- Nvidia’s tailored ‘China-specific’ chips gain traction in the Chinese market amidst export control measures.
- Despite Nvidia’s dominance, Chinese chipmakers show decreasing interest due to performance concerns.
- Huawei emerges as a formidable contender, backed by breakthroughs in AI chip technology.
- Huawei’s Ascend 910B chip gains momentum, offering a competitive alternative to Nvidia’s offerings.
- Chinese government subsidies and domestic collaborations bolster local chip supply chains.
- China’s strategic shift towards domestic chip reliance poses long-term challenges against US dominance.
Main AI News:
Amidst China watchers’ assertions regarding Washington’s export control tactics incentivizing Chinese enterprises to bolster self-reliance, Nvidia, a prominent US chipmaker, has caught attention for its consistent rollout of ‘China-specific’ revamped chips, providing relief to Chinese chipmakers grappling with business constraints.
In the wake of export control measures, Nvidia witnessed a surge in its 2023 revenue and stock prices. During a visit to China in January 2024, Nvidia’s CEO Jensen Huang hailed 2023 as a ‘dream year’ for the company. Commanding approximately 90 percent of China’s chip market, particularly in artificial intelligence (AI) chips, Nvidia seems to have solidified its position.
However, as per TrendForce, a Taiwan-based technology consultancy, Nvidia’s revenue from China is anticipated to dip below 50 percent by 2030. In its annual report, Nvidia pinpointed China’s tech behemoth, Huawei Technologies, as its foremost competitor.
Despite a heavy reliance on Nvidia’s cutting-edge chips, Chinese chipmakers are exhibiting waning interest in the company. Market leaders in China have expressed mounting concerns about increasing their stock from Nvidia, citing significant downgrades in chip performance, leading to cost inefficiencies.
A growing cohort of Chinese chipmakers deems a sustained, long-term partnership with Nvidia unfeasible, prompting them to explore domestic alternatives. In their quest for enduring stability, Chinese chipmakers appear inclined to weather short-term challenges, with Huawei emerging as a notable contender.
Huawei’s steadfast commitment to promoting Chinese innovations has instilled long-term trust in domestic innovative capabilities. Its breakthrough success with a 7nm AI-powered chip has reinstated confidence in China’s chip market amid US sanctions. Huawei’s focus on displacing Nvidia’s position in the domestic market aims to reduce reliance on foreign advanced graphic processing units, which are crucial for AI training, gaming, and electric vehicles.
Despite being in the advanced development stage, Huawei’s Ascend 910B chip has already garnered traction in the market and is expected to deliver 80 percent efficiency compared to Nvidia’s H100 and H800 chips. It emerges as a favored alternative to Nvidia’s downgraded chips for Chinese chipmakers.
Following the 2023 revision of export controls, demand for Ascend 910B surged, and Chinese chipmakers were willing to pay a premium. Baidu, a significant player in AI, swiftly expressed interest in Huawei’s chips. Even prior to the imposition of proposed rules by the US Department of Commerce and the revelation of Ascend 910B chip specifications, Huawei collaborated with Baidu to advance its large-scale AI modeling infrastructure.
This collaboration aims to establish an open ecosystem utilizing Huawei’s HiAI platform and Baidu Brain — a compilation of the company’s AI assets and services. Leveraging Huawei’s neural network processing unit and Baidu’s PaddlePaddle deep learning framework, the collaboration seeks to empower AI developers.
While continuing substantial orders with Nvidia, Baidu stands among the first to procure Huawei’s Ascend 910B chips. Other Chinese AI companies and telecom operators have initiated testing of intelligent cluster modeling based on Huawei’s Ascend 910B.
Huawei is reportedly developing a proprietary software platform for companies to conduct AI modeling — an area where Chinese AI giants traditionally relied on US platforms. The efficiency of Huawei’s proprietary software platform in enabling Huawei to replace US platform providers remains to be seen.
To reduce reliance on foreign suppliers, the Chinese government is subsidizing chipmakers that can source content locally. Collaborations among domestic chipmakers, designers, and suppliers are becoming more prevalent. Semiconductor Manufacturing International Corporation (SMIC), China’s domestic giant in the foundry business, leads the way by prioritizing local suppliers. Empyrean Technology, with its indigenous electronic design automation software capable of supporting advanced node chips, recorded a year-on-year increase of around 50 percent in 2023 compared to 2022.
In December 2023, the Shanghai Micro Electronics Equipment Group was rumored to have achieved complete independence in producing SSA/800-10W, a lithography scanner capable of producing 28nm equipment. Zhejiang Wazam New Materials Co. Ltd., a leading supplier of film used to insulate semiconductor chips, is concluding its final trials, enabling Chinese chipmakers to source film domestically. Whether these developments prove effective in producing equipment at scale remains to be seen.
Experts attribute Nvidia’s strong position in China’s chip market to the failure of the chip ban. Yet, it is less emphasized that before the chip ban escalated, Chinese companies had already begun strategically aligning themselves through cooperation and domestication of supply chains.
Amidst escalating conflicts between the United States and China in the technology sector, domestic giants anticipated challenges and proactively developed domestic synergies, which are now visible. While reducing reliance on Nvidia’s advanced chips for the Chinese market may pose short-run challenges, Huawei’s resurgence, its successful business practices despite US hostilities, and increasing synergies with domestic AI companies highlight that Chinese chipmakers are ready to trade short-term pain for long-term stability.
In 2024, chip companies in China have different priorities compared to two years ago, viewing the domestic supply chain as more reliable. The lingering question is whether the domestication of the semiconductor supply chain can remain reliable or effective in the long run, aiding China in its catch-up game against the United States. Another concern is whether domestic reliance on outdated equipment technology will keep China generations behind the United States and Japan in advanced manufacturing technology — the target of Washington’s export sanctions.
Conclusion:
The rise of domestic AI innovators like Huawei signifies a paradigm shift in China’s chip market dynamics. While Nvidia maintains a stronghold, diminishing interest from Chinese chipmakers and Huawei’s ascension underscore a growing trend towards self-sufficiency. This strategic pivot, supported by government initiatives, may reshape the global semiconductor landscape, challenging US dominance and fostering a more competitive market environment.
