NVIDIA's low-spec artificial intelligence (AI) chips are selling like hotcakes in China following the DeepSeek innovation, while the Trump administration is pushing to tighten sanctions on NVIDIA chips exported to China. There are analyses suggesting that if the sales of low-spec NVIDIA AI chips in China are restricted, Huawei, which is enhancing its own AI chip competitiveness, will benefit.
On the 25th (local time), Bloomberg News reported that the Trump administration is considering measures to restrict the types of NVIDIA chips exported to China. Industry insiders believe there is a high possibility that the sales of NVIDIA's low-spec AI chip H20, which was made for the Chinese market, will be limited. Three years ago, after the sale of its most powerful AI chip H100 was banned in China, NVIDIA released the H800, a lower-performance AI chip, and subsequently introduced the H20 last year, further reducing its performance as exports were restricted.
During the Biden administration, there were considerations to impose export sanctions on the NVIDIA H20 chip to China, but former U.S. Secretary of Commerce Gina Raimondo decided against pushing it forward. However, as the Chinese AI startup DeepSeek has launched low-cost, high-performance AI models that surpass U.S. semiconductor sanctions, the Trump administration now believes that additional sanctions are inevitable. The U.S. government is currently investigating whether DeepSeek purchased NVIDIA AI chips through third parties in Singapore. It is reported that the inference AI model 'R1' announced by DeepSeek last month utilized more than 2,000 NVIDIA H800 accelerators intended for the Chinese market.
Recently, as Chinese tech corporations are purchasing a large number of H20 chips to utilize the DeepSeek AI model, predictions suggest that additional sanctions may be implemented faster than expected. According to Reuters, major Chinese tech corporations such as Tencent, Alibaba, and ByteDance are significantly increasing their orders for H20 chips. Initially, some anticipated that DeepSeek's highly efficient AI model would reduce chip demand, but the demand for NVIDIA chips in China is on the rise. It is reported that not only major tech companies but also small-scale medical and education-related corporations in China are adopting AI servers equipped with the DeepSeek model.
If the supply of NVIDIA AI chips in China is blocked again, Huawei is expected to absorb the demand for AI chips from local corporations. The industry predicts that from this year, Huawei will be able to mass-produce its self-developed AI chips. Until last year, the yield of Huawei's latest AI chip Ascend 910C was only 20%, but it is now reported to have improved to around 40%. China's Semiconductor Manufacturing International Corporation (SMIC), which produces Huawei's AI chips, aims to increase the yield to 60%. The performance of the Ascend 910C is estimated to be at 60% of the NVIDIA H100 level. An industry official noted, "With SMIC's 7-nanometer (1 nanometer is one billionth of a meter) production capacity significantly increased and its own supply chain established faster than expected, it appears to be gradually generating revenue through AI chip production," and added that "the Ascend 910C and other domestically produced AI chips, which were not produced properly last year, are expected to be mass-produced this year."
This also makes it highly likely that sanctions from the Trump administration will be a variable. Currently, Trump’s team is also considering strengthening sanctions against SMIC. The Biden administration introduced individual review procedures for SMIC sanctions, allowing the use of legacy semiconductor equipment for certain SMIC production facilities; however, the Trump administration is expected to restrict this. Officials from the Trump administration are concerned that SMIC may bring in advanced equipment through facilities that are not subject to sanctions.