Nvidia has defied US export controls and is set to sell $12 billion worth of artificial intelligence (AI) chips in China this year, despite tensions between the US and China. The Silicon Valley giant is expected to deliver over 1 million of its new H20 chips to Chinese customers, surpassing the estimated sales of Huawei’s China-made rival product. The restrictions on selling AI processors to China are part of the Biden administration’s efforts to prevent the flow of powerful chips to China, fearing their military applications. This shortage of AI chips has affected Chinese tech groups, hindering their ability to compete with US-based companies in this rapidly transforming industry.
Each H20 chip costs between $12,000 and $13,000, implying that Nvidia is likely to generate upwards of $12 billion in sales, surpassing the revenue made from its entire China business in the previous financial year. Despite the limitations imposed by the export control restrictions, Nvidia’s H20 chip is proving popular with Chinese customers. Analysts point to “strong China demand” and positive feedback on the chip’s competitiveness.
While the H20 chip’s capabilities may be lower on paper compared to Huawei’s 910B chip, Nvidia’s offering is considered superior in practice, thanks to its superior memory performance. This, coupled with the fact that most Chinese AI companies have built their models on Nvidia’s ecosystem and software, makes it challenging for them to switch to Huawei’s infrastructure. Additionally, Huawei and its manufacturing partners are experiencing difficulties in producing the complex processors in high enough volumes to meet demand.
Since the US introduced restrictions on Nvidia’s ability to sell its most powerful chips to China in October 2022, the company has focused on adapting its chips for the Chinese market. The H20 chip is the most powerful chip in Nvidia’s new set of chips designed specifically for China. Despite the decline in the proportion of Nvidia’s total revenues coming from China, the company has seen overall revenue growth in the region, indicating the resilience of its business in the face of restrictions.
The sale of these AI chips highlights Nvidia’s ability to navigate the complex landscape of US-China tensions while meeting the demands of Chinese customers. The company continues to serve its customers in China despite the competitive landscape and limitations on its technology. Nvidia’s success in the Chinese market underscores its stature as a major player in the global AI industry.
As the AI industry continues to evolve, Nvidia’s innovation and adaptability will be crucial in maintaining its position as a leader in AI technology. By delivering powerful and competitive AI chips to China, Nvidia is not only defying US export controls but also propelling the transformation of multiple industries in China and beyond.
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