Despite potential restrictions on selling its high-performance computing GPUs to major Chinese consumers like Huawei and Inspur, Nvidia is optimistic about finding alternative partners in Asia to distribute its products.
The loss of these major consumers could result in significant financial losses, as they consume a considerable amount of Nvidia’s hardware.
Now Nvidia is left with no choice but to pursue alternative partnerships. However, it plans to look for additional partners to help them establish computing capabilities in the Asia-Pacific region and other locations as they move forward. Their top priority is to follow export control regulations and legal requirements, so they are willing to collaborate with other partners to achieve this objective.
In 2019, the U.S. Department of Commerce added Huawei to its Entity List, which necessitates American companies to acquire an export license if they wish to sell their products, software, technologies, or services to Huawei.
Nvidia could potentially sell its compute GPUs to Huawei by obtaining the required license. However, due to the Biden administration’s plan to impose further restrictions on what American companies can export to Huawei, Nvidia is anticipated to face substantial financial losses, as per a report from a government contractor cited by Reuters.
Recently, Inspur, one of the leading server manufacturers in China and the third-largest in the world, was added to the U.S. government’s blacklist. This presents a new challenge for Nvidia as it seeks to sell its products to Chinese companies.
The U.S. government had already introduced export regulations last year that prohibit American technology from being used by Chinese companies to build supercomputers that exceed certain performance levels.
This means that Nvidia cannot sell its A100, A100X, and H100-series products to Chinese entities. To comply with these regulations, Nvidia developed the A800 compute GPU, which uses Ampere technology and cannot be used to build supercomputers that exceed a certain level of performance.
The potential loss of export licenses from the U.S. government for selling its A30, A800, and other GPUs to Inspur and Huawei could result in Nvidia losing hundreds of millions of dollars in revenue.
Despite being a leader in the A.I. and HPC GPU market with its popular CUDA platform, Nvidia may seek out new partners in the APAC region to distribute its hardware to end customers if its partnership with Huawei and Inspur falls through.
However, obtaining an export license to sell to Chinese clients will remain a hurdle for Nvidia to overcome.
Nvidia’s partnership with Huawei and Inspur extends beyond mere distribution, as they offer their vast customer base a range of hardware and services. Thus, losing these two customers would be challenging for Nvidia to overcome. If additional restrictions are placed on sales of computing hardware to Chinese entities, the impact on Nvidia’s finances would be noticeable.
During the Morgan Stanley conference, NVIDIA’s CFO, Colette Cress, revealed that Inspur is one of their partners in providing computing solutions to end customers. However, as they move forward, the company will likely explore other partners to help establish computing capabilities in the Asia-Pacific region and beyond.
Despite this, NVIDIA’s primary focus is to ensure compliance with export control regulations and the law. As a result, the company will consider collaborating with other partners to assist them in adhering to these regulations. The inability to sell its GPUs to partners like Inspur is expected to result in a significant revenue loss for NVIDIA. Nonetheless, the company emphasizes that complying with export regulations is its utmost priority.