Nvidia forced to cut chip prices in China to compete with Huawei

Chip giant Nvidia is facing a price war in the crucial Chinese market, forced to cut prices on its high-end artificial intelligence (AI) chips to compete with domestic rival Huawei. This move comes amid ongoing tensions between the US and China, impacting chip exports.

According to Reuters, Nvidia's H20 chip, designed specifically for the Chinese market after US export restrictions on its most advanced A100 chip, is being sold at a discount. In some cases, the price is over 10% lower than Huawei's competing Ascend 910B. This price cut reflects the challenges Nvidia faces in China.

The US Department of Commerce restricted the export of Nvidia's most powerful AI chips to China in late 2022 due to national security concerns. This move forced Nvidia to develop alternative offerings for the Chinese market, like the H20. However, an oversupply of these chips combined with Huawei's growing competitiveness has put pressure on Nvidia's pricing strategy.

"The competitive position has been harmed" in China, Nvidia acknowledged in its latest annual report, highlighting a drop in data center revenue from the region. This decline reflects a shift towards domestic chipmakers encouraged by the Chinese government in recent years.

"Our data centre revenue in China is down significantly from the level prior to the imposition of the new export control restrictions in October," said CFO Colette Kress. "We expect the market in China to remain very competitive going forward."

Analysts believe Nvidia's price cuts are a strategic attempt to regain market share. "They're trying to stay relevant," said one analyst, pointing out that Nvidia remains a leader in AI chip technology globally. However, the long-term impact of this pricing strategy on Nvidia's profitability remains to be seen.

The situation highlights the increasingly competitive landscape of the global chip market. With geopolitical tensions simmering, chipmakers are navigating a complex environment. For Nvidia, maintaining its foothold in China, a crucial market for AI development, will require strategic maneuvering and potentially even adapting its technology offerings.