Next Year’s Orders from Chinese Companies Total 6.75 Trillion Won
New Ministry of Commerce Regulations Immediately Enforced, Blocking Exports to China
"China's AI Development Speed Also Expected to Slow Down"
The U.S. government’s control over the export of low-specification artificial intelligence (AI) semiconductors to China has put Nvidia’s $5 billion (approximately 6.75 trillion KRW) semiconductor sales contract with Chinese companies for next year at risk of cancellation. The pace of AI technology development among Chinese tech companies is also expected to slow down.
According to the Wall Street Journal (WSJ) on the 31st, the U.S. government sent a letter to Nvidia last week notifying that the recently announced export control measures on AI semiconductors to China have taken immediate effect.
Earlier, the U.S. Department of Commerce announced on the 17th a measure banning exports of AI semiconductors with lower specifications than those set in previous export control measures to China. Nvidia had been exporting low-spec AI semiconductors A800 and H800, which were made as China-exclusive products, to circumvent U.S. export controls, but this regulation has now made even that difficult.
Initially, Nvidia planned to deliver part of the $5 billion worth of semiconductor orders from Chinese companies for next year early, before the new regulation fully takes effect in mid-November. Deliveries for AI semiconductor orders placed by Chinese companies this year had already been completed. However, with the U.S. government notifying that the ban on exports of low-spec AI semiconductors to China has taken immediate effect, Nvidia’s plans have been disrupted. Nvidia has already stopped accepting new orders and must cancel existing orders from Chinese companies such as Alibaba Group, ByteDance, and Baidu unless it obtains export approval from the Department of Commerce.
An Nvidia spokesperson said, "We have been working to supply advanced AI computing systems using graphics chips affected by the regulations to customers in the U.S. and other regions, and we are currently seeking additional supply channels," adding, "These new export control measures are not expected to have a significant impact in the short term."
However, significant damage is expected in the mid to long term. Nvidia Chief Financial Officer Colette Kress stated earlier this year, "If the ban on AI semiconductor exports to China continues, opportunities for the U.S. semiconductor industry will be permanently lost."
The WSJ analyzed that Nvidia and Chinese companies had anticipated additional U.S. government regulations and discussed expanding purchases of another AI semiconductor, the L40S, but it does not replace the performance of the A800 and H800, which are now banned from export.
As the U.S. strengthens export controls on advanced semiconductors to China, the pace of AI development in China is inevitably expected to slow down. Chinese companies are seeking workarounds, but given the high costs and time involved, the path ahead is expected to be difficult. According to a Bernstein Research report, using Nvidia’s low-spec AI semiconductor V100, released in 2017, for AI development requires more semiconductors and power, increasing AI system training costs by an estimated 30%.
The WSJ reported, "The semiconductor export controls will slow China’s AI development," adding, "Chinese companies will have to rely on inventory or use more low-spec semiconductors and find secondary solutions."
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