Nvidia is preparing to head straight with Huawei to maintain its relevance in China’s booming AI chip market.
Future AI chips created for China are like strategic gambling by Nvidia. Will the company’s third attempt at regulatory compliance maintain its foothold against the surge in domestic competition?
Despite increasing geopolitical pressure from the US serial administration, Nvidia has refused to abandon the Chinese market altogether. The company plans to introduce stripped Blackwell-based processors specifically designed to navigate export restrictions and specifically designed to compete with sophisticated local alternatives from the huge Huawei.
Strategies born out of necessity
Reuters Sources revealed that Nvidia’s latest products come with a price tag of between $6,500 and $8,000. This is a dramatic cut of $10,000 to $12,000, directed by the currently banned H20 model. Production is scheduled to begin in June, highlighting the urgency behind Nvidia’s China AI Chip Initiative.
Cost reductions involve significant trade-offs. The new processor uses NVIDIA’s RTX Pro 6000D foundation paired with standard GDDR7 memory, and abandons the high-bandwidth memory found in the premium variant.
Additionally, the chip is absent from Taiwanese semiconductor advanced Cowos packaging technology. This is a decision that simultaneously reduces capacity and manufacturing complexity.
Following the effective ban on H20 sales in April, Nvidia has absorbed $5.5 billion cuts on China’s inventory and commitments. The company’s initial plan to change the H20 for continued sales in China has ultimately proven unfeasible under the current US export framework.
Domestic competition is intensifying
The emergence of Huawei as a legitimate challenger fundamentally changed the landscape of China’s AI chips. The company’s ASCEND 910C and 910B processors have ensured adoption among major domestic technology companies, including Tencent, Baidu and bytedance, primarily for inference applications.
Competitive pressures fully extend infrastructure solutions beyond individual chips. Huawei’s CloudMatrix 384 rack system directly challenges Nvidia’s Blackwell GB200 NVL72 configuration, demonstrating the Chinese company’s ambition to compete across the AI hardware stack.
Market dynamics reflect changes in balance. Reports say the H20 chips are trading at a discount of over 10% compared to Huawei’s Ascend 910b, highlighting Nvidia’s struggle to maintain its pricing power over domestic alternatives.
CEO Jensen Huang has noted erosion, revealing that Nvidia’s Chinese market share has almost halved after recent export restrictions.
It’s taking billions of risks
The economic impact is huge. Huang estimates the potential for China’s AI chip market is $50 billion, while Nvidia recorded over $17 billion in China sales in 2024. The numbers underscore why the company continues to pursue Nvidia China AI chip development despite regulatory headwinds.
Sources suggest that Nvidia does not place all hope in this single product. The company reportedly plans to have China’s second Blackwell variant, targeting production in September. The multifaceted approach demonstrates Nvidia’s commitment to maintaining the presence of the Chinese market through a diverse range of product offerings tailored to a variety of customer segments and regulatory requirements.
Going on an uncertain path
The strategic questions surrounding the latest Nvidia China AI chip venture are profound. Can deliberately weakened hardware effectively compete for rapid improvements to domestic alternatives? Will Chinese customers accept performance compromises despite local options continuing to advance in capabilities?
Huang’s recent approval of “China is right behind us. We are very, very close” suggests that the competitive gap may be narrowing faster than expected in AI capabilities. Combined with substantial government support for domestic semiconductor development, the market raises fundamental questions about Nvidia’s long-term viability in China.
(Photo: Mariia Shalabaeva)
See: Can the US really enforce a global AI chip ban?
Want to learn more about AI and big data from industry leaders? Check out the AI & Big Data Expo in Amsterdam, California and London. The comprehensive event will be held in collaboration with other major events, including the Intelligent Automation Conference, Blockx, Digital Transformation Week, and Cyber Security & Cloud Expo.
Check out other upcoming Enterprise Technology events and webinars with TechForge here.