NVIDIA has begun accepting pre-orders for its customized artificial intelligence (AI) chips tailored for the Chinese market, as per a report from Reuters. The prices of the chips are said to be comparable to those of its competitor Huawei’s products.
The H20 graphics card, exclusively designed by NVIDIA for the Chinese market, is the most powerful among the three chips developed, although its computing power is lower than its own flagship AI chips, the H100 and H800. The H800, also tailored for China, was banned in October last year.
According to industry sources cited in the report, the specifications of the H20 are inferior to Huawei’s Ascend 910B in some critical areas. Additionally, NVIDIA has priced orders from Chinese H20 distributors between $12,000 and $15,000 per unit in recent weeks.
It is noteworthy that servers provided by distributors with 8 pre-configured AI chips are priced at CNY 1.4 million. In comparison, servers equipped with 8 H800 chips were priced at around CNY 2 million when they were launched a year ago.
Furthermore, it’s added in the report that distributors have informed customers that they will be able to begin small-scale deliveries of H20 products in the first quarter of 2024, with bulk deliveries starting in the second quarter.
In terms of specifications, the H20 appears to lag behind the 910B in FP32 performance, a critical metric that measures the speed at which chips process common tasks, with the H20’s performance being less than half of its competitor’s.
However, according to the source cited in the report, the H20 seems to have an advantage over the 910B in terms of interconnect speed, which measures the speed of data transfer between chips.
The source further indicates that in applications requiring numerous chips to be interconnected and function as a system, the H20 still possesses competitive capabilities compared to the 910B.
NVIDIA reportedly plans to commence mass production of the H20 in the second quarter of this year. Additionally, the company intends to introduce two other chips targeted at the Chinese market, namely the L20 and L2. However, the status of these two chips cannot be confirmed at the moment, as neither the H20, L20, nor L2 are currently listed on NVIDIA’s official website.
At the same time, major Chinese AI firms like Huawei, will continue to develop general-purpose AI chips to provide AI solutions for local businesses. Beyond developing AI chips, these companies aim to establish a domestic AI server ecosystem in China.
TrendForce recognizes that a key factor in achieving success will come from the support of the Chinese government through localized projects, such as those involving Chinese telecom operators, which encourage the adoption of domestic AI chips.
According to sources cited by the Financial Times, South Korean chip manufacturer SK Hynix is reportedly planning to establish a packaging facility in Indiana, USA. This move is expected to significantly advance the US government’s efforts to bring more artificial intelligence (AI) chip supply chains into the country.
SK Hynix’s new packaging facility will specialize in stacking standard dynamic random-access memory (DRAM) chips to create high-bandwidth memory (HBM) chips. These chips will then be integrated with NVIDIA’s GPUs for training systems like OpenAI’s ChatGPT.
Per one source close to SK Hynix cited by the report, the increasing demand for HBM from American customers and the necessity of close collaboration with chip designers have deemed the establishment of advanced packaging facilities in the US essential.
Regarding this, SK Hynix reportedly responded, “Our official position is that we are currently considering a possible investment in the US but haven’t made a final decision yet.”
The report quoted Kim Yang-paeng, a researcher at the Korea Institute for Industrial Economics and Trade, as saying, “If SK Hynix establishes an advanced HBM memory packaging facility in the United States, along with TSMC’s factory in Arizona, this means Nvidia can ultimately produce GPUs in the United States.”
Previously, the United States was reported to announce substantial chip subsidies by the end of March. The aim is to pave the way for chip manufacturers like TSMC, Samsung, and Intel by providing them with billions of dollars to accelerate the expansion of domestic chip production.
These subsidies are a core component of the US 2022 “CHIPS and Science Act,” which allocates a budget of USD 39 billion to directly subsidize and revitalize American manufacturing.
NVIDIA’s AI chip supply faces constraints, with insufficient CoWoS advanced packaging production capacity at TSMC potentially being the main issue. According to Economic Daily News, NVIDIA is also providing advanced packaging services to Intel, with a monthly capacity of about 5,000 units. It is expected to join NVIDIA’s advanced packaging supply chain as early as the second quarter in 2024, grabbing a share of TSMC’s related orders.
TSMC declined to comment on the rumors on January 30th. As per industry sources cited by Economic Daily News, Intel’s entry into NVIDIA’s advanced packaging supply chain is expected to lead to a significant increase of nearly ten percent in total production capacity.
As per industry analysis cited in the report, even with Intel joining to provide advanced packaging capacity for NVIDIA, TSMC remains NVIDIA’s primary supplier for advanced packaging. When considering the expanded production capacity of TSMC and other related assembly and testing partners, it is estimated that they will supply approximately 90% of advanced packaging capacity for NVIDIA.
