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Nvidia is on track to sell $12 billion worth of artificial intelligence chips in China this year, despite US export controls that have hampered its business in one of the world’s biggest semiconductor markets.
According to analysts’ forecasts, the $3 trillion Silicon Valley group will deliver more than 1 million new H20 chips in the coming months, which are designed to get around US restrictions on selling AI processors to customers. Chinese.
That figure is almost twice what Huawei is expected to sell for its China-made rival Ascend 910B, according to estimates from SemiAnalysis, a chip consultancy.
Nvidia is the latest Silicon Valley company to find itself embroiled in tensions between Washington and Beijing. The Biden administration wants to stop the flow of the world’s most powerful chips to China, fearing Beijing could use them to create more powerful AI systems with military applications.
The resulting shortage of AI chips has hit the ability of Chinese tech groups such as ByteDance, Tencent and Alibaba to compete with US-based OpenAI, Microsoft, Meta and Google in a technology that is reshaping the industry.
Each H20 chip costs between $12,000 and $13,000, suggesting that Nvidia is likely to generate over $12 billion in sales. That would be more than the $10.3 billion in revenue generated by its entire China business — including the sale of graphics chips to PC gamers and other products — in the financial year ending in January 2024.
Nvidia declined to comment on the forecasts. Huawei did not respond to a request for comment.
Since the Biden administration first introduced restrictions on Nvidia’s ability to sell its most powerful AI chips in China in 2022, the US company has warned that its business would suffer as cloud computing providers and AI start-ups there would turn to local alternatives like Huawei. .
“Our business in China is significantly lower than past levels,” said Jensen Huang, Nvidia’s chief executive, during the company’s most recent earnings call in May. “And it’s much more competitive in China now, because of the limitations in our technology. . . However, we continue to do our best to serve customers in the markets there.”
Colette Kress, Nvidia’s chief financial officer, said on the same call that revenue from its data center segment – which includes artificial intelligence chips – in China in the latest quarter was “down significantly from the pre-deployment level of new export control restrictions in October.
By 2021, before the US began imposing export controls, China accounted for more than a quarter of Nvidia’s total revenue. Even if the H20 chip sells as analysts expect, China could be closer to 10 percent of sales this year. But it also reflects the huge growth Nvidia is seeing from US tech companies as they build ever-larger AI systems.
Although Nvidia’s sales in China have been lower ahead of the introduction of the new H20 this spring, analysts at both Morgan Stanley and SemiAnalysis say the chip is now shipping in volume and proving popular with Chinese customers despite its performance dwarfed by the chips Nvidia can sell in the US.
“Buyers report positive feedback on potential competition from H20 clusters,” Morgan Stanley wrote in a research note to clients this week, pointing to “strong China demand.”
SemiAnalysis’ Dylan Patel said that while the H20’s capabilities “on paper” were below those of the Huawei 910B, in practice the Nvidia chip was “slightly ahead”, thanks to superior memory performance.
He estimated that Huawei would sell about 550,000 910B chips during the same period, as the Shenzhen-based company and its manufacturing partners struggle to produce complex processors in high enough volumes to meet demand.
Most Chinese AI companies have also built their own AI models on top of Nvidia’s ecosystem and software. Switching to Huawei’s infrastructure would take time and cost.
The Biden administration introduced restrictions on Nvidia’s ability to sell its most powerful chips, including the A100 and H100, in China in October 2022. It further tightened those controls late last year to also exclude its most powerful chips. Nvidia’s newbies. By November, Nvidia had started marketing a new set of chipsets tailored for China, of which the H20 is the most powerful.
Including chips for PC gamers, data centers and other customers, China represented about 9 percent of Nvidia’s total revenue in the last quarter ending in April, up from 22 percent in the same period a year ago. before. However, overall revenue from China, including Hong Kong, still grew during that time, rising more than 50 percent year-on-year to $2.5 billion.