The AI chip shortage could become even more dire as Chinese customers are purportedly looking to hoard Nvidia chips ahead of a proposed US sales ban.
According to inside sources, Chinese companies including ByteDance, Alibaba Group, and Tencent Holdings have ordered at least $16 billion worth of Nvidia’s H20 server chips for running AI workloads in just the first three months of this year, The Information reported Wednesday.
There are already warnings of shortages of the chip in China, which, according to some industry watchers, means Nvidia could choose to focus its efforts on manufacturing more H20s to meet the intense demand before the proposed ban takes effect and fill at least some of the $16 billion in orders. This could, in turn, slow manufacturing of its other chips and lead to even more bottlenecks, making US and European customers wait even longer than they already have been for Nvidia’s highly sought after chips.
US cracking down, China keeping it local
The H20 is the most powerful processor that Nvidia is permitted to sell in China under US export controls imposed in October 2023. But the US may soon ban their sale altogether. At the same time, Beijing is reportedly considering even stricter controls on non-domestic chip sales to reduce Nvidia’s growing influence and to push Chinese companies to purchase local offerings.
“The Chinese government is supporting and subsidizing local manufacturers to produce ARM-based chips,” explained Lidice Fernandez, group VP for IDC’s worldwide enterprise infrastructure trackers.
Will it lead to shortages?
The US first placed export controls on chips sent to China in October 2022 as a means to slow the country’s technological advances. It blocked the sale of Nvidia’s A100 and H100 chips, leading the company to develop the less powerful A800 and H800 chips for the market; they were also subsequently banned.
There was a surge in demand for the H20 following the arrival of Chinese startup DeepSeek’s ultra low-cost, open-source AI model in January. And while the H20 is reported to be 15 times slower than Nvidia’s newest Blackwell chips sold elsewhere in the world, it was designed specifically by Nvidia to comply with the further US export controls introduced in October 2023. It is being used by Chinese companies for training, although it’s billed as an inference chip, explained Matt Kimball, VP and principal analyst for datacenter compute and storage at Moor Insights & Strategy.
Should Nvidia choose to focus its efforts on manufacturing more of the chips, Kimball said he doesn’t think it will impact supply in the US and Europe, as Blackwell is the main product sold in those markets and H20 is an N-1 Hopper architecture chip.
“If you take this a step further and ask whether this large order slows down the production of chips destined for the US and Europe, I’d say the answer is no, as the Hopper family is built on a different process node than the Blackwell family,” he said.
Still, Kimball noted, “supply chain management is difficult, especially for smaller organizations that are put to the back of the line as hyperscalers with multibillion dollar orders are first in line for the newest [chips].”
Source:: Network World