Supply chain sources cited by the report further indicate that TSMC is ramping up its advanced packaging production capacity. Production capacity is estimated to increase to nearly 50,000 units in the first quarter of this year, representing a 25% increase from the estimated nearly 40,000 units in December last year.
While Intel may potentially provide NVIDIA with nearly 5,000 units of advanced packaging capacity, this accounts for about 10% of the total. However, Intel is reportedly not involved in NVIDIA’s AI chip foundry orders.
Intel has advanced packaging capacity in Oregon and New Mexico in the United States and is actively expanding its advanced packaging capabilities in its new facility in Penang. It is noteworthy that Intel previously stated its intention to offer customers the option to only use its advanced packaging solutions, expected to provide customers with greater production flexibility.
Industry sources also indicate that the previous shortage of AI chips stemmed from three main factors: insufficient capacity in advanced packaging, tight supply of high-bandwidth memory (HBM3), and some cloud service providers placing duplicate orders. However, these bottlenecks have gradually been resolved, and the improvement rate is better than expected.
NVIDIA CEO Jensen Huang stated on January 25th that the current phase marks the beginning of AI expansion and growth. He emphasized that AI is set to transform everything and be omnipresent in the future. However, the most significant challenge at present is the ongoing tight supply of AI chips.
According to a report fromEconomic Daily News, Huang, who recently visited Taiwan, shared his thoughts during an interview before attending the NVIDIA Taiwan branch’s year-end banquet.
He revealed that during his trip to Taiwan, he had meetings with TSMC’s founder couple, Morris and Sophie Chang, as well as with CEO C.C. Wei, his semiconductor manufacturing partner. During the discussion, Huang and Wei talked about the substantial demand for NVIDIA’s products and the necessary collaborative efforts with TSMC to address market needs.
Regarding the challenges facing AI development, Jensen Huang believes that one key challenge lies in expanding the production capacity of AI chips. While there is a tight supply of NVIDIA products, the demand is incredibly strong.
As a result, NVIDIA actively collaborates with TSMC and other supply chain partners to meet this demand. The company continues to advance AI technology while also paying attention to related security issues.
When discussing the major trends in AI, Jensen Huang pointed out that the development of AI can help rejuvenate the computer industry. He further indicated that AI will operate in smartphones, computers, robots, automobiles, as well as in the cloud and data centers. Huang emphasized that NVIDIA is a pioneer in accelerating computation and AI computing, and in the next decade, he envisions a reshaping of computation, with every industry being impacted.
Before Huang’s visit to Taiwan, Huang also went to China recently, which is seen as an effort to alleviate concerns among customers about adopting the downgraded versions
NVIDIA CEO Jensen Huang has reportedly gone to Taiwan once again, with reports suggesting a recent visit to China. Industry sources believe NVIDIA is planning to introduce downgraded AI chips to bypass U.S. restrictions on exporting high-end chips to China. Huang’s visit to China is seen as an effort to alleviate concerns among customers about adopting the downgraded versions.
Experts indicate that due to the expanded U.S. semiconductor restriction on China, NVIDIA’s sales in the Chinese market will decline. To counter this, NVIDIA might adjust its product portfolio and expand sales of high-end AI chips outside China.
The export of NVIDIA’s A100 and H100 chips to China and Hong Kong was prohibited in September 2022. Following that, the A800 and H800 chips, which were further designed with downgraded adjustments for the Chinese market, were also prohibited for export to China in October of the previous year.
In November 2023, the NVIDIA’s management acknowledged the significant impact of the U.S. restrictions on China’s revenue for the fourth quarter of 2023 but expressed confidence that revenue from other regions can offset this impact.
According to reports in Chinese media The Paper, Jensen Huang recently made a low-profile visit to China. The market is closely watching the status of NVIDIA’s AI chip strategy in China and the company’s subsequent development strategies in response to U.S. restrictions. The fate of the newly designed AI chips, H20, L20, and L2, to comply with U.S. export regulations remains uncertain and will be closely observed.
Liu Pei-Chen, a researcher and director at the Taiwan Institute of Economic Research, discussed with CNA’s reporter about NVIDIA’s active planning to introduce a downgraded version of AI chips in China.
The most urgent task, according to Liu, is to persuade Chinese customers to adopt these downgraded AI chips. Chinese clients believe that there isn’t a significant performance gap between NVIDIA’s downgraded AI chips and domestically designed AI chips.
Liu mentioned that this is likely the reason why Jensen Huang visited China. It serves as an opportunity to promote NVIDIA’s downgraded AI chips and alleviate concerns among Chinese customers.