In a strategic pivot underscoring the ripple effects of US export controls, Baidu Inc., one of China's AI vanguards, has taken a decisive step towards diversifying its supply chain away from American tech giant Nvidia. The Beijing-based internet conglomerate has placed a significant order for AI chips with Huawei Technologies, marking a departure from its historical reliance on Nvidia's processing hardware.
The deal involves the procurement of 1,600 Huawei Ascend 910B AI chips, tailored for 200 servers, and comes in the wake of tightening US export restrictions. This move not only signifies a deepening collaboration between Baidu and Huawei but also reflects a broader trend of Chinese tech giants seeking alternatives to circumvent the escalating techno-political standoff.
With an approximate value of 450 million yuan ($61.83 million), the Baidu-Huawei partnership is not just a transaction but a statement of strategic realignment within China's tech industry. The chips, which are a domestic answer to Nvidia's acclaimed A100, are deemed by insiders as the most advanced local option available, despite not matching their American counterpart's performance.
Baidu's diversification comes as an anticipatory response to the US Commerce Department's stringent October regulations that have effectively barred firms from supplying advanced chips and chip-making equipment to China. These measures aim to restrain China's prowess in producing sophisticated chips for defense technologies while asserting that consumer electronics are not the target.
The urgency of the shift became palpable when Nvidia, facing the heat of new curbs, unveiled alternative chips - the A800 and H800 - designed to fit within the parameters set by US policies, only to find these too falling under the ambit of the October restrictions.
Nvidia's Chief Financial Officer, Colette Kress, candidly reflected on the situation during an earnings call, "Given the strength of demand for our products worldwide, we do not anticipate that additional export restrictions on our data center GPUs, if adopted, would have an immediate material impact to our financial results. However, over the long term, restrictions prohibiting the sale of our data center GPUs to China, if implemented, will result in a permanent loss of an opportunity for the US industry to compete and lead in one of the world's largest markets."
While the deal's volume may seem marginal compared to the tens of thousands of chips Chinese companies have historically sourced from Nvidia, it's the underlying strategic recalibration that resonates more profoundly. China's technological titans are not just scrambling for stockpiles but are reengineering their supply chains, with potential long-term implications on the global tech landscape.
This recalibration is part of a larger narrative where Chinese companies, traditionally heavy consumers of Nvidia's high-performance chips, are now increasingly turning inward. Analysts perceive this as a testament to Beijing's push for technological self-sufficiency, particularly in the semiconductor sector, which has been a focal point of US-China tensions.
Amid this backdrop, Huawei's foray into the domestic chip market, especially after the 2019 US export controls, carries a tint of resurgence. The firm has been showcasing its capacity for innovation, from launching smartphones with internally developed processors to delivering Chinese-made processors for surveillance cameras in 2023, signaling its defiant stride in chip development despite sanctions.
As the US-China tech tussle continues to unfold, the Baidu-Huawei chip deal is emblematic of a deep-seated shift that might reshape the global tech supply chains. With AI and data center operations at the heart of this tech renaissance, the world is witnessing the emergence of a new tech epoch, where the lines between economic policy and technological progress are increasingly blurred.
