China Starts 'Semiconductor Hoarding'... Pre-orders 6 Trillion Won Worth of Nvidia Products

Before US Tightens Regulations... $5 Billion Worth of Orders Placed

As the United States intensifies semiconductor export restrictions against China, Chinese IT giants have started stockpiling semiconductors. With the U.S. continuously raising the level of regulations, including export controls on semiconductors and administrative orders limiting capital investments, Chinese companies are resorting to 'every man for himself' strategies.

According to major foreign media on the 9th (local time), Chinese companies such as Baidu, Tencent, and Alibaba have placed orders worth $5 billion (6.6 trillion KRW) for NVIDIA semiconductors. They plan to secure $1 billion worth of inventory this year and $4 billion worth next year.

The semiconductors ordered by Chinese companies from NVIDIA are the A800, an advanced graphics processing unit (GPU) for data centers. It is essential for building generative artificial intelligence (AI) systems but is a lower-spec model compared to the latest GPU model, the A100. The A800 has a data transfer speed of 400 gigabytes (GB) per second, which is lower than the A100's 600 GB per second. However, as the U.S. controls exports of the high-spec A100 to China, it is analyzed that Chinese companies are purchasing the lower-spec model that is not subject to regulations.

In particular, media reports that the U.S. is considering export restrictions on the A800 following the A100 have led to stockpiling to secure inventory before additional export controls are implemented. Currently, Chinese IT companies are competing in generative AI development, but without NVIDIA products that account for 90% of the AI semiconductor market, developing AI technology itself is difficult.

ByteDance, the parent company of social media platform TikTok, is reported to have stockpiled at least 10,000 NVIDIA semiconductors. The company, which is developing various generative AI products such as AI chatbots, has also ordered 70,000 units of A800 worth about $700 million to be supplied next year. Baidu is also developing a generative AI chatbot similar to ChatGPT. An anonymous Baidu official explained, "Without NVIDIA semiconductors, it is impossible to train any large language model necessary for AI development."

As Chinese IT giants stockpile NVIDIA semiconductors, semiconductor prices held by the distribution industry are also rising. Just a few months ago, the inventory held by each company was at the level of thousands of units, but with rampant stockpiling, the volume circulating in the market has significantly decreased. A representative from the industry distributing NVIDIA semiconductors said, "The price of A800 held by the distribution industry has increased by more than 50%."

One foreign media outlet reported, "China is competing to stockpile A800 chips amid concerns that the Biden administration is considering broader new export controls," adding, "Fear of U.S. export controls is triggering a rush among Chinese companies to purchase NVIDIA semiconductors."