The US government’s latest export restrictions on Nvidia’s H20 artificial intelligence (AI) chips are set to disrupt the plans of China’s Big Tech firms in the industry, forcing companies such as ByteDance and Tencent Holdings to accelerate their shift to domestic semiconductor alternatives, according to analysts.
US chip giant Nvidia disclosed on Tuesday that Washington will now require a licence to export its H20 chips to China, a move the company expects to cost it US$5.5 billion. The H20 is a graphics processing unit (GPU) tailored for the Chinese market after earlier US export controls. Despite tightening restrictions, Chinese companies have continued to rely heavily on Nvidia chips to train and run large language models (LLMs), analysts said.
Nvidia’s China business is likely to “fall to nearly zero”, Morningstar analyst Brian Colello said, declining from about 10 per cent of total revenue last year, which was already significantly reduced from previous levels.
“We don’t foresee a turnaround any time soon,” Colello said in a research note on Wednesday.
Nvidia began selling H20 chips to the Chinese market in early 2024, after its advanced A100, H100, A800 and H800 AI chips were all placed under US export controls due to national security concerns.
“With its powerful computing power and energy efficiency advantages, the H20 chip has become key hardware for LLM training,” said Gao Chengfei, director of Guangzhou-based consulting firm Tiaoyuan.
TikTok owner ByteDance and social media giant Tencent have both relied on the H20 in their AI efforts. Each company ordered about 230,000 of Nvidia’s Hopper-series chips last year, ranking them by order volume only behind Microsoft, which bought 485,000 chips, the Financial Times reported in December, citing data from research firm Omdia.
