Nvidia, a leading chip designer, announced on Tuesday its plans to manufacture newly compliant chips for China. This move comes in response to the expanded US chip restrictions that have heightened pressure on chip companies like Nvidia. The company, during its third-quarter earnings call, predicted a significant decline in sales in China for the fourth quarter.
The forecasted drop in sales reflects the impact of increased US export controls on Nvidia’s business in China. While the company reported record-high revenue from data center products in the fiscal third quarter, it expects a reduction in sales to China, which typically constitutes 20 to 25 percent of data center revenue.
Chief Financial Officer Colette Kress acknowledged the negative effects of export controls on the China business during the earnings call and confirmed that Nvidia is developing compliant chips for China. However, the new chips are not expected to significantly contribute to fourth-quarter revenue.
The US government implemented a new set of restrictions in October, further complicating the export landscape for US chip companies. Nvidia had previously indicated that the updated export restrictions would prevent the sale of two of its modified advanced artificial intelligence chips designed for the China market.
Experts suggest that the intensified chip ban could jeopardize the position of US chip giants like Nvidia in the Chinese market. Chinese companies are actively seeking domestic alternatives in response to the escalating US chip bans. Tencent President LAU Chi Ping mentioned that the company has sufficient chips on hand but will explore domestically produced AI chips due to the US ban.
Baidu has reportedly ordered 1,600 of Huawei’s 910B Ascend AI chips as an alternative to Nvidia’s A100 chip. The uncertainty caused by US sanctions and restricted access to advanced chips is leading Chinese companies to favor domestic chip solutions, creating challenges for US companies.
Amid the geopolitical tensions, US chip enterprises, including Intel and Qualcomm, are making efforts to retain the Chinese market. They showcased their latest research results and products at the 6th China International Import Expo in Shanghai in November. China has reiterated its stance on US chip export controls, urging the US to stop politicizing and weaponizing tech and trade issues. Chinese Foreign Ministry spokesperson Mao Ning emphasized China’s commitment to safeguarding its rights and interests amid these developments.