#172 Huawei Challenges Nvidia with Advanced AI Chip, Defies U.S. Sanctions
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Huawei Challenges Nvidia with Advanced AI Chip, Defies U.S. Sanctions
I have always stated that sanctions and trade barriers can only do so much to restrict countries from nation-building, be it in terms of manufacturing or technology. It can act as a deterrent for a while, and possibly buy some time for the country that imposes the restrictions, but long term the restricted country will figure out a way.
And China has always been able to do that.
So now, I am not at all surprised that China’s Huawei Technologies is on the verge of unveiling a new AI chip, the Ascend 910C, which aims to compete with Nvidia in the Chinese market.
This move comes as Huawei overcomes U.S. sanctions, showcasing its ability to continue advancing in semiconductor technology despite significant external pressure.
In recent weeks, Chinese internet giants and telecom operators have begun testing Huawei’s latest processor, the Ascend 910C. Huawei has informed potential customers that this new chip offers performance on par with Nvidia’s H100, which was launched last year but is not directly available in China due to U.S. export controls.
Huawei's continued progress in chip development highlights its resilience in the face of U.S. sanctions, which have sought to curb China's access to advanced technology. In response, China has also stepped up support for semiconductor manufacturing and in May raised $48 billion in the third installment of a national investment fund for the industry.
With billions of dollars in state support, Huawei has now become a key player in China’s drive to replace American technology with homegrown alternatives, particularly in AI.
Major Chinese companies, including ByteDance, Baidu, and China Mobile, are reportedly in early talks to acquire the Ascend 910C. Initial discussions suggest that orders could exceed 70,000 chips, potentially generating around $2 billion in revenue for Huawei. The company aims to begin shipments by October this year, although final purchase volumes and delivery schedules may still fluctuate.
Huawei, which has been on the U.S. entity list since 2019 due to national security concerns, has faced significant obstacles in manufacturing its chips, including restrictions on using key factories in Taiwan and limited access to critical components and equipment.
Huawei’s new AI chip is positioned to fill the gap left by Nvidia after U.S. export controls in 2022 effectively barred the company from selling its most advanced chips to Chinese customers. Nvidia has since developed less powerful versions of its AI chips, such as the H20, specifically designed to comply with U.S. export regulations. (however, some Chinese customers in recent months have been able to obtain Nvidia's more advanced chips through alternative channels).
Initially, Chinese customers were hesitant to adopt Nvidia’s H20 chip, questioning its performance relative to Huawei’s offerings. However, after favorable test results from larger H20 clusters and subsequent price cuts by Nvidia, demand for the H20 has increased, despite Huawei’s production bottlenecks.
It was projected in July that Nvidia would sell over one million H20 chips in China this year, valued at approximately $12 billion. This projection will have to be re-evaluated with the upcoming launch of the Ascend 910C
So while Nvidia continues to cater to the Chinese market with its downgraded H20 chips, companies in the U.S., including OpenAI, Amazon, and Google, are set to access Nvidia’s latest and most powerful Blackwell chips.
Nvidia is also working on another China-oriented chip, the B20, but there are concerns that this design may struggle to gain U.S. approval for export to China if the White House tightens restrictions.
The Ascend 910C could outperform Nvidia’s B20 if it is successfully produced and if Nvidia continues to face export limitations. In this case, Nvidia could rapidly lose market share in China.
It is estimated that Huawei could potentially produce between 1.3 million and 1.4 million Ascend 910C chips next year, again assuming no additional U.S. sanctions are imposed.
U.S. sanctions have already contributed to delays in the shipment of Huawei’s Ascend 910B, the company’s most advanced AI processor to date. But China is also not sitting with their hands folded. In response, Huawei has been stockpiling high-bandwidth memory chips, which are crucial for cutting-edge AI processors, to mitigate the impact of potential future U.S. restrictions.
As a precaution, Huawei has also instructed its local manufacturers and suppliers to increase their inventory of machine components, anticipating that workarounds might reduce the lifespan of certain parts and that sourcing these components could become more challenging.
At a semiconductor industry conference in June, a Huawei executive revealed that nearly half of China’s large language models were trained using Huawei chips. The executive also claimed that the Ascend 910B outperformed Nvidia’s A100 in training these models.
However, a June analysis by the Center for Security and Emerging Technology at Georgetown University noted that while the Ascend 910 series is competitive with Nvidia’s A100, it faces significant challenges, including limited manufacturing capacity and low yield.
The analysis also pointed out that the 910B chip has fewer active AI cores compared to its predecessor, making it less of an upgrade than initially anticipated.
It is just a matter of time, that Chinese chip companies with state-backed funding will provide a strong pushback to the globally established players like Nvidia, Intel, etc, and could alter the chip manufacturing landscape altogether.