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Nvidia to Sell Chips to China That Comply with US Regulations

Lanon Wee

Nvidia, a U.S. chipmaking giant, is reportedly launching a method to market top-quality chips to Chinese companies while staying in conformity with U.S. limitations. On Thursday, Cailian Press, Chinese financial media, stated, based on their sources, that Nvidia would be delivering three new chips shortly to local manufacturers. When CNBC made contact with Nvidia, the U.S. Department of Commerce, and the Bureau of Industry and Security, there were no immediate responses. Nvidia, the U.S. chipmaking company, has reportedly managed to discover a method which allows them to sell high-end processors to Chinese companies while still abiding by US regulations meant to limit Chinese access to technology. Chinese customers represent 20%-25% of Nvidia's revenue generated from their data center branch, its most lucrative segment. According to a Cailian Press report on Thursday, citing unnamed sources, Nvidia should deliver three different chips - the HGX H20, L20 PCIe and L2 PCIe - based on the H100 chip, in the coming days. Previously, the H100 and A100 AI chips were the first to be affected by the U.S.'s new rulings in 2020 that had the purpose of restraining sales to China. Nonetheless, Nvidia made a September 2022 filing stating that the U.S. government would still permit them to devise the H100 within China. Chinese companies had previously turned to Nvidia's H800 and A800 chips, only to see the U.S. impose restrictions on their sales last month. Bo Du, a former engineer in the chip industry and now WestSummit Capital Management's managing director, has mentioned that the H20's computing strength is only about half of the A100's. Bo Du expressed in Mandarin that this is effectively "saying goodbye to physical simulation," and no ideal solution is available now due to the costs accrued. Du said that in the near future, Chinese manufacturers have no viable alternative and will keep getting Nvidia's chips, although some big web companies have begun to buy home-produced AI processors in bulk.The requirement for AI computing capability has risen drastically as organizations in China press ahead with their own versions of OpenAI's ChatGPT. The Financial Times reported of Nvidia's new chips designated for China, following a document shared with potential customers. Nvidia, however, declined to comment on the matter. CNBC's inquiry to the U.S. Department of Commerce and the Bureau of Industry and Security for their opinion on the subject went unanswered. According to SemiAnalysis, an online research firm, none of the three newly-developed chips are over the threshold of U.S. regulations. Through their Substack blog with more than 64,000 subscribers, the company declared its attempt to "straddle the line on peak performance and performance density" to fulfill the new U.S. law. Analysis from Nomura affirms this point, as they found that Nvidia's Drive AGX Orin chip stayed within the precedent set by the U.S. to sale the product in China. The U.S. has declared that its priority is preventing China from utilizing advanced technology for military purposes. Additionally, the Biden administration has made clear that the nation is in a rivalry with China. Consequently, home-grown businesses are attempting to devise responses to the U.S.'s regulations. In late August, Huawei launched a new phone with reviews indicating it has the capacity to hit 5G download speeds, in part due to a sophisticated semiconductor chip. Although the exact process behind the fabrication of the chip is not evident, CNBC's Arjun Kharpal contributed to this report.

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