Why China is unable to reduce its dependence on NVIDIA
What's the story
China is making major strides in the development of its own artificial intelligence (AI) chips. However, the country's top tech firms are still relying on US-based chipmaker NVIDIA to meet their growing computing demands. According to a Financial Times report, Chinese companies have already bought over one million NVIDIA gaming and workstation chips this year alone.
Production v/s demand
Domestic supply v/s total demand
Despite a major increase in domestic chip production, China is struggling to keep up with the growing demand for computing power.
This is especially true as companies like Alibaba, ByteDance, and Tencent continue to expand their AI models and services.
The country's domestic supply of AI chips is projected to reach 3.5 million by 2026 (including one million made abroad), but total demand could exceed five million units.
Preference
NVIDIA's RTX Pro models in high demand
Even with US export controls preventing NVIDIA from selling its most advanced AI processors directly to China, local tech firms are still opting for its gaming and workstation chips.
The RTX Pro 6000D, RTX Pro 5000, and RTX 5090 models are particularly popular.
While they may not perform as well in advanced AI tasks compared to top Chinese alternatives like Huawei's Ascend 910C, they are still useful for simpler workloads.
Race for production
Major chip production ramp-up underway
Chinese manufacturers are ramping up production to meet the growing demand.
Huawei is expected to produce around 1.6 million AI chips this year, while Alibaba and Baidu's chip divisions are expected to produce about one million combined.
Cambricon could add another 300,000 units.
Despite these efforts, a major shortage remains due to rapidly expanding AI businesses at Alibaba, ByteDance, and Tencent.
Overseas leasing
Chinese companies leasing overseas data centers for computing power
With domestic supplies falling short, Chinese tech firms are increasingly turning to overseas data centers for computing power.
Tencent has reportedly signed a deal with Oracle to lease 100,000 graphics processing units across Southeast Asia.
ByteDance and Alibaba are also pursuing large overseas agreements.
These data centers often have the latest NVIDIA processors like the B300, giving Chinese companies access to cutting-edge computing power that's hard to find domestically.