Nvidia to Launch AI Chip for China Amid U.S. Export Controls

Nvidia, the leading AI chip manufacturer, is developing a version of its new flagship AI chip tailored for the Chinese market, sources familiar with the matter revealed. This strategic move aims to comply with stringent U.S. export controls while maintaining Nvidia's competitive edge in one of the world's largest technology markets.

In March 2024, Nvidia unveiled its groundbreaking “Blackwell” chip series, which is set to revolutionize AI computing with its advanced capabilities. The Blackwell series, particularly the B200 model, boasts a performance that is 30 times faster than its predecessor for specific tasks such as chatbot responses. The B200's architecture combines two silicon squares, significantly enhancing its processing power.

To navigate the U.S. export restrictions imposed in 2023, Nvidia is working on a modified version of the B200, tentatively named the “B20“. This chip is designed to meet the regulatory requirements while still providing robust AI capabilities to Chinese consumers. The B20 is expected to enter mass production later this year, with shipments slated to begin in the second quarter of 2025.

Nvidia has partnered with Inspur, a major distributor in China, to facilitate the launch and distribution of the B20 chip. This collaboration is crucial for Nvidia as it seeks to retain its market share in China amidst increasing competition from domestic players like Huawei and Tencent-backed Enflame.

The U.S. government tightened its export controls on advanced semiconductors to China in 2023 to curb advancements in supercomputing that could benefit China's military. These restrictions have significantly impacted Nvidia's business in China, which accounted for approximately 17% of its revenue in the year ending January 2024, down from 26% two years earlier.

In response, Nvidia has developed three AI chips specifically for the Chinese market, including the H20, which initially faced slow sales but has since gained traction. Nvidia is on track to sell over one million H20 chips in China this year, generating an estimated $12 billion in revenue.

While the U.S. export controls have posed challenges, they have also created opportunities for domestic Chinese companies to expand their presence in the AI processor market. Nvidia's development of the B20 chip is a strategic effort to fend off these challenges and maintain its foothold in China.

Following the announcement of the B20 chip, Nvidia's shares rose by 1.4% to $119.67 in U.S. premarket trading. However, the broader semiconductor market has experienced volatility due to ongoing geopolitical tensions and potential new restrictions from the U.S. government.

Nvidia's development of the B20 chip represents a significant step in navigating the complex landscape of U.S.-China trade relations. By adapting its flagship AI technology to comply with export controls, Nvidia aims to sustain its market presence in China while continuing to innovate in the field of artificial intelligence.

As the geopolitical landscape evolves, Nvidia's ability to adapt and collaborate with local partners like Inspur will be crucial in maintaining its competitive edge. The launch of the B20 chip is not just a response to regulatory challenges but also a testament to Nvidia's commitment to delivering cutting-edge AI solutions to global markets.