Nvidia to Sell $12 Billion Worth AI Chips to China

US chip maker Nvidia is on course to sell $12 billion worth of artificial intelligence chips in China this year despite US export controls that have throttled its business in one of the world’s biggest semiconductor markets.

According to a report in Financial Times, the $3.1 trillion Silicon Valley group will over the coming months deliver more than one million of its new H20 chips, which are designed to fall outside of the US restrictions on selling AI processors to Chinese customers, according to analyst forecasts.

That figure is almost twice as many as Huawei is expected to sell of its China-made rival product, Ascend 910B, according to estimates from SemiAnalysis, a chip consultancy, the report said.

Nvidia is the latest Silicon Valley company to find itself entangled in tensions between Washington and Beijing. The Biden administration wants to stem the flow of the world’s most powerful chips to China, fearing Beijing may 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 upwards of $12 billion in sales. That would be more than the $10.3 billion revenue made from its entire China business – including selling graphics chips to PC gamers and other products – in the financial year ending in January 2024,” the Financial Times said.

Ever 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 turned to local alternatives such as Huawei.

More Competition

During the company’s earnings call in May this year, Nvidia’s Chief Executive Jensen Huang said that their business in China was substantially lower than the levels of the past. And it’s a lot more competitive in China now, because of the limitations on our technology … However, we continue to do our best to serve the customers in the markets there, he said.

As recently as 2021, before the US began imposing export controls, China accounted for more than a quarter of Nvidia’s total revenues. Even if the H20 chip sells as well as analysts expect, China could be closer to 10% of sales this year. But that also reflects the huge growth that Nvidia is seeing from US tech companies as they build out ever-larger AI systems.

Dylan Patel, of SemiAnalysis, said that while the H20′s capabilities “on paper” were below that of Huawei’s 910B, in practice Nvidia’s chip was “a decent bit ahead”, thanks to superior memory performance.

He estimated that Huawei would sell about 550,000 910B chips over the same period, as the Shenzhen-based company and its manufacturing partners struggle to produce the complex processors in high enough volumes to meet demand.

Most Chinese AI companies have also built their AI models on top of Nvidia’s ecosystem and software. Switching over to Huawei’s infrastructure would be time-consuming and costly, the Financial Times report added.