Chinese enterprises are intensifying their efforts to develop a competitive alternative to Nvidia’s AI chips, in line with Beijing’s aspiration to reduce its dependency on American technology. U.S. sanctions imposed over recent years, coupled with Nvidia’s dominance in the sector, have presented significant obstacles to these ambitions, particularly in the short term, according to analysts consulted by CNBC.
Nvidia’s growth has been fueled by substantial investments from major cloud computing companies in its server products containing GPUs, which facilitate the training of extensive AI models on vast quantities of data. These AI models underpin applications such as chatbots and other emerging AI technologies.
The U.S. government has restricted exports of Nvidia’s most advanced chips to China since 2022, with further tightening occurring last year. These semiconductors are essential for China’s goal to emerge as a leader in AI.
Analysts from CNBC identified several Chinese companies striving to rival Nvidia, including tech giants Huawei, Alibaba, and Baidu, as well as startups like Biren Technology and Enflame. However, these companies currently lag behind Nvidia.
Wei Sun, a senior analyst at Counterpoint Research, noted these firms have made progress in developing AI chips for specific applications but face substantial challenges in closing the technological gap with Nvidia, especially concerning general-purpose GPUs.
Chinese firms face several challenges, including a lack of technological expertise, as highlighted by Sun. However, the U.S. sanctions and their subsequent impacts pose the most significant hurdles. Several Chinese contenders to Nvidia have been placed on the U.S. Entity List, which limits their access to American technology. Additionally, numerous U.S. curbs have restricted key AI-related semiconductors and machinery exports to China.
China’s GPU designers depend on manufacturing companies. Previously, they utilized Taiwan Semiconductor Manufacturing Co. (TSMC), but U.S. restrictions have limited access to TSMC-made chips, pushing them toward China’s largest chipmaker, SMIC, whose technology is several generations behind TSMC. This lag is partly due to limitations on SMIC’s access to crucial machinery from Dutch firm ASML.
Huawei has been advancing its development of more sophisticated chips for its smartphones and AI endeavors, monopolizing available capacity at SMIC, according to Paul Triolo, a partner at Albright Stonebridge consulting firm. Triolo explained that SMIC faces the complex task of balancing production resources among Huawei, GPU startups, and other Chinese firms affected by restrictions from TSMC.
Nvidia’s success stems not only from its advanced semiconductors but also from its CUDA software platform, which enables developers to create applications compatible with Nvidia’s hardware. This has generated an ecosystem around Nvidia’s products that is challenging to replicate.
Huawei is positioned as a leader in China with its Ascend series of data center processors, notably the Ascend 910B and the forthcoming Ascend 910C, which could rival Nvidia’s H100, according to a Wall Street Journal report. Nvidia’s annual report identified Huawei as a competitor in AI chips, software, and networking products.
In the software domain and developer community building, Huawei holds significant advantages, according to Triolo. Nonetheless, like the rest of the industry, it faces substantial challenges in competing with Nvidia’s entrenched GPU software support ecosystem and producing advanced GPUs amidst U.S. export controls restricting SMIC’s capabilities.
Despite these challenges, Chinese startups remain hopeful. Biren Technology and Moore Threads have experienced layoffs attributed to U.S. sanctions, yet companies like Enflame and Biren are pursuing public listings to raise funds, as reported by Bloomberg. Triolo indicated that, although Biren and other GPU startups have experienced personnel from leading western semiconductor companies, they lack the financial depth of Huawei. Consequently, both Biren and Enflame are seeking IPOs in Hong Kong for further hiring and expansion efforts.
