Nvidia Readies Custom AI Chips for China Amid Tightened U.S. Export Controls

Nvidia (NASDAQ:NVDA) is gearing up to launch a custom version of its cutting-edge AI chips tailored specifically for the Chinese market, staying within the confines of U.S. export restrictions. According to three insiders who know the project, the tech titan is crafting this new iteration of its flagship AI chip series, dubbed "Blackwell," originally unveiled in March. Mass production is slated to kick off later this year.

What sets the "Blackwell" lineup apart is its architecture, which combines two silicon squares to significantly outpace its predecessor. Within this series, the B200 chip particularly stands out, offering performance speeds up to 30 times faster for tasks such as chatbot responses. According to two of the sources, for the Chinese variant, Nvidia will collaborate closely with Inspur, a significant distribution partner in China. The new chip may carry the tentative name "B20."

Due to the sensitive nature of this development, these sources opted to remain anonymous as Nvidia has yet to officially disclose the project. When prompted for comments, Nvidia declined to provide any, while Inspur did not reply to requests for comment.

The backdrop to this development is a tightening web of U.S. export controls targeting advanced semiconductor technology, which took a substantial turn in 2023. The objectives include curbing supercomputing advancements that could benefit China's military capabilities. In response, Nvidia has previously rolled out three AI chips that are engineered explicitly for the Chinese market.

This environment has inadvertently spurred Chinese tech behemoth Huawei and startups like Tencent-backed Enflame to gain traction domestically in the advanced AI processor market. Nvidia's upcoming move aims to shore up its position amidst these rising competitors. Notably, the company's revenue from China declined to approximately 17% for the fiscal year ending January, down from 26% just two years prior.

While Nvidia launched the H20, its most advanced AI chip for China, to a lukewarm reception earlier this year, recent indicators suggest a turnaround. The company is set to sell over a million H20 chips in China within this year alone, translating to a revenue spike upwards of $12 billion, as estimated by research firm SemiAnalysis.

As the geopolitical landscape remains fraught with complexities, there are mounting expectations that U.S. export controls on semiconductors will persist. Rumors are rife that the U.S. is pressing its allies, the Netherlands and Japan, to tighten restrictions on chipmaking equipment destined for China. This rule would prevent the U.S. from selling products manufactured using American technology.