Nvidia's Budget AI Chips: Can They Compete with Huawei's Rapid Rise?
Nvidia is gearing up for a fierce contest against Huawei as it seeks to maintain its stronghold in China's flourishing AI chip market. The tech giant's forthcoming AI chip signifies a key strategic move. Is this third attempt at complying with regulations enough to keep them afloat against formidable local competitors?
Despite facing increasing pressures from various U.S. administrations, Nvidia isn't counting China out just yet. The company plans to roll out a more affordable Blackwell-based processor, tailored specifically to tackle export restrictions while standing tall against sharp local competitors like Huawei.
Pivoting Out of Necessity
Recent reports suggest that Nvidia's latest chip will range between **$6,500 and $8,000**—a sharp decline from the $10,000-$12,000 price tag of its now-forbidden H20 model. With production set to kick off in June, the urgency behind this launch highlights Nvidia's commitment to adapting to the challenging landscape.
However, this price drop comes at a cost. The new chip will rely on Nvidia's RTX Pro 6000D design, paired with GDDR7 memory instead of high-bandwidth memory typically found in higher-tier models. Even more impactful, it will skip Taiwan Semiconductor's cutting-edge CoWoS packaging technology, which might limit its performance potential while simplifying manufacturing.
Following the April ban on H20 sales, Nvidia has reported a staggering **$5.5 billion** write-down due to unsold Chinese inventory and commitments. Plans to modify the H20 for continued sales in China were swiftly deemed impractical given the current U.S. export policies.
Rising Domestic Rivals
Huawei has emerged as a significant force in the AI chip arena, shaking things up considerably. Their Ascend 910C and 910B processors have gained traction among major Chinese tech companies like Tencent and Baidu for inference applications, where they shine in terms of performance.
The competition broadens beyond individual chips; Huawei's CloudMatrix 384 rack system directly challenges Nvidia's Blackwell GB200 NVL72 configuration, indicating Huawei's ambition to dominate the entire AI hardware ecosystem.
Market shifts are clear. Reports show that the H20 chips are now selling at prices more than **10%** lower than those of Huawei’s Ascend 910B, underlining Nvidia's struggle to keep its pricing competitive against domestic alternatives. CEO Jensen Huang acknowledged that Nvidia's market share in China has notably dropped, approximately halving due to recent export controls.
Billions on the Line
The stakes are high. Huang estimates the potential of China's AI chip market to hover around **$50 billion**. In contrast, Nvidia recorded sales exceeding $17 billion in China in 2024. These figures reveal why Nvidia persists with its chip development initiative in the face of regulatory difficulties.
However, it seems Nvidia isn't banking solely on this one product. There are whispers of a second Blackwell variant for China slated for production in September. This diversified strategy suggests Nvidia’s intent to stay relevant within the Chinese market catering to different segments and regulatory demands.
A Rocky Road Ahead
The questions surrounding Nvidia's new chip venture are intricate. Will a purposefully weakened hardware be able to stand up against progressively improving local options? Will Chinese consumers settle for lesser performance in light of rapidly advancing local technology?
Huang’s candid remark, stating that “China is right behind us. We’re very, very close” concerning AI capabilities, suggests a narrowing competitive gap. Coupled with significant backing from the government for domestic semiconductor development, Nvidia's long-term prospects in China could face serious challenges.
