content to continue relying on Qualcomm’s modems rather than invest in its own 6G modem design.

Huawei’s 7nm SMIC Chip

Huawei introduced its first smartphone powered by a 7nm chip manufactured by China’s SMIC foundry. This is an impressive engineering achievement considering Huawei’s lack of access to leading-edge foundries like TSMC due to US export sanctions. However, it is unclear how much further Huawei and SMIC can advance without access to extreme ultraviolet (EUV) lithography equipment needed for 5nm and beyond.

The Kirin 9000S chip in Huawei’s phone appears to deliver performance approaching 5nm-class designs from competitors. There is debate around whether the strong performance is thanks to SMIC’s process maturity or Huawei’s chip design capabilities. Either way, it demonstrates China’s determination to advance its domestic semiconductor supply chain.

Huawei has invested heavily in chip design talent and may have provided significant assistance to SMIC to optimize the 7nm process for this mobile application processor. SMIC’s yields are also likely still low compared to mature foundries like TSMC or Samsung.

Next Milestones

The next milestones to watch for China’s semiconductor advancement will be 1) if other Chinese companies begin adopting SMIC’s 7nm process for products like AI accelerators, networking chips, and data center processors, and 2) how much further Huawei/SMIC can push with future chip designs manufactured at SMIC on 7nm or more advanced nodes.

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