Baidu (NASDAQ: BIDU) commissioned artificial intelligence chips from Huawei this year, said two people familiar with the matter, adding to signs that U.S. pressure is leading China to embrace the company’s products as an alternative to Nvidia (NASDAQ: NVDA).
One of the sources said that Baidu, one of China’s leading AI companies operating the large Ernie (LLM) language model, placed the order in August, before the widely anticipated new rules by the U.S. government in October that strengthened restrictions on chip exports and chip tools to China, including those from the American chip giant Nvidia.
The information comes from Reuters.
Baidu ordered 1,600 Huawei Technologies Ascend AI 910B chips—developed by the Chinese company as an alternative to Nvidia’s A100 chip—for 200 servers, the source said, adding that in October, Huawei delivered more than 60% of the order, or around 1,000 chips, to Baidu.
The second person said the total value of the order was approximately 450 million yuan ($61.83 million), and Huawei was expected to deliver all the chips by the end of this year. Both sources declined to be identified because the details of the agreement were confidential.
While the order is small compared to the thousands of chips that major Chinese tech companies have historically ordered from Nvidia, the sources said it was significant as it showed how some companies might distance themselves from the American company.
Baidu, alongside Chinese competitors like Tencent and Alibaba, is known to be a long-time customer of Nvidia. It was previously unknown that Baidu was a customer for Huawei’s AI chips.
Although Huawei’s Ascend chips are still seen as much 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 maybe they couldn’t buy from Nvidia anymore,” said the first source.
Baidu and Huawei did not respond to requests for comments. Nvidia declined to comment.
Another source said they have been collaborating with Baidu since 2020 to make its AI platform compatible with Huawei hardware. In August, both companies announced plans to 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 claims supports large-scale AI computing, but it has mainly relied on Nvidia’s A100 chip to train its LLM.
After the U.S. imposed rules last year that prevented 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 can no longer sell these chips to China due to the October rules.
HUAWEI OPPORTUNITY
Analysts predicted last month that U.S. restrictions would create an opening for Huawei to expand in its $7 billion domestic market. The company has been subject to U.S. export controls since 2019.
The order adds to signs of technological advancements for Huawei as Beijing invests in its domestic semiconductor industry to help it catch up with foreign counterparts and urges state firms to replace foreign technology with domestic alternatives.
Huawei attracted substantial global attention in August when it unexpectedly unveiled a new smartphone that analysts say uses internally developed processors with 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 begun shipping newly developed Chinese-made processors for surveillance cameras to customers in 2023, another sign of resurgence.