NVIDIA and Intel are adapting to the latest U.S. chip export restrictions by introducing downgraded AI chips specifically tailored for the Chinese market, UDN News said.

According to insider from the China Star Market, a Chinese media, NVIDIA has developed three downgraded AI chip models for the Chinese market. Intel also plans to release downgraded Gaudi 2 chip with an aim to US restriction.

NVIDIA’s latest downgraded AI chips, including HGX H20, L20 PCle, and L2 PCle, are anticipated to be unveiled after November 16th. Chinese companies are likely to receive samples in the coming days. These three chips, derived from the modification of NVIDIA H100, will align their performance with parameters below the new U.S. regulations. Ongoing communication with NVIDIA suggests mass production is slated for the year-end, said by industry sources.

Besides, Yicai also confirms from multiple NVIDIA supply chain sources. The three AI chip products are designed for cloud training, cloud inference, and edge inference, with specific launch times pending confirmation. Sampling is projected between November and December this year, followed by mass production from December this year to January next year.

On the Intel front, there are rumors of a response plan. As reported by The Paper, Intel is planning to release an improved version of its Gaudi 2 chip. Although the rumor exists, specific details are yet to be disclosed.

Since the U.S. government introduced chip export control to China last year, NVIDIA initially designed downgraded AI chips A800 and H800 for Chinese companies. However, new regulations in October this year by the U.S. Department of Commerce brought A800, H800, L40S, and other chips under control. Failure to secure export permission may necessitate order cancellations for NVIDIA.

(Image: Nvidia)

During the Snapdragon Summit 2023 in October, Qualcomm made a big announcement by introducing the Snapdragon X Elite chip, built on TSMC’s cutting-edge 4nm process. Qualcomm’s claim is bold; they assert that the chip will deliver superior performance compared to Intel’s x86 architecture and Apple’s M2 chip. Simultaneously, towards the end of October, Apple revealed its own Arm-based M3 chip. Notably, semiconductor giants AMD and NVIDIA are rumored to be exploring the development of new PC processors on the Arm architecture. The future outlook suggests that Arm-based processors may gradually cut in the market share traditionally held by x86 architecture processors.

TrendForce’s Insights:

1. Qualcomm’s New PC Processor Poised to Expand the Arm-Based PC Processor Market

Following Intel’s September 2023 Meteor Lake processor release, Qualcomm introduced the Snapdragon X Elite, its latest Arm-based PC processor in October. This chip leverages TSMC’s advanced 4nm technology. Qualcomm is forging partnerships with Taiwanese heavyweights such as Quanta, Compal, Wistron, Acer, Asus, Realtek, Nuvoton and others, aiming to secure a foothold in the CPU market within the PC supply chain. This collaborative effort is expected to yield new PC products hitting the market in 2024.

As of 2023, Arm commands approximately 11% of the market share. Apple, a pioneer in PC chips built on the Arm architecture, has seen success with the release of three generations of processors since the 2020 debut of M1 chip.

With Qualcomm entering the Arm architecture group, AMD also intends to step into Arm architecture with the upcoming Phoenix processor, set for launch in 2025. There are also whispers of NVIDIA partnering with MediaTek to develop a chip processor featuring SoC+GPU capabilities on the Arm architecture, with an initial focus on ChromeBook market, where MediaTek boasts years of experience.

In the PC market, significant factors include processor development timelines, product performance, power efficiency, extended battery life, and compatibility with software and hardware. High-end CPUs and GPUs have become indispensable components for high-end computers. Currently, Intel leads the CPU market, with AMD following closely in the x86 landscape. As more companies delve into the development of Arm-based processors, there is potential for them to carve a share from the x86 market in the future.

2. Arm Architecture Processors Gain Momentum, Intel Focusing on AI Software Application Processor Development

Apple’s M-series chips demonstrate their efficiency and extended battery life. Microsoft recognizes the advantages of the Arm architecture and is dedicated to fostering a strategic collaboration for Windows on Arm. This collaboration involves integrating operating systems with processors to attract leading manufacturers to engage in Arm-based processor development, aligning with the growing demands for AI PCs.

In the realm of x86 architecture, Intel enjoys a dominant position in the CPU market. To tap into the opportunities arising from AI PCs, Intel has integrated AI acceleration engine features into its processors, introducing a new generation of AI application processors that combine CPU, GPU, and NPU (Neural Processing Unit) functionalities. This caters to the growing demand for generative AI applications in enterprise mobile PCs. Furthermore, Intel has joined forces with major laptop brands to launch new AI PCs, aiming to seize a substantial share of the market.

As momentum grows in Arm-based processor development, Intel maintains confidence that their immediate effect on the demand for x86 architecture processors will be restrained. It is unlikely to hinder Intel’s continuous advancement in developing new processors. Unlike competitors concentrating on Arm architecture processor development, Intel places a stronger focus on AI software applications and the market opportunities arising from its partnership with the Microsoft platform.

Explore more:

• [News] Qualcomm Challenges Intel & AMD in AI PC Chip Race
• [News] Intel, Samsung, TSMC Race in Cutting-Edge Processes

Non-Apple IC manufacturers are reporting positive business performance this quarter. Chinese brands are experiencing a revival driven by the release of new Huawei smartphones, and a resolution in inventory clearance in emerging markets. This has led to an increase in orders. Additionally, Samsung’s success in foldable phones is contributing to the upsurge. This overall trend is benefiting companies like MediaTek and Novatek in the smartphone-related IC manufacturing sector.

