US chip controls hurting Nvidia while making Huawei more innovative: Analysts

‘US chip controls on Nvidia’ has become a major topic of discussion among analysts, as these restrictions are helping Huawei to rise. Looks like the foreign government is indirectly making China more independent in the AI chip field by preventing it from accessing U.S.-designed technologies.

The US Commerce Department announced new chip controls last week. As per these regulations, Nvidia will now require licenses worth $5.5 billion to ship H20 AI in China. Nvidia decided that it would stop the flow of its processors due to a heavy charge.

Although these restrictions can become a trouble for Nvidia. The company used to generate a big part of its sales revenue from one of the significant markets – China.

On the other hand, Nvidia sales loss can become a profit for Chinese companies like Huawei as they are already making efforts to build Nvidia H20 alternatives and counter US chip controls, says some analysts.

Paul Triolo, the partner and senior vice president for China at DGA Group, said:

“US controls on GPUs and semiconductor manufacturing equipment have primarily damaged US companies, including Nvidia, while having a marginal impact on the ability of Chinese companies to develop frontier AI models. Export controls have even encouraged the Chinese semiconductor industry to become more innovative.”

US chip controls hurting Nvidia while making Huawei more innovative: Analysts (Image Credits: Nvidia)

Brady Wang, the associate director at Counterpoint, notes that many Chinese firms are working on new chips to challenge Nvidia’s dominance in China, including Huawei. After the new rules, China will get the opportunity to grow and improve its AI solutions.

Another analyst, Doug O’Laughlin, said:

“With Nvidia’s H20 and other advanced GPUs restricted, domestic alternatives like Huawei’s Ascend series are gaining traction. While there are still gaps in software maturity and overall ecosystem readiness, hardware performance is closing in fast.”

Huawei is still facing problems in the AI chip segment. Lack of advanced chipmaking tools and low production has been major obstacles for the OEM. But the positive point is – it’s striving to close these challenging doors with self-developed forces.

Phelix Lee – a chip-focused equity analyst at Morningstar mentioned that Huawei has been a competitive fabless chip designer, but struggles to find enough supply from their foundaries. Although it may soon be able to supply enough H20 GPU alternatives to meet the demand of Chinese tech firms.

According to TheInformation, Chinese companies have ordered H20 server chips worth $16 billion in the first quarter of this year. Thus, the country seems to have enough AI chips for now, at least.

Improvements in Ascend AI chips show that Huawei has claimed victory on the US sanctions to a limited extent. Though the complete win will be considered when the company will start using even better processors for its products.

Image Credits: Huawei

[source]