In response to the recent broadened U.S. restrictions on high-end chip sales to China, Tencent Holdings is strategically navigating the challenges posed by the semiconductor export bans to safeguard its cloud services. The company, acknowledging its substantial stockpile of AI chips from U.S. manufacturer Nvidia, is proactively planning to optimize their usage amidst the evolving regulatory landscape.
Tencent’s President, Martin Lau, emphasized the impact of the U.S. ban on exporting additional AI chips to China, revealing that the company is committed to efficiently utilizing its existing Nvidia chip stock for the continued development of its “Hunyuan” AI model. Despite the ban, Tencent assures continuity for at least a couple more generations, minimizing the near-term impact on its AI capabilities.
Tencent's Strategy to Mitigate Impact
However, the export restrictions are expected to affect Tencent’s cloud services, particularly in the resale of AI chips to clients. Tencent currently relies on Nvidia, which dominates approximately 90% of the Chinese AI chip market. The company is exploring alternatives, including domestically produced chips, to mitigate the risks posed by the U.S. restrictions.
Tencent’s rival, Baidu, has reportedly taken steps to secure alternatives by ordering 1,600 Huawei Ascend 910B chips. In a bid to address the challenges posed by the ban on its H800 AI chips developed by Nvidia specifically for China, Tencent plans to reserve them for the crucial training phase of AI model development. The company is actively seeking ways to offload inference capability to lower-performance chips, preserving high-performance AI chips for training purposes.
Increasing Reliance on Domestic Chips
Recognizing the need to reduce reliance on U.S.-made chips, Tencent is looking to increase its usage of domestically-produced chips. The company is not alone in this endeavor, as Chinese firms, including Baidu, are seeking alternatives and turning to domestic chipmakers like Huawei.
In response to the changing landscape, Nvidia is expected to announce new China-bound AI chips designed to comply with the export rules by featuring reduced computing power while retaining essential AI features.
China's Semiconductor Industry Efforts
Tencent’s move to explore domestic sources for training chips aligns with China’s broader efforts to invest billions in its semiconductor industry, countering the impact of U.S. high-end chip bans. Initiatives like the $41 billion fund launched in September and support for domestic chipmakers, such as YMTC, demonstrate China’s commitment to achieving self-sufficiency in the semiconductor sector despite external challenges.
