Danish Kapoor
Danish Kapoor

Huawei gains ground against Nvidia in China AI chip market

The competitive landscape in China's artificial intelligence (AI) chip market is undergoing a significant shift as Huawei gains strength against Nvidia. The sanctions imposed by the USA on Huawei and the export restrictions imposed on Nvidia's advanced processors have radically changed the dynamics in the market. This helps Huawei increase its market share.

Huawei's self-developed 910B Ascend chips are rapidly becoming widespread in various industries. This proliferation is fueled by the popularity of so-called “AI boxes,” machines that offer ready-to-use solutions that include AI chips, industry-specific algorithms, and large pre-trained AI models. Using these AI boxes, small companies and public organizations can optimize large model-based services without large investments.

In the Chinese market, previously dominated by Nvidia, Huawei has the potential to surpass its American rival. In response to US export restrictions on its A800, H800 and L40S processors, Nvidia began offering lower-end chips like the H20 for China. However, these chips are sold at a discount compared to Huawei's Ascend 910B chips, reflecting the market challenges Nvidia faces.

Huawei's Ascend ecosystem has grown rapidly and now has 40 hardware partners, 1,600 software partners and 2,900 AI application solutions. Leading Chinese companies such as Tianjin Sitonholy and SenseTime are adopting Huawei chips for their AI boxes. SenseTime expects generative AI sales to double thanks to these AI boxes.

Analysts predict that Huawei's expanding AI chip business will soon dominate the market. AI boxes, which are vital for businesses, are expected to be dominated by local players led by Huawei. Forecasts from Pacific Securities and Counterpoint analysts highlight Huawei's technological capabilities and huge market potential. However, Huawei's pace of rise depends on its ability to increase production capacity of high-performance AI accelerators and server processors.

Despite these advances, Nvidia remains a major player, accounting for 90% of AI chips sold in China in the first half. However, the trend in the market is changing and more Chinese companies are launching AI boxes using Huawei chips. Nvidia's chips adapted for China, like the H20, are currently sold at a discount to Huawei's products.

Looking ahead, Huawei is expected to prioritize AI chips over mobile chips and take a leading position in the Chinese market. Collaborations with companies like iFlyTek aim to overcome computing power bottlenecks, and the Spark Number 1 AI box is benchmarked against Nvidia's A100 processor.

Nvidia's strategic response to this competitive pressure includes price cuts and the introduction of chips tailored for the Chinese market. However, analysts point out uncertainty about Nvidia's future in China due to US-China tensions and fierce competition.

China's share in the global AI industry is projected to exceed 30 percent by 2035. This fight between Huawei and Nvidia in the AI ​​chip market will have far-reaching implications for both the companies and the broader industry.

Danish Kapoor