In a strategic move away from Nvidia, Baidu (9888.HK), one of China’s prominent AI firms, has placed orders for artificial intelligence chips from Huawei (HWT.UL), according to two anonymous sources. This development underscores growing signs that U.S. pressure is prompting Chinese tech companies to consider Huawei’s products as a viable alternative.
The shift towards Huawei
Baidu, renowned for its Ernie large language model (LLM), reportedly initiated the chip order in August, ahead of new U.S. government regulations in October that tightened restrictions on chip exports to China, including those from Nvidia. The order comprised 1,600 of Huawei Technologies’ 910B Ascend AI chips, developed as a direct competitor to Nvidia’s A100 chip, intended for use in 200 servers. By October, Huawei had delivered over 60% of the order, approximately 1,000 chips, to Baidu.
The total value of this significant deal is estimated at around 450 million yuan ($61.83 million), and Huawei is expected to fulfill the entire order by the end of the year. Both sources have requested anonymity due to the confidential nature of the transaction.
While the order may seem relatively small compared to the extensive chip orders historically placed with Nvidia by leading Chinese tech firms, it serves as a noteworthy indication of a potential shift away from the U.S.-based company.
Baidu’s historic ties to Nvidia
Baidu has been a long-standing client of Nvidia, alongside other Chinese tech giants like Tencent (0700.HK) and Alibaba (9988.HK). However, this recent move reveals Baidu’s previously undisclosed AI chip engagement with Huawei.
Although Huawei’s Ascend chips currently lag behind Nvidia in terms of performance, they represent a domestically developed option that is increasingly gaining traction in China. According to one of the sources, Baidu’s choice to order 910B chips is a strategic move to prepare for a future where procurement from Nvidia might no longer be feasible.
Both Baidu and Huawei declined to comment on the matter, while Nvidia chose not to provide a statement.
Deepening collaboration between Baidu and Huawei
Huawei’s website indicates that since 2020, the company has been collaborating with Baidu to ensure compatibility between its AI platform and Huawei’s hardware. Furthermore, in August, the two firms announced their intention to enhance compatibility between Baidu’s Ernie AI model and Huawei’s Ascend chips.
Baidu has also developed its own Kunlun AI chips, designed to support large-scale AI computing. Nevertheless, the company had predominantly relied on Nvidia’s A100 chips for training its LLM.
In response to U.S. restrictions last year that prevented Nvidia from selling A100 and H100 chips to China, Nvidia introduced new A800 and H800 chips as alternatives for Chinese customers, including Baidu. However, due to the October regulations, Nvidia is no longer able to supply these chips to China.
Huawei’s opportunity amidst U.S. Curbs
Analysts have been predicting that U.S. restrictions would present an opportunity for Huawei to expand its presence in its $7 billion home market. Huawei has been subjected to U.S. export controls since 2019.
This recent order reaffirms Huawei’s potential to capitalize on the changing dynamics of the global chip market. Beijing has been directing significant investments into the domestic semiconductor industry to bridge the gap with overseas competitors while encouraging state-owned enterprises to replace foreign technology with domestic alternatives.
Huawei’s strides in chip development came to the fore in August when it unveiled a new smartphone featuring internally developed processors with advanced semiconductor technology. This move showcased Huawei’s progress despite international sanctions.
In September, Reuters reported that Huawei’s chip design unit, HiSilicon, had begun shipping newly developed Chinese-made processors for surveillance cameras to clients in 2023. This marked another significant sign of Huawei’s resurgence in the semiconductor domain.
The shifting landscape of AI chips
Baidu’s decision to diversify its chip sourcing strategy highlights the evolving landscape of AI chips in China. As geopolitical tensions continue to impact global supply chains, Chinese tech firms are increasingly exploring domestic alternatives.
Huawei’s ascendancy as a potential chip supplier is not only a testament to its resilience in the face of adversity but also reflects the shifting dynamics in the semiconductor industry. As Baidu and other Chinese tech giants consider Huawei as a viable alternative to Nvidia, the competitive landscape in the AI chip sector is likely to undergo further transformation.
