NVIDIA Prepares New AI Chip for China Amid Ongoing US Export Controls
One of the biggest beneficiaries of the AI boom, NVIDIA, is working on a version of its new flagship AI chips for the China market, according to a Reuters report. The chip manufacturer is working with Inspur, one of its major distributor partners in China, to launch the tentatively named “B20” chips. The new chips are expected to be launched in the second quarter of 2025. However, NVIDIA has yet to make a public announcement.
The news has helped ease investors’ concerns about the geopolitical tensions and tightening trade restrictions. As a result, NVIDIA's share price has experienced a slight surge, aiding its rebound after last week's sell-off. Global chips stock tumbled last week after rumors surfaced that the White House is considering tougher trade rules to block chipmaking exports to China.
The US government is also debating whether to use the foreign direct product rule (FDPR) to extend its reach of US export controls. Under FDPR, the US can impose export restrictions on products manufactured outside its borders if they incorporate American technology. While these efforts are aimed at protecting national security, they could have a major negative impact on the global AI chips market.
Earlier this year, the AI chip giant introduced its Blackwell chip series which it claims can enable organizations to build and run GenAI applications on trillion-parameter large language models at up to 25x less cost and energy consumption than its predecessor. The new AI chips for China are reportedly going to be a version of the Blackwell series.
NVIDIA, now the world’s third-most valuable company, faces two key challenges in launching an AI chip for the Chinese market. First, they must comply with US regulations on AI chip exports. Second, they need to ensure that Chinese customers do not perceive the product as less powerful or inferior.
China used to contribute a quarter of NVIDIA’s data center revenue, which aligns with its chip business. However, the data center revenue has been down since the US government started regulating sales of NVIDIA AI chips to China since October 20222. China used to account for 26% of NVIDIA’s revenue two years ago but is now down to 17%.
The new curbs are aimed at curtailing China’s access to advanced computing chips. Even with the restrictions, China sells over a million of its H20 AI chips to China, according to SemiAnalysis, an independent research and analysis company specializing in the Semiconductor and AI industries.
Selling AI chips in China will allow NVIDIA to tackle the increasing threat from local Chinese competitors like Huawei and startups like Tencent-backed Enflame. Huawei's Ascend 910B chips present strong competition for NVIDIA. However, Huawei faces mass production challenges with its primary manufacturer, SMIC, remaining cut off from advanced chip-making equipment due to US sanctions.
The White House has shown no sign of letting up on the pressure on AI chip export control. It continues to push semiconductor allies including the Netherlands and Japan to extend existing chip-making export bans to China. However, these countries are resisting, concerned that prolonged restrictions might negatively impact their own semiconductor industries.
The Biden administration is also focusing on limiting Chinese access to AI software, specifically targeting the export of proprietary, closed-source AI models. China’s rapid advances in AI have led U.S. senators to propose allocating at least $32 billion annually by 2026 for non-defense AI systems.
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