Innovation

Nvidia towards $12 billion sale of AI chips in China

Samsung announced an operating profit for the quarter that grew more than 15-fold to $7.5 billion on revenues that rose 23%.

5 July 2024

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FILE PHOTO: Semiconductor chips are seen on a printed circuit board in this illustration picture taken February 17, 2023. REUTERS/Florence Lo/Illustration//File Photo

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Nvidia could sell $12 billion worth of artificial intelligence chips to China this year, despite the slowdown related to US export controls. The rumour is reported by the Financial Times, according to which analysts' forecasts indicate that the $3 trillion Silicon Valley group will deliver more than one million of its new H20 chips in the coming months, designed to circumvent US restrictions on the sale of AI processors to Chinese customers.

The Battle of the Chips

This is almost double, estimates chip consultancy SemiAnalysis, what Huawei expects to sell with its Chinese competitor product Ascend 910B. Nvidia, the Ft. recalls, is the latest Silicon Valley company to find itself embroiled in the tensions between Washington and Beijing, with the Biden administration committed to stemming the flow of the most powerful chips to China, fearing that Beijing might use them in military applications with artificial intelligence.

H20 chips cost between $12 and $13,000, hence the estimated possible $12 billion in sales for Nvidia, compared to the group's previous total revenue in China of $10.3 billion in the year ending January 2024. In 2021, before the US began imposing export controls, China accounted for more than a quarter of Nvidia's total revenues. If the H20 chip sells as expected by analysts, China would account for 10% of this year's sales.

Growing results for Samsung

Chips were also the driving force behind Samsung Electronics' results, which posted the fastest pace of sales and profit growth in years, reflecting a pick-up in demand for memory chips as the development of artificial intelligence accelerates globally. The world's largest maker of memory chips and smartphones said operating profit grew more than 15-fold to 10.4 trillion won ($7.5 billion) in its preliminary results for the June quarter, exceeding market projections. Sales grew about 23%, the biggest increase since the Covid-era highs recorded in 2021. Samsung is expected to announce final earnings with breakdowns for individual divisions on 31 July, and from there we will be able to go into more detail about the results for the period.

However, the preliminary results were enough to drive Samsung shares up almost 3 per cent in Seoul.

The chip market

Samsung's results underscore how the $160 billion memory market is recovering from a severe post-Covid recession this year, driven by a boom in data centres and the development of artificial intelligence. That demand has pushed average memory chip prices up 15 per cent from the previous quarter, CLSA estimates, helping Samsung's largest division reverse losses from the previous year.

Both DRAM and NAND prices were revised upwards as demand for AI servers and enterprise data storage grew, helping to reverse stock valuation losses, said Sanjeev Rana, analyst at CLSA Securities Korea.

The government of South Korea said this week that the country exported the largest number of semiconductors ever recorded in June, bringing its strade surplus to $8 billion, the largest since 2020.

Samsung strikes

Samsung has decided to announce its results a few days before a three-day strike organised by the trade unions, which will involve its more than 28,000 employees - including its main chip plants - over a wage dispute. The proposed action follows a strike involving a small number of employees last month, the company's first in 55 years. It is unclear at the moment how many employees intend to participate in the strike on Monday 8 July, but certainly the rising figures will only increase the unions' demands.