Nvidia vs. Huawei: The Battle for AI Supremacy Heats Up as Chip Constraints Redirect Focus

With soaring demand for its artificial intelligence (AI) chips and production constraints, Huawei Technologies Co has shifted focus towards AI, affecting the production of its premium Mate 60 smartphones, which compete with Apple Inc’s AAPL iPhone. Huawei’s production facility, responsible for its Ascend AI chips and Kirin chips, has experienced reduced output due to low yield rates. 

This strategic decision comes as Huawei leads Chinese smartphone sales for the first time in over three years, despite facing significant challenges from U.S. sanctions imposed in 2019 that restricted access to advanced chipmaking tools, Reuters reports. 

Also Read: Nvidia Faces Fierce Competition in China, Tencent and Huawei Lead the Charge

Last week, reports indicated that AI chip frontrunner Nvidia Corp NVDA has begun accepting pre-orders for its new AI chip, the H20, explicitly targeting the Chinese market and aiming to compete with Huawei’s similar products on price. 

The company has set the price of the H20 chip between $12,000 and $15,000, positioning it as a direct competitor to Huawei’s 910B chip in terms of cost. 

Nvidia’s CEO, Jensen Huang, emphasized the increasing worldwide demand for Nvidia’s offerings as nations such as India, Japan, France, and Canada invest in developing their domestic AI infrastructures to use their data effectively.

Also, last week, an Apple analyst cited the possibility of the company facing a significant drop in iPhone shipments by 2024.

The U.S. has tightened restrictions on AI chip sales to China, a market previously dominated by Nvidia Corp NVDA, prompting a shift towards domestic options like Huawei’s Ascend series. 

The Chinese government’s push to enhance computing power has seen local authorities launch data center projects, increasing demand for Huawei’s AI chips. Huawei’s Ascend 910B chip is now considered China’s most competitive non-Nvidia AI option.

Huawei’s focus on Ascend chips over Kirin has led to a slowdown in Mate 60 smartphone production, with efforts underway to improve chip yield rates. 

Despite limited public information on Huawei’s chip manufacturing capabilities, the company surprised the market with the launch of the Mate 60 series, which features a Chinese-made chip capable of 5G speeds. 

This achievement is speculated to involve collaboration with SMIC, China’s largest contract chipmaker, using a more laborious and expensive chip production process due to U.S. restrictions. 

The Mate 60’s scarcity has been evident, with long waiting times for pre-orders, yet it has propelled Huawei back to the top of China’s smartphone market in early 2024.

Price Action: NVDA shares traded higher by 3.07% at $681.90 premarket on the last check Monday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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