American export restrictions are forcing artificial intelligence (“AI”) companies in China to find alternative microchip suppliers at home. Tensions between the United States and China have risen significantly in recent years as the two nations fight to be the world’s top economy.
The escalating trade war has seen China and the U.S. sanction the export of key raw materials such as rare earth minerals and chips. With the nascent artificial intelligence sector going through major growth over the past couple of years, companies worldwide are racing to develop AI-based technologies. However, machine learning and AI technology require significant processing power. This has put companies with semiconductor chip development capabilities such as Nvidia at the forefront of AI development and given their home nations an edge in the swiftly growing AI segment.
Cut off from major Western chip supplies, Chinese AI companies are turning to Chinese chip developers to maintain their supply chains. Embattled tech company Huawei Technologies has emerged as a potential alternative chip supplier for AI companies in China. Many experts are still unsure of Huawei’s ability to develop chips with similar performance. Although Nvidia CEO Jensen Huang was seen wishing the company’s Shanghai employees a happy Lunar New Year on Chinese social media in late January, the U.S.-based tech company’s footprint in China is very limited.
Nvidia’s market share of China’s AI semiconductor market was approximately 90%, but the company had to cut its Chinese exports drastically after export restrictions prevented the export of advanced chips such as the H100 AI graphics unit. The graphics card maker exported weaker H800 AI graphics-processing units to the Chinese market to avoid export restrictions. However, lawmakers prohibited the export of these chips in additional export restrictions passed in October.
These restrictions left China-based tech giants such as Tencent Holdings, Baidu and Alibaba Group Holding scrambling to find Nvidia chips to fulfill their generative AI needs. Nvidia is looking to export chips that don’t fall under the latest restrictions, but the U.S. will likely impose new sanctions to prevent further exports to China.
Consequently, AI companies in China are switching to domestic suppliers to fortify their supply chains against U.S. policy. Tencent president Martin Lau recently revealed that the company has enough Nvidia to fulfill its AI needs in the short-term but noted that Tencent would try to “look for domestic sources” for generative AI training chips.
Huawei recently debuted a smartphone featuring advanced 7-nanometer chips developed by Chinese company Semiconductor Manufacturing International Corp, proving that Chinese companies can still operate without American-made chips.
An executive at a top internet company in China notes that while Huawei’s Accent AI chipset doesn’t perform as well as Nvidia chips, they are still usable. Hygon Information Technology informed investors that it would start to build AI infrastructure with Alibaba and Baidu, and startup Moore Threads Technology debuted its MTT S4000 AI semiconductor in late 2023.
Chinese tech companies such as FingerMotion Inc. (NASDAQ: FNGR) now have the challenge of accessing the locally available chips and working with manufacturers to source customized versions that will serve their needs as they grow their market share in the telecommunications, big data insights and other industry verticals.
NOTE TO INVESTORS: The latest news and updates relating to FingerMotion Inc. (NASDAQ: FNGR) are available in the company’s newsroom at https://ibn.fm/FNGR
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