[Insights] China Advances In-House AI Chip Development Despite U.S. Controls

On October 17th, the U.S. Department of Commerce announced an expansion of export control, tightening further restrictions. In addition to the previously restricted products like NVIDIA A100, H100, and AMD MI200 series, the updated measures now include a broader range, encompassing NVIDA A800, H800, L40S, L40, L42, AMD MI300 series, Intel Gaudi 2/3, and more, hindering their import into China. This move is expected to hasten the adoption of domestically developed chips by Chinese communications service providers (CSPs).

TrendForce’s Insights:

1. Chinese CSPs Strategically Invest in Both In-House Chip Development and Related Companies

In terms of the in-house chip development strategy of Chinese CSPs, Baidu announced the completion of tape out for the first generation Kunlun Chip in 2019, utilizing the XPU. It entered mass production in early 2020, with the second generation in production by 2021, boasting a 2-3 times performance improvement. The third generation is expected to be released in 2024. Aside from independent R&D, Baidu has invested in related companies like Nebula-Matrix, Phytium, Smartnvy, and. In March 2021, Baidu also established Kunlunxin through the split of its AI chip business.

Alibaba, in April 2018, fully acquired Chinese CPU IP supplier C-Sky and established T-head semiconductor in September of the same year. Their first self-developed chip, Hanguang 800, was launched in September 2020. Alibaba also invested in Chinese memory giant CXMT, AI IC design companies Vastaitech, Cambricon and others.

Tencent initially adopted an investment strategy, investing in Chinese AI chip company Enflame Tech in 2018. In 2020, it established Tencent Cloud and Smart Industries Group(CSIG), focusing on IC design and R&D. In November 2021, Tencent introduced AI inference chip Zixiao, utilizing 2.5D packaging for image and video processing, natural language processing, and search recommendation.

Huawei’s Hisilicon unveiled Ascend 910 in August 2019, accompanied by the AI open-source computing framework MindSpore. However, due to being included in the U.S. entity list, Ascend 910 faced production restrictions. In August 2023, iFLYTEK, a Chinese tech company, jointly introduced the “StarDesk AI Workstation” with Huawei, featuring the new AI chip Ascend 910B. This is likely manufactured using SMIC’s N+2 process, signifying Huawei’s return to self-developed AI chips.

2. Some Chinese Companies Turn to Purchasing Huawei’s Ascend 910B, Yet It Lags Behind A800

Huawei’s AI chips are not solely for internal use but are also sold to other Chinese companies. Baidu reportedly ordered 1,600 Ascend 910B chips from Huawei in August, valued at approximately 450 million RMB, to be used in 200 Baidu data center servers. The delivery is expected to be completed by the end of 2023, with over 60% of orders delivered as of October. This indicates Huawei’s capability to sell AI chips to other Chinese companies.

Huawei’s Ascend 910B, expected to be released in the second half of 2024, boasts hardware figures comparable to NVIDIA A800. According to tests conducted by Chinese companies, its performance is around 80% of A800. However, in terms of software ecosystem, Huawei still faces a significant gap compared to NVIDIA.

Overall, using Ascend 910B for AI training may be less efficient than A800. Yet with the tightening U.S. policies, Chinese companies are compelled to turn to Ascend 910B. As user adoption increases, Huawei’s ecosystem is expected to improve gradually, leading more Chinese companies to adopt its AI chips. Nevertheless, this will be a protracted process.