In the face of Huawei's fierce competition in the field of AI chips, global chip giant Nvidia has adopted a price reduction strategy to enhance its competitiveness in the Chinese market. According to Reuters, Nvidia's H20 AI chip, developed specifically for the Chinese market, began to reduce its price when the supply was sufficient, and in some cases its price was even more than 10% lower than Huawei's Ascend 910B chip.
According to the latest market developments, in order to enhance its competitiveness in the Chinese market, Nvidia has lowered the price of its AI chip H20 specially developed for the Chinese market. Behind this strategic adjustment is the dual pressure faced by NVIDIA's business in China: on the one hand, the rapid rise of local Chinese companies such as Huawei in the field of AI chips poses a direct competitive threat to NVIDIA; On the other hand, U.S. export control policies against China have restricted Nvidia from supplying its most advanced chip products to the Chinese market.
Huawei, as a major competitor to Nvidia, has been actively developing its own AI chips. Huawei's Ascend 910B chip competes with Nvidia's H20 in terms of performance, and even outperforms the H20 in some key performance indicators. Huawei plans to significantly increase shipments of the Ascend 910B this year, which undoubtedly puts huge market pressure on Nvidia.
Figure: Nvidia price cuts (Source: CnBeta)
Faced with the dual challenges of Huawei's competition and U.S. export controls, Nvidia has adopted a price reduction strategy. According to market sources, the H20 chip is sold at a price of more than 10% cheaper than Huawei's Ascend 910B in some cases. This strategy is aimed at stimulating demand and attracting more Chinese customers, especially in the current market environment of abundant supply and weak demand. The Chinese market is strategically important for NVIDIA. China is NVIDIA's third-largest market, accounting for 17% of the company's total revenue in fiscal 2024. Therefore, NVIDIA has every incentive to maintain and expand its presence in the Chinese market.
Analysts say that while Nvidia is trying to grab a market share it cannot afford to lose, the outlook is increasingly uncertain. According to a report by CCID Consulting, a Chinese market research firm, China's share of the global AI industry is expected to exceed 30% by 2035.
Despite the challenges, Nvidia remains bullish on the potential of the Chinese market and is actively responding to U.S. tensions and competition in the Chinese market. Nvidia is taking a delicate path, balancing between preserving the Chinese market and dealing with tensions in the United States. In the long run, NVIDIA is also preparing for possible adverse scenarios, including continuous innovation and optimization in product performance, price, ecological construction, etc. Nvidia may want to increase its market share and brand awareness by lowering prices. While some profits may be sacrificed in the short term, in the long run, this will help Nvidia build a stronger market position in the Chinese market.
