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Nvidia Chip Prices Take a Hit in Duel With China’s Huawei

Sanctions and a directive from Beijing have impacted Nvidia’s sales in China; it has been forced to sell its top chip, the H20, at a price below Huawei’s Ascend 910B

Nvidia is caught in the middle of a sad 'catch me if you can' game with US officials keen to limit China's access to advanced computer chips, according China's state media outlet the Global Times.
A major stumbling block to the success of Nvidia's H20 chip in China has been a directive by Beijing for companies to buy Chinese chips, such as Huawei's Ascend 910B (Reuters).


Chip designer Nvidia has suffered a ‘double whammy’ in China, with sales of its most advanced AI chip impacted by US sanctions and a directive from Beijing for companies to buy locally made chips.

These setbacks have meant sales of its most advanced chip made for the Chinese market have got off to a soft start.

Indeed, Nvidia has been forced to sell its most powerful product, the H20, at a price below a rival chip from local tech giant Huawei, sources have said.


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The flattening prices underscore the challenges Nvidia’s business in China faces because of US sanctions on AI chip exports and heightened competition, casting a cloud over its future in a market that contributed 17% to its revenue for fiscal 2024.

Before the US curbs, Nvidia dominated China’s AI chip market with more than 90% share. However it now faces increasing competition from domestic rivals, notably Huawei.

The growing competitive pressure in China also adds a cautionary note to investors in the US semiconductor designer as its shares extended a stunning rally following Wednesday’s bumper revenue forecast.

Nvidia, which dominates the market for artificial intelligence (AI) chips, introduced three chips tailored for China late last year after US sanctions prevented it from exporting its most advanced semiconductors.


Weak demand

Among those chips, the H20 is the most closely watched as it’s the most powerful Nvidia product sold in China, but the three supply chain sources have said there is an abundant supply of the chip in the market, signalling weak demand.

That has seen H20 chips being sold in some cases at an over 10% discount to Huawei’s Ascend 910B – the most powerful AI chip from a Chinese company – two of the three sources said, who declined to be identified due to the sensitivity of the issue.

Analysts said while Nvidia was trying hard to capture share in a market it cannot afford to lose, the outlook is increasingly uncertain.

China’s global share of the AI industry is projected to exceed 30% in 2035, according to a report by Chinese market research firm CCID Consulting.

“Nvidia is walking a fine line and working on a balancing act between maintaining the Chinese market and navigating US tensions,” said Hebe Chen, a market analyst at IG. “Nvidia is definitely preparing for the worst in the long-term.”

During Nvidia’s first quarter earnings on Wednesday, senior executives warned that the company’s business in China is “substantially” lower than in the past due to the sanctions.

“Our data centre revenue in China is down significantly from the level prior to the imposition of the new export control restrictions in October,” CFO Colette Kress said. “We expect the market in China to remain very competitive going forward.”

Analysts said the H20’s performance will be a major factor for its business in China, while longer-term prospects will depend on how it competes with home-grown tech giant Huawei.

Huawei only began to challenge Nvidia last year and the sources have said the Guangdong-based company will dramatically increase its shipments of its Ascend 910B chip this year, which the sources said outperforms the H20 in some key metrics.

Huawei did not immediately respond to a request for comment.

In the past six months, just five state or state-affiliated buyers have expressed interest in purchasing H20 chips, compared with over a dozen for Huawei’s 910B in the same period, according to Reuters’ checks on available government procurement data, which is not exhaustive and may not reflect the full extent of market demand.


Top chips banned by sanctions

Nvidia’s H800 and A800 are banned in China due to US sanctions aimed at limiting China’s capabilities in becoming a tech powerhouse. Its other advanced product lines, including H100 and B100, have also been banned.

Another major stumbling block to the success of Nvidia’s H20 chip in China has been a directive by Beijing for companies to buy Chinese chips, although two of the three sources said those orders had eased in recent months.

The H20 became widely available in China last month, with deliveries to clients in little over a month, the sources said.

Some of China’s technology giants have already made orders, with Alibaba ordering over 30,000 H20 chips, according to two of the sources. Alibaba did not immediately respond to a request for comment.

Server distributors in China are selling the H20 at prices around 100,000 yuan per card, and the eight-card server for around 1.1 million yuan to 1.3 million yuan per server, the sources said.

In comparison, distributors are selling the Huawei 910B at above 120,000 yuan per card, while its eight-card server equivalent starts at 1.3-1.5 million yuan per server. The sources added that prices for both the H20 and Huawei’s 910B can fluctuate depending on the size of orders placed.

Dylan Patel, founder of research group SemiAnalysis, said close to a million H20 chips will be shipped to China in the second half of 2024 and Nvidia must compete with Huawei on pricing.

“The H20 cost more than an H100 to manufacture due to its higher memory capacity,” Patel said, adding that it is being sold, however, at half the price of the H100, referring to the powerful Nvidia chip banned from export to China in 2022.

“This is a dramatic decrease in margin.”

However, this setback in China comes at a time when Nvidia and other key players in the chip sector are seeing explosive growth because of booming interest in artificial intelligence, which has generated huge enthusiasm from investors.


  • Reuters with additional input and editing by Jim Pollard



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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.


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