AsianFin -- Nvidia Corporation CEO Jensen Huang is becoming more cautious about the artificial intelligence (AI) chip giant’s business in China even though the recent Sino-U.S. trade talks could lead to some of export curbs to be eased.
Credit：China Daily
Nvidia will exclude the Chinese market from its revenue and profit forecast following the tough U.S. trade restrictions on chip sales to China, Huang said a CNN interview on Thursday.
Asked if the United States would lift the export controls after the trade discussions with China in London this week, Huang said he wasn’t counting on it. He continued:”But, if it happens, then it will be a great bonus. I’ve told all of our investors and shareholders that, going forward, our forecasts will not include the China market.”
Nvidia the same day said it was still evaluating its "limited options for the China market". "Until we settle on a new product design and receive approval from the U.S. government, we are effectively foreclosed from China’s $50 billion data center market," the chipmaker said.
Huang in the CNN interview reiterated his criticism of U.S. export controls on chips. “The goals of the export controls are not being achieved,” he said. “Whatever those goals are that were being discussed initially, (they) are apparently not working. And so I think, with all export controls, the goals have to be well-articulated and tested over time.”
On May 21, Huang described U.S. chip export controls as a “failure” at Computex, an AI trade show in Taiwan. He the policies have cut the AI chip leader’s China market share from 95% to 50% and motivated Beijing to make its own chips faster.
In the financial results released on May 28, Nvidia said incurred a $4.5 billion charge during its first fiscal quarter ended April 27 associated with H20 excess inventory and purchase obligations as the demand for H20 diminished under the new requirements for export license. The company on April 9 was informed by the U.S. government that a license is required for exports of its H20 products, which were designed primarily for China, into the market.
Huang told analysts on an earnings call Nvidia has some limited options that it is exploring so it can continue to serve the Chinese market, and for now, it has to take a write-off for H20 chips.
“China is one of the world’s largest AI markets and a springboard to global success with half of the world’s AI researchers based there; the platform that wins China is positioned to lead globally today,” Huang said. “However, the $50 billion China market is effectively closed to us. The H20 export ban ended our Hopper data center business in China. We cannot reduce Hopper further to comply.”
Huang cautioned that “shielding Chinese chipmakers from U.S. competition only strengthens them abroad, and weakens American’s position. Export restrictions have spurred China’s innovation and scale.” He continued: “the AI race is not just about chips. It’s about which stack the world runs on.”
For Huang, Washington’s policy has made on on the assumption that China cannot make AI chips, while such assumption “was always questionable, and now its clearly wrong.”
However, the Trump administration seemed not to soften its stance on controls on advanced semiconductors. National Economic Council Director Kevin Hassett on Monday expected restrictions on exports of some microchips that China views as critical to its manufacturing sector could be loosened after U.S.-China trade talks in London this week, but the restrictions on the most advanced AI chips made by Nvidia would remain.
“The very, very high-end Nvidia stuff is not what I’m talking about,” Hassett said, adding that curbs would not be lifted on the Nvidia H2O chips that are used to train AI services. “I’m talking about possible export controls on other semiconductors which are also very important to them.”
