The U.S. Commerce Department recently announced that it would require export licenses for Nvidia’s H20 graphics processing units (GPUs). This move effectively halts the product’s sale to China. Semiconductor analysts say this new regulation is poised to benefit Chinese companies like Huawei.
They are eager to provide domestic alternatives to Nvidia. The introduction of these export controls is expected to increase demand for China’s domestic AI chipmakers. Firms such as Huawei are likely to capitalize on the situation as Beijing searches for its own Nvidia substitute.
Analysts note that the restrictions on Nvidia’s H20 GPUs will compel the U.S. chipmaker to cease exports. This will lead to a quarterly charge of approximately $5.5 billion. There are several local Chinese companies that produce chips to compete with Nvidia,” said Brady Wang, associate director at Counterpoint Research.
Chinese tech powerhouse Huawei and the partially state-owned Cambricon Technologies are among the key players stepping up to the challenge. They design GPUs. Shares of Cambricon have surged over 10% in the past five trading days following news of the latest Nvidia controls.
The stock is up over 400% in the past 12 months. Analysts highlighted Huawei as a notable leader in the race to find a viable alternative to Nvidia’s GPUs. Doug O’Laughlin, an industry analyst at SemiAnalysis, observed that Huawei’s Ascend series is gaining traction in the wake of new restrictions on Nvidia’s advanced GPUs.
However, experts also caution that despite the progress in hardware, there are still significant gaps in software maturity and overall ecosystem readiness.
Impact on Chinese AI chipmakers
Export controls have also impacted China’s ability to produce advanced GPUs on a large scale.
Although Huawei has demonstrated strong capabilities as a chip designer, they face challenges in securing enough supply from their foundries. Companies like TSMC, the world’s largest contract chipmaker, have complied with U.S. trade restrictions. This further complicates the situation for Huawei.
Despite these hurdles, China has not been completely set back. Reports indicate Chinese companies placed orders for at least $16 billion worth of H20 server chips in the first quarter of the year. This suggests stockpiles that could delay immediate impacts from the export restrictions.
These stockpiles provide domestic chipmakers with a crucial window to scale up their capabilities. In the short term, analysts believe the impact of the controls will be limited. However, the long-term effects will depend on the progress of local GPU development.
According to a report by SemiAnalysis, Huawei’s Ascend chips reflect how China has navigated around export controls to access essential foreign tools and sub-components for advanced GPU production. Paul Triolo, partner and senior vice president for China at DGA Group, stated that U.S. controls on GPUs and semiconductor manufacturing equipment have primarily damaged U.S. companies like Nvidia while having a marginal effect on the capability of Chinese firms to advance their AI technology. He emphasized that the restrictions have, in fact, spurred innovation within the Chinese semiconductor industry.
They motivate companies to design out U.S. technology. In conclusion, while the export controls may pose immediate challenges, they have catalyzed a push for self-reliance and innovation in China’s chipmaking sector. The ongoing developments will be crucial in assessing the future landscape of the global semiconductor industry.
Image Credits: Photo by Slejven Djurakovic on Unsplash
April Isaacs is a news contributor for DevX.com She is long-term, self-proclaimed nerd. She loves all things tech and computers and still has her first Dreamcast system. It is lovingly named Joni, after Joni Mitchell.