As reported by CTEE, China holds about 25% of the global smartphone market, with industry analysts predicting sales of 260 million units in China for 2023. Huawei’s re-entry into the smartphone market will significantly impact the smartphone SoC market share in 2024. This development will challenge Apple’s market share in China, and Huawei’s upcoming Nova mid-range smartphones will also affect brands like Honor, OPPO, Vivo, Xiaomi, and others, as they vie for market share.

Key drivers of the smartphone industry’s recovery

According to Economic Daily News, many Chinese smartphone brands are optimistic about the local market’s improvement following the launch of Huawei’s new smartphones. Beyond flagship models like the Mate 60, mid-range series like Nova are also showing increased activity. Leading non-Apple smartphone manufacturers are gearing up for a surge in demand and are actively stocking up on top-tier flagship chips, thus stimulating the supply chain’s demand for additional orders.

At the same time, Taiwanese manufacturers mention that Chinese smartphone brands that primarily target emerging markets have already digested their accumulated inventory and are now starting to replenish their stocks. Some smartphone-related chip manufacturers have also pointed out that Samsung and other Korean smartphone giants are enjoying good sales of foldable phones and have recently conveyed messages about increasing orders.

TrendForce notes that the current revival on demand side in the global smartphone market is primarily driven by inventory restocking. The potential for sustained orders remains uncertain due to the prevailing economic challenges.

(Image: MediaTek)

Explore more:

• [News] Oppo and Transsion Expand to Southeast Asia, with a Focus on Foldable Phones
• [News] Industry Insiders Report Huawei’s Target of Shipping 100 Million Smartphones Next Year
• [News] Xiaomi’s Second Chip Company Founded with a Capital of 3 Billion Yuan
• OLED Penetration in Smartphones to Exceed 50% in 2023

As reported by Jiwei, Beijing Xuanjie Technology Co., Ltd. has recently been established, and its legal representative is Xuezhong Zeng, who holds the position of Senior Vice President at Xiaomi Corporation. The company has registered capital amounting to 3 billion Yuan and is involved in activities related to IC design services and product sales, among other areas.

This marks the second “Xuanjie Technology” venture within the Xiaomi family. Back in December 2021, Shanghai Xuanjie Technology Co., Ltd. was established, also under the legal representation of Zeng. The company’s scope of operations encompasses technological services in the semiconductor field, integration of information systems, IC design and service related, and product sales. All of these are fully owned by X-Ring Limited.

Xiaomi, alongside OPPO and VIVO, among other Chinese smartphone brands, often find it challenging to independently develop advanced system on a chip (SoC) due to constraints in technical expertise and financial resources. Consequently, their primary focus on developing specialized chips like power management integrated circuits (PMICs) and Image Signal Processor (ISP), based on their collective experience in chip development.

Xiaomi stands out as the sole Chinese brand among these peers, having successfully launched its self-developed SoC in 2017, known as the “Surge S1,” which was integrated into the mid-range Xiaomi 5C. Nevertheless, the Xiaomi 5C fell short of expectations, mainly due to the absence of distinguishing features in the “Surge S1.” Many reviews highlighted subpar real-world performance of Xiaomi phones equipped with the S1 chip.

Subsequently, Xiaomi did not introduce a successor chip. In 2021, they introduced the ISP chip “Surge C1” and the charging chip “Surge P1.” In 2022, they rolled out the PMIC G1, emphasizing its significant potential in enhancing battery health, accurate battery life predictions, and overall smartphone battery performance.

Xiaomi’s President, Weibing Lu, has previously reaffirmed the company’s unwavering commitment to developing in-house chips. They fully acknowledge the long-term and intricate nature of chip development, respect the established development patterns in the industry, and remain prepared for a long-term strategy, all with the ultimate goal of enhancing the competitiveness and user experience of their end products.
(Image: Xiaomi)

According to CTEE, NVIDIA’s forthcoming AI server, the GB200 (B100), slated for a 2024 release, has entered the certification phase in the supply chain. Recent market rumors suggest that Foxconn, originally intended to secure orders for the B100 board, faced certification challenges. As a result, Wistron has maintained its initial order share.

Additionally, it is worth noting that Ingrasys, a subsidiary of Foxconn, is actively manufacturing the H100 product and is a strong contender to secure orders.

Unofficial sources indicate that NVIDIA initially considered making Foxconn the second supplier for AI-GPU server baseboard in the upcoming B100 series. However, due to yield concerns and other factors, Wistron is still expected to receive 100% of the orders. Wistron has also capitalized on the opportunity to secure orders for the front-end AI-GPU module, which appears to be a successful move.

The rapid evolution of AI has intensified competition among assembly plants. Wistron and Foxconn play crucial roles as suppliers for NVIDIA’s current mainstream H100 series GPU modules and baseboards.

Wistron, as the exclusive supplier for H100 baseboards in the NVIDIA DGX and HGX architectures, also holds the exclusive role of providing mainboards and assembling AI servers for DGX. As shipments of the H100 series AI servers, built on the NVIDIA DGX and HGX frameworks, steadily increase in the latter half of the year, Wistron’s AI server-related product business shows consistent growth.

It’s worth noting that Ingrasys is responsible for manufacturing the H100. NVIDIA’s founder, Jensen Huang, and Foxconn’s Chairman, Young Liu, jointly attended a technology event, highlighted the close collaboration in between, underscoring Foxconn’s determination to secure B100 orders.

(Image: Wistron)