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Nvidia is poised to sell $12 billion worth of artificial intelligence chips in China this year, despite US export controls that have curtailed its business in one of the world’s biggest semiconductor markets.
The $3 trillion Silicon Valley group will ship more than 1 million of its new H20 chips in the coming months, designed to avoid U.S. restrictions on the sale of AI processors to Chinese customers, analysts forecast.
That figure is nearly twice what Huawei is expected to sell for its Chinese rival Ascend 910B, according to estimates by 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 that Beijing could use them to create more powerful artificial intelligence 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 the technology that is reshaping the industry.
Each H20 chip costs between $12,000 and $13,000, suggesting Nvidia is likely to generate as much as $12 billion in revenue. That would be more than $10.3 billion in revenue from its entire China business — including sales 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 imposed 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 there and AI startups turn to local alternatives such as Huawei. .
“Our business in China is significantly lower than in the past,” Jensen Huang, Nvidia’s CEO, said during the company’s latest earnings call in May. “And it’s much more competitive in China now because of the limitations of our technology. . . However, we continue to try to serve customers in those markets as best we can.”
Colette Kress, Nvidia’s chief financial officer, said on the same call that revenue from its data center segment — which includes AI chips — in China in the latest quarter “declined significantly from levels before new export control restrictions were imposed in October.” “.
As recently as 2021, before the US began implementing export controls, China accounted for more than a quarter of Nvidia’s total revenue. Even if the H20 chip sells as well as analysts expect, China could approach 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 were lower before the launch of the new H20 this spring, analysts at Morgan Stanley and SemiAnalysis say the chip is now shipping in bulk and popular with Chinese customers, despite its lower performance compared to chips that can Nvidia sell in the US.
“Buyers are reporting positive feedback on the potential competitiveness of H20 clusters,” Morgan Stanley wrote in a note to clients this week, pointing to “strong Chinese demand.”
SemiAnalysis’ Dylan Patel said that while the H20’s capabilities were “on paper” inferior to the Huawei 910B’s, in practice the Nvidia chip was “a fair bit ahead” thanks to superior memory performance.
He estimated that Huawei will sell about 550,000 910B chips in the same period as the Shenzhen-based company and its manufacturing partners struggle to produce the complex processors in large enough volumes to meet demand.
Most Chinese AI companies have also built their AI models on Nvidia’s ecosystem and software. Switching to Huawei infrastructure would be time-consuming and expensive.
The Biden administration imposed restrictions on Nvidia’s ability to sell its most powerful chips, including the A100 and H100, to China in October 2022. Late last year, it further tightened those controls to exclude newer Nvidia chips as well. In November, Nvidia began rolling out 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 accounted for about 9 percent of Nvidia’s total sales in the latest quarter ended in April, down from 22 percent in the same period a year earlier. However, total revenue from China, including Hong Kong, continued to grow during that time, rising more than 50 percent year-on-year to $2.5 billion.