The latest news, NVIDIA will resume shipments of China's "special edition" AI chips in the second quarter, but Tencent, Alibaba and other major customers are not interested.

Two people familiar with the matter revealed that NVIDIA plans to start mass production of a China-designed AI chip in the second quarter of 2024, in order to comply with U.S. export regulations. One of the people familiar with the matter said that the initial production will be limited, and NVIDIA will mainly meet the orders of large customers.

It is learnt that the chip that NVIDIA wants to ask TSMC to prioritise in the form of a "super rush order" could be the H20, which has the most powerful specifications of the three chips being developed for the Chinese market after facing controls.

According to the Wall Street Journal (WSJ), China's biggest cloud companies began testing samples of the H20 provided by NVIDIA last November. But Alibaba and Tencent have made it clear to NVIDIA that far fewer chips will be ordered in 2024 than were planned before the new US ban came out, the sources said.

Fearing that the U.S. may tighten restrictions again, big Chinese customers are reluctant to spend big bucks betting on a downgraded H20, instead turning to testing and sourcing alternatives from domestic manufacturers, the report said.

In the short term, the gap between NVIDIA's downgraded GPUs and China's homegrown alternatives has narrowed, boosting the attractiveness of the domestic chips to cloud computing and AI big-model customers, according to some analyses.

According to sources, Alibaba and Tencent have decided to shift some of their orders to companies such as Huawei and rely more on home-developed ASICs. baidu and ByteDance have also taken the same action.

Analysts at TrendForce, a leading semiconductor consulting firm, pointed out that Chinese cloud companies currently purchase about 80% of their high-end AI chips from NVIDIA, and that percentage could drop to 50-60% in the next five years.

According to the news, Huawei has secured a pre-order of at least 5,000 of its Rise 910B chips from a major Chinese customer in 2023, with the latter seen as the closest Chinese alternative to NVIDIA's A100 after testing. Deliveries of the Rise 910B are expected to begin in 2024, but Huawei is still facing capacity constraints due to US sanctions.

*Disclaimer: The news in this article originated from the Wall Street Journal, TrendForce, Chip Master, collated by YuanXinAi Electronics, the news has not been officially confirmed, and is only for the purpose of communication and learning.