Production of semiconductor chip File photo: VCG

The US government is sacrificing the interests of US semiconductor companies on the altar of its China-containment strategy with its hegemonic and bullying practices that have seriously disrupted global semiconductor industry and supply chains, Chinese analysts said on Monday, over the reported trouble faced by California-based US graphics processing unit (GPU) giant Nvidia in its downgraded offerings to Chinese customers.

The event once again demonstrated the selfish aim of the US government to relentlessly crack down on China in the technology sector, and its selfish desire to retain a certain amount of profits by selling China downgraded chips is not working as planned, analysts noted. 

China is steadily beefing up its chip industry, with progress made in artificial intelligence (AI), proving that the US government's scheme of crippling China's AI development is failing.

With US chip firms forced to lose the Chinese market, as well as a significant portion of their revenue, US technology companies will gradually lose their global technological lead, Chinese analysts noted.

The Wall Street Journal reported on Sunday (US time) that Nvidia's customers in China are "not so keen on buying its lower-powered AI chips," which the company designed to be compliant with US export rules.

China's leading cloud companies have been testing Nivdia samples since November and said that they would order far fewer of its chips in 2024 than originally planned, the WSJ report said, citing sources.

Companies mentioned in the report, including Alibaba Group, Baidu, Tencent and ByteDance, did not reply to a Global Times inquiry as of press time on Monday.

The US has been stepping up control over chip export to China and going after China's semiconductor industry in the name of national security. This is out-and-out economic bullying, Foreign Ministry spokesperson Mao Ning said on Monday.

The Nvidia RTX 4090 is a consumer graphics card for video game enthusiasts. But the company has been forced to pull this product off the Chinese market due to US export controls, Mao pointed out.

Mao said the US behavior is taking a serious toll on the stability of the global industrial and supply chains. It poisons the atmosphere for international cooperation and fuels division and confrontation. This selfish move will inevitably backfire.

Xiang Ligang, a veteran telecom industry observer, told the Global Times on Monday that reports that Nvidia chips were losing favor among Chinese customers showed that the company's assumption is just naive that Chinese customers will always buy and use its chips, no matter what.

"Chinese customers are picky. If Nvidia cannot provide its best offerings and can only come up with less powerful products, they [Chinese customers] are going to look somewhere else," Xiang said.

There are at least five Chinese companies that can offer hardware that is competitive with Nvidia offerings, Xiang said, noting that what the Chinese companies lack is an ecosystem like that of Nvidia's CUDA computing platform, which can greatly improve the comprehensive performance of chips.

"The question is whether the vast and fast-growing Chinese market can support the building and the functioning of a homegrown ecosystem," Xiang said.

"I'm sure that the Chinese government is working in this regard to pull together industry players in China to build a domestic ecosystem based on domestically produced GPUs that could rival that of global leaders in the future," Xiang said.

An industry observer who declined to be identified told the Global Times on Monday that since advanced chips are not available from US suppliers and continued purchases face the prospect of being cut off by the US government's tightening curbs at any time, it is a must and only natural for Chinese companies to seek diversified technology and channels to mitigate risks from rising uncertainty.

Experts predicted that as the US government recklessly scales up its chip export ban on China, Nvidia is very likely to be "removed" from the Chinese market. The chip curb won't hinder the development of AI in China as AI chip manufacturing is actually relatively easy, they said. Other US chip firms such as Qualcomm and Intel are also affected by the US export curbs.

Ma Jihua, an expert in the telecom industry, told the Global Times on Monday that China's evolving local demand for AI computing and GPUs will accelerate the development pace of the country's independent and controllable AI and chip industries. 

The downgraded Nvidia chips, which have lost their cost-competitiveness, will inevitably be abandoned while domestic alternative suppliers such as Huawei can deliver some products to rival those from Nvidia. "This is what Nvidia fears most."

Ma said that the latest US measures to contain China's AI development have had little impact despite some short-term hindrance.

Nvidia has failed to unveil its for China-specific chips at timings suggested by some media outlets.

During its third-quarter earnings call, it warned of a significant decline in fourth-quarter sales in China, following an upgraded US chip ban announced in October to hinder China's technological advancement.

The artificial intervention of the US government in the global semiconductor supply chain has nonetheless offered opportunities for domestic Chinese companies making GPUs, Xiang said. "Now that the leader has its hands tied up, these companies are increasingly looking at the market segment in which they previously had no chance for."