Chinese chip designers are rushing to chip away Nvidia’s market share at home with their own artificial intelligence (AI)-focused offerings.
The firms — ranging from Huawei and Tencent to smaller and upcoming names — are betting that expanding US chip export curbs would push Nvidia’s existing Chinese clients to embrace alternative suppliers, four people familiar with such discussions said.
That confidence has led Tencent and smaller Chinese AI players to accelerate chip product launches and organise more marketing visits, the people said.
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Nvidia, which became the most valuable US chipmaker this year, currently dominates China’s AI chip market.
The chip designer commands more than 90% of China’s $7-billion market for chips used to process enormous amounts of data to develop AI software.
Nvidia has projected a steep hit to its fourth quarter earnings from China with the US thwarting even the lower computing power AI chip products it designed specifically for Chinese customers.
Nvidia chief Jensen Huang has also cautioned about competition from the firm’s Chinese rivals.
“Our competitors in China, that’s a whole lot of startups … There’s like 50 startups that focus on AI. Huawei is a formidable competitor. Other US competitors, Intel, AMD are all very rigorous competitors. We have no shortage of competition,” Huang told reporters last week in Singapore.
Wide range of products on offer
Huawei is widely seen as making the most progress, with its Ascend 910B being compared to Nvidia’s A100 in terms of computing power though not overall performance.
Tencent, China’s largest social media and gaming firm, which also sells cloud services to external clients, has also been pushing services that use the AI inference chip Zixiao it developed with deep learning startup Enflame.
The firm is touting performance comparable to some Nvidia chips, two of the people said.
One of the people said Tencent is pitching its Zixiao v1 variant as a cheaper substitute for Nvidia’s A10, used for image and speech recognition AI applications. It is also pushing an upcoming v2Pro variant optimised for AI training as capable of replacing Nvidia’s now-blocked L40S, the person said.
Tencent uses Zixiao chips internally and does not sell them directly to external clients. It rents computing power to clients via its cloud services, which also offer Nvidia or AMD chips as options.
Tencent said it does not have plans to develop Zixiao beyond the current version.
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Smaller players join the race
“Tencent designed Zixiao to complement our cloud products and solutions in compliance with laws and regulations. It is only available to clients through Tencent Cloud’s enterprise services,” a company spokesperson said.
Others are pitching direct sales. Tencent-backed Enflame, which has an AI training accelerator chip called Yunsui, and Iluvatar CoreX, which makes the Tiangai graphics processing unit (GPU), have also been promoting upcoming upgrades of their offerings as substitutes for Nvidia’s advanced A100 chip, two of the people said.
State-backed Hygon Information Technology is marketing its newly released GPU, Shensuan No-2, as designed from the outset to be compatible with Nvidia’s chips computing platform CUDA, meaning Nvidia users can switch chips with minimal design changes, a third person said.
Last month, startup Intellifusion announced the DeepEdge10 chip to compete with the upcoming H20 chip that Nvidia designed to be compliant with the latest export curbs.
A fourth person said Intellifusion brought forward its announcement to capitalise on Nvidia’s situation, licensing the chip to clients even though it is yet to be mass produced.
Sources said last month that Nvidia was delaying the launch of the H20 chip due to technical constraints.
Overcoming production challenges key for China
Technology firms in the world’s second-largest economy have started to move towards Nvidia alternatives. Tencent itself has said US curbs sent it looking for domestic sources of AI training chips.
And internet search leader Baidu placed a hefty order for Huawei chips, sources said last month.
Should Chinese chip designers win orders, they could still struggle for production capacity given constraints US curbs put on foundries such as TSMC from working with Chinese firms, Isaiah research vice-president Lucy Chen said.
“The majority of China’s advanced manufacturing processes and advanced packaging capacity are likely to be prioritised for Huawei’s use. These emerging companies need to strategise on how to overcome the constraints posed by US restrictions and production limitations,” she said.
Still, the curbs have created a market opportunity as tech giants pursue a strategy of having more types of AI chips in stock rather than just Nvidia’s, with sustainability of their AI strategy becoming a priority rather than performance, Nori Chiou, investment director at White Oak Capital, said.
“The (United States’) original goal was to slow down China’s AI capabilities but, in fact, related action has boosted China’s self-development capability,” he said.
“Many Chinese cloud giants are working on building their AI ecosystems without US chips due to these restrictions.”
- Reuters, with additional editing by Vishakha Saxena
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