Nvidia to make $12bn from AI chips in China this year despite US controls

Paywall-removed version for the poors (including myself) below. You know, in case any berrs still had an ounce of hope after the Nancy news.

https://www.ft.com/content/b76ef55b-21cd-498b-ac16-5660908bb8d2

Nvidia is on course to sell $12bn 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.
The $3tn Silicon Valley group will over the coming months deliver more than 1mn of its new H20 chips, which are designed to fall outside of 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.

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 $12bn in sales. That would be more than the $10.3bn 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.

Nvidia declined to comment on the forecasts. Huawei did not respond to a request for comment.
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.

“Our business in China is substantially lower than the levels of the past,” Jensen Huang, Nvidia’s chief executive, said during the company’s most recent earnings call in May. “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.”
Colette Kress, Nvidia’s finance chief, said on the same call that revenue from its data centre segment — which includes AI chips — in China in the latest quarter was “down significantly from the level prior to the imposition of the new export control restrictions in October”.

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 per cent 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.

Although Nvidia’s sales in China have been lower ahead of the rollout of the new H20 this spring, analysts at both Morgan Stanley and SemiAnalysis say that the chip is now being shipped in volume and is proving popular with Chinese customers, despite its downgraded performance compared with the chips Nvidia can sell in the US.

“Buyers report positive feedback on the potential competitiveness of H20 clusters,” Morgan Stanley wrote in a research note to clients this week, pointing to “strong China demand”.

Positions: leaps. Mainly here to collect berr tears because they’re highly precious