Baidu placed AI chip order from Huawei in shift away from Nvidia -sources

Digital China Holdings

07/11/2023 09:14

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       BEIJING/SHANGHAI, Nov 7 (Reuters) - Baidu  9888.HK 
ordered artificial intelligence chips from Huawei  HWT.UL  this
year, two people familiar with the matter said, adding to signs
that U.S. pressure is prompting Chinese acceptance of the firm's
products as an alternative to Nvidia's.
    One of the people said Baidu, one of China's leading AI
firms, which operates the Ernie large language model (LLM),
placed the order in August, ahead of widely anticipated new
rules by the U.S. government that in October tightened
restrictions on exports of chips and chip tools to China,
including those of U.S. chip giant Nvidia  NVDA.O .
    Baidu ordered 1,600 of Huawei Technologies' 910B Ascend AI
chips - which the Chinese firm developed as an alternative to
Nvidia's A100 chip - for 200 servers, the source said, adding
that by October, Huawei had delivered more 60% of the order, or
about 1,000 chips, to Baidu.
    The second person said that the order's total value was
approximately 450 million yuan ($61.83 million) and that Huawei
was to deliver all of the chips by the end of this year. Both
people declined to be named because the details of the deal were
confidential.
    Although the order is tiny relative to the thousands of
chips top Chinese tech firms have historically ordered from
Nvidia, the sources said it was significant, as it showed how
some firms could shift away from the U.S. company. 
    Baidu, alongside Chinese peers such as Tencent  0700.HK  and
Alibaba  9988.HK , is known to be a long-time client of Nvidia.
Baidu was not previously known to be a AI chip customer of
Huawei. 
    Although Huawei's Ascend chips are still seen as far
inferior to Nvidia's in terms of performance, the first source
said they were the most sophisticated domestic option available
in China.
    "They were ordering 910B chips to prepare for a future where
they may no longer be able to purchase from Nvidia," the first
source said. 
    Baidu and Huawei did not respond to requests for comment.
Nvidia declined to comment. 
    Huawei's website says it has since 2020 collaborated with
Baidu to make its AI platform compatible with Huawei hardware.
In August, the two companies said they would deepen
compatibility between Baidu’s Ernie AI model and Huawei’s Ascend
chips.
    Baidu has developed its own line of Kunlun AI chips, which
the company says supports large-scale AI computing, but the
company has mainly relied on Nvidia's A100 chip to train its
LLM.
    After the U.S. last year imposed rules stopping Nvidia from
selling its A100 and H100 chips to China, the company issued new
A800 and H800 chips as alternatives for Chinese customers,
including Baidu. Nvidia is no longer able to sell those chips to
China because of the October rules.  
    
    HUAWEI OPPORTUNITY 
    Analysts predicted last month that the U.S. curbs would
create an opening for Huawei to expand in its $7 billion home
market. The company has been the subject of U.S. export controls
since 2019.
    The order adds to signs of technological advances for
Huawei, as Beijing pours investment into its domestic
semiconductor industry to help it catch up with overseas peers
and urges state-owned firms to replace foreign technology with
domestic alternatives. 
    Huawei drew substantial global attention in August when it
unexpectedly unveiled a new smartphone that analysts said uses
internally developed processors featuring advanced semiconductor
technology, highlighting the company's progress in chip
development despite sanctions.
    In September, Reuters reported that Huawei's in-house chip
design unit, HiSilicon, had commenced shipments of newly
developed Chinese-made processors for surveillance cameras to
clients in 2023 in another comeback sign. 

($1 = 7.2782 Chinese yuan renminbi)

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 (Reporting by Yelin Mo, Zhang Yan and Brenda Goh; Additional
reporting by Josh Ye in Hong Kong; Editing by Gerry Doyle)