Nvidia's special version of chips is no longer available in China.
According to industry chain sources, Nvidia is developing the "latest improved" AI chip for China, and the three chips are all based on Nvidia H100 to comply with the latest technology export control policy of the United States. But China's largest cloud computing companies, including Alibaba and Tencent, have told Nvidia that the number of chips they order this year will be much lower than originally planned.
Why can't the castrated version of the chip be sold?
Nvidia's reluctance to launch castrated chips stems from a new ban issued by the U.S. government on October 17, 2023, which further restricts the export of Nvidia's high-performance AI chips, which applies to "products with a comprehensive performance of 4,800 or more and designed or sold for data centers." Nvidia also announced at the time that it would immediately stop shipping A100, A800, H100, H800 and L40S products.
Subsequently, Nvidia developed the latest improved versions of AI chips for China, including the HGX H20, L20 PCle and L2 PCle, but from today's signals, in the past few months, Chinese technology companies including Alibaba Tencent Baidu Byte have gradually adjusted their supply chains, shifting some advanced semiconductor orders to local companies, and relying more on internally developed chips and less reliance on external chip suppliers.
Compared with American chips, China's most advanced chips have been able to meet the requirements of prediction through trained AI models and undertake some less complex training tasks. Nvidia CEO Jensen Huang acknowledged that Huawei is a "strong competitor" to Nvidia in China. According to US media, the restrictions imposed on Nvidia have given Huawei the opportunity to conquer the Chinese market.
And this kind of repeated sanctions, special supply for the Chinese market, in fact, is stimulating the mood of market manufacturers, so that Chinese technology companies feel the crisis, some people in the industry frankly said: "The United States has shown a model of 'not keeping its word', for example, the new alternative version of Chinese enterprise buyers has completed the matching, and the United States has an executive order down and is out of stock, so who is responsible?"
Secondly, this special version of the chip has also made Chinese manufacturers feel dissatisfied. Some people in the industry pointed out sharply: What is the "special version for China"? This is spitting in the face while stuck in the neck. You can not sell it, but you can't perfunctory me with a low-quality product and say that it was made for me.
NVIDIA's vicious cycle may have begun
Now Nvidia is restricted, resulting in high-end chips cannot be sold, which has formed a vicious circle - Nvidia's revenue in the Chinese market accounts for up to 47% of its overall global market revenue, which has a very big impact. In China's $7 billion AI chip market, Nvidia occupies more than 90% of the market.
Nvidia is likely to fall into a kind of self-lockdown dilemma, with a large amount of chip inventory in hand and no huge market demand to digest production capacity.
From an economic point of view, when technology is forcibly separated from a huge market, and other markets are simply unable to fill this huge gap, the growth of companies with technology will inevitably be hindered, profits will fall sharply, and then they may face a series of practical problems such as layoffs and business contraction. The global layoffs of chip companies, including Qualcomm, have verified this trend.
In the period of stock and market decline, the upward trend of technological innovation began to be blocked, and some business lines faced the problem of life and death, and human and technological R&D resources could only be reserved for the most needed projects in the shrinking market.
On NVIDIA, if NVIDIA's cutting-edge chips are not digested by the huge market of China, the investment in cutting-edge chips may be reduced, because the market demand is suppressed, the driving force of product consumption is extinguished, profits are declining, the capital chain is affected, and there is a lack of sufficient motivation to continue to develop higher performance and more advanced products, and the momentum of technological innovation will gradually slow down, from the upward period to the flat period. This enters a vicious circle.
This is the problem that Nvidia needs to face: the castrated version of the core cannot be sold, in the short term, it is the loss of profits, and in the long run, it is the huge market concession, once other players in the market grow up, Nvidia will be difficult to regain lost ground. What's more fatal is that the loss of the market will interrupt the positive cycle of profits and R&D investment, which is fatal for a technology company, which is perhaps the most anxious problem for Nvidia.
AI chips are a gold mine to be mined, and China may have a strong rival to Nvidia
At present, the development of domestic AI large models requires a large number of high-computing AI chips, which makes domestic AI chip manufacturers continue to make efforts, and their products cover the needs of AI inference and AI training, including chips based on general GPU architecture, chips based on ASIC architecture, and brain-like architecture chips, which have shown a diversified development trend.
In general, the current gap period is an excellent period for Chinese chip players, the situation of domestic technology-based chip companies and Nvidia have just reversed, a large number of domestic AI companies have chip demand, when there is enough market demand to fill, there is naturally enough motivation to invest in research and development, once the performance is improved to a certain height, a large number of orders will pour in, to the market to pull technology research and development, forming a positive virtuous circle. Similar to the AI chip released by Huawei, the Ascend 910 series, in some performance, it is close to NVIDIA's most advanced A100 series.
As a result, Huang said he still wants to supply high-end processors to China, and the company is working with Chinese customers to obtain export licenses.
TrendForce believes that Chinese cloud computing companies currently purchase about 80% of high-end chips from NVIDIA, and this proportion is expected to drop to 50%-60% in the next five years.
In fact, this forecast may be overly optimistic, with a high probability of falling below 50% within three years, according to the trend. After the development of AI large models this year, many large manufacturers and research institutions are rolling large models, AI chips are the guarantee of computing power, and the dependence of large models on AI chips is like the dependence of fish on water, NVIDIA's biggest problem is that its reputation has been damaged, and you have ordered your products, as a supplier, there is no room for maneuver, you can only "only ban from", then who will dare to buy things from you.
The industry estimates that there is a high probability that it will fall by one-third, because under normal circumstances, the revenue and profit of the Chinese market account for at least 30% of NVIDIA, and the proportion will increase due to the expansion of the Chinese market in the future. NVIDIA's castrated version of AI chips no longer has an advantage over some local AI chips in China, which may make domestic manufacturers such as Cambrian, Jingjiawei, Haiguang Information, and Huawei absorb a large number of orders, so as to obtain a lot of profits and promote a positive cycle of research and development.
Technological innovation is driven by market demand, the huge demand can not be met means that it is a huge gold mine with mining, this gold mine to be mined will inevitably absorb the market's technology and industrial innovation and the agglomeration of the industrial chain, forming a substitution effect, as the Chinese market becomes huge, among domestic manufacturers, or there is a strong opponent against NVIDIA, it may only be a matter of time, we keep looking forward to it.