Impact of Export Restrictions on Chinese AI Chip Market and the Rise of Domestic Alternatives

The United States has been imposing export restrictions on the Chinese artificial intelligence (AI) chip market since October 2022. Initially, the US prohibited the export of the highest level of chips from companies like Nvidia and AMD, but other chip models were still allowed. However, on October 17, 2023, the US government expanded the controls to include all chip models, including Nvidia's L40S chip. Despite these restrictions, on November 9, Chinese media outlet STAR Market Daily reported that Nvidia is planning to release three new chips for China called the HGX H20, L20 PCIe, and L2 PCIe. Nvidia may announce the new chips as early as November 16. China is one of Nvidia's largest markets, along with Taiwan and the US. Chinese companies are also turning to domestic companies like Huawei to meet their AI chip needs. Baidu, one of China's leading AI companies, has ordered 1,600 of Huawei's 910B Ascend AI chips and received over 60% of the order so far.