Nvidia, a leading semiconductor company, is reportedly gearing up to launch a new lower-cost artificial intelligence chip specifically designed for the Chinese market. This move comes in response to restrictions on exporting its higher-end AI chips to China. The new AI chips are expected to go into mass production starting in June as part of Nvidia’s latest generation of AI chips, according to a report by Reuters on May 26, citing sources familiar with the matter.
The upcoming AI chips are anticipated to be priced between $6,500 and $8,000, making them more affordable compared to Nvidia’s recently restricted H20 model, which sold for around $10,000 to $12,000. The lower price point is attributed to the new chip's simplified manufacturing requirements and reduced specifications. An Nvidia spokesperson acknowledged the challenges posed by the restrictions, stating, “Until we settle on a new product design and receive approval from the US government, we are effectively foreclosed from China’s $50 billion data center market.”
China has historically been a significant market for Nvidia, accounting for 13% of its sales in the previous financial year. However, export restrictions imposed by the US government in April required Nvidia to obtain export licenses for its H20 chips, with specific mention of concerns related to potential technology diversion to supercomputers in China. As a result, Nvidia's CEO Jensen Huang noted a decline in the company's market share in China from 95% before the restrictions to 50% currently.
This new AI chip marks Nvidia's third attempt to create China-compliant chips, with a focus on meeting current US bandwidth limits of 1.7 terabytes per second. Notably, Nvidia faces competition from Shenzhen-based Huawei, which is also working on its own AI chip, the Ascend 910D.
The announcement of the upcoming AI chip release precedes Nvidia’s quarterly earnings report scheduled for May 28. Analysts are eagerly awaiting the financial results, with expectations of significant year-over-year revenue growth. Despite the challenges posed by the loss of H20 sales to China, analysts remain optimistic about Nvidia's performance.
Nvidia's foray into the Chinese market with a more affordable AI chip reflects the company's strategic response to regulatory hurdles while aiming to maintain its competitiveness in the rapidly evolving AI industry. As the demand for AI technologies continues to grow globally, Nvidia's tailored approach for the Chinese market underscores the importance of adapting to changing regulatory landscapes to sustain market presence and drive innovation.
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