Nvidia Forecasts $12 Billion in AI Chip Sales to China in 2023 Despite Restrictions

Nvidia is estimated to realize $12 billion in sales of AI chips to China this year following the US restrictions that threaten to close off the firm in one of the world’s biggest semiconductor markets.

The forecast from the analysts suggests that Nvidia is set to ship over one million of the new H20 chips which are anticipated to be free from the stringent restrictions on the sale of AI processors to China that were imposed by the US.

New limits on the sale of advanced chips include those that the Biden administration wants to reduce the capability of Chinese buyers to develop better artificial intelligence systems, particularly to create ones that could have military applications.

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This has resulted in a shortage of chipsets for AI, which has impacted Chinese tech players like ByteDance, Tencent, and Alibaba, and puts them at a disadvantage against US-based players like OpenAI, Microsoft, Meta and Google to compete in this fast-growing technology segment.

The H20 chip of Nvidia is in the range of $12,000 to $13,000 and it should achieve a sales number of over $12 billion which is more than $10. It would be 3 billion USD in revenue generated from its China business in the FY ended January 2024. The forecasts were not commented on by Nvidia, and Huawei also did not answer the requests for comment.

Nevertheless, it was further revealed that restrictions in the US export controls have impacted its operations in China, whereby its data centre segment that entails AI chips saw its revenue from China in the latest quarter reduced significantly from its previous level before the new export control regulation started in October as testified by Colette Kress, Nvidia’s finance chief.

A report by analysts from Morgan Stanley and SemiAnalysis reveals that the Nvidia H20 chip is now shipping in massive volumes and has shown customer preference among Chinese buyers even though it has less performance than the US chips.

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Chinese AI companies rely heavily on Nvidia’s ecosystem and software, making a switch to Huawei’s infrastructure expensive and time-consuming. The Biden administration imposed restrictions on Nvidia’s chip sales to China in October 2022, which were further tightened later that year. In response, Nvidia began marketing a new set of chips adapted for China in November, with the H20 being the most powerful.

Revenue from China

Including chips for PC gamers, data centres, and other customers, China represented about 9% of Nvidia’s total revenues in the most recent quarter, ending in April, down from 22% in the same period a year earlier. However, overall revenues from China, including Hong Kong, still increased during that time, growing more than 50% year on year to $2.5 billion.

Hence, it can be seen that Nvidia is expected to generate significant revenues by exporting it to China despite there are limitations set by the United States. The brand new H20 chips seem to be a very popular choice among the Chinese, and Nvidia still seems to be an integral part of the AI companies from China. 

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