Nvidia: China remains a significant opportunity despite US ban

• Nvidia Corp Chief Executive Jensen Huang continues to see a large market for its data center chips in China despite the US restrictions on exports.
• In fact, the vast majority of their customers are not affected by the specification.
• The US government restriction could however affect up to US$400 million in sales for the company in its current fiscal quarter.

On September 1 this year, US gaming and computer graphics giant Nvidia were instructed by the US government to stop exports of its A100 and H100 chips to China. The two products are Nvidia’s fastest chips and are used in data centers to speed up artificial intelligence tasks such as natural language processing. The ban, meant to stall the advancement of China in related fields, is however not a hindrance for Nvidia as China continues to present a significant growth opportunity, according to its founder and CEO Jensen Huang Jen-hsun.

At a news conference last week, Huang said that the restrictions disclosed earlier this month have specific thresholds for both the performance of a chip as well as the processor’s ability to connect other chips. He noted that the rules leave “a large space for us” in the Chinese market and that “The vast majority of our customers are not affected by the specification,” Huang added.

To recall, Washington’s move forms part of broader efforts by the US to limit China’s access to advanced chips and other technologies. The latest ban has already sent shock waves across the Chinese tech industry, as products made by domestic companies are currently incapable of replacing Nvidia’s best graphics processing units (GPUs). As it is, Nvidia GPUs account for 95% of general-purpose GPUs in AI training systems,  Nvidia’s Chinese rival Iluvatar Corex’s chief technology officer Lu Jianping told South China Morning Post.

“So our expectation is that for the US and also for China, we will have a large number of products that are architecturally compatible, that are within the limits and that require no license at all,” Huang noted, according to a separate report by Reuters. Huang even told China-based Caixin and other media outlets that the alternative GPU chips will be built with their new Hopper architecture for Chinese clients, which enables them to sell the hardware without violating the export ban.

The alternative chips can “fulfill most of the needs in China,” while for those clients who absolutely need the banned products, Nvidia could attempt to apply for licenses, Huang added. Frankly, Nvidia cannot afford to lose its luster in China, its most important market besides the US. To put into context, the mainland Chinese market accounted for 26% – or US$7.11 billion – of Nvidia’s global revenue during its 2022 financial year, which ended on Jan 30, 2022.

During the same period, Nvidia’s revenue from the mainland Chinese market is more than 1.5 times that of the US market. The upside, if a report published by a Taiwanese business journal turns out to be true, is that Nvidia is said to be seeking to fast-track some high-end GPU orders to fulfill some lucrative Ampere A100 and Hopper H100 GPU orders to China before the US sanctions on Nvidia and AMD kicks in.

The UDN report says that Nvidia’s manufacturing partner Taiwan Semiconductor Manufacturing Co (TSMC) has a special program to help out time-pressured customers with a ‘super hot run.’ It basically means the order to delivery time can be basically cut in half. That means Nvidia’s order for a new batch of A100 and/or H100 GPUs can be delivered in two to three months, rather than in five to six months, according to the source. 

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