NVIDIA Speaks: China as a Crucial Market

Recently, executives from American technology companies have been visiting China in a concentrated manner. On November 25th, Nvidia executives visited China and met with high-level Chinese officials, signaling the multinational tech giants' high regard for the Chinese market.

Wang Shouwen, the Vice Minister and Trade Negotiation Representative, met with Jay Puri, Executive Vice President of Nvidia, to discuss topics including Nvidia's development in China. The Chinese side welcomed Nvidia to continue its deep roots in China.

As one of the most important technology companies in the world today, how Nvidia will conduct its future business in China is highly watched by the market.

Seeking balance in policy and promoting global technology cooperation

Puri, who is in charge of Nvidia's global operations, stated that the company views China as an important market and will continue to strengthen communication with Chinese partners, providing high-quality and efficient products and services, and actively participating in China's digital economic development.

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Regarding this meeting, Nvidia stated, "We are pleased to have the opportunity to meet with government officials in every market we serve." The company did not provide more information about the talks to First Financial Daily reporters, nor did it disclose whether Nvidia's founder and CEO, Jensen Huang, has plans to visit mainland China.

Currently, as artificial intelligence technology is exploding globally, Nvidia, which provides the majority of AI chips for global data centers, is becoming increasingly important in various industries worldwide. So far this year, Nvidia's stock price has risen by nearly 190%.

However, as of the close on November 25th, Nvidia's stock price fell by over 4%, being overtaken by Apple, and lost its position as the company with the highest market value in the U.S. stock market.

The decline in Nvidia's stock price is related to the rare downgrade of its investment rating by investment bank analysts. An investment report from Phillip Capital, a Singapore-based investment and wealth management company, believes that as the U.S.-China tariff war may heat up again if the U.S. implements stricter tariff policies, it may impact Nvidia's stock price and downgraded its investment rating from "Buy" to "Accumulate."

Nvidia's development in China is facing multiple challenges. In the latest financial report, when asked about the possibility of the government imposing higher tariffs on high-tech product exports, Huang Renxun stated, "No matter what decisions the new government makes, we will of course support them. The company will fully comply with any regulations that follow."

Recently, Huang Renxun reiterated that even if the new government implements stricter export controls, "we will try to strike a balance between complying with regulations and continuing to promote technology cooperation, supporting and serving customers worldwide."

Facing fierce competition in China

Affected by export controls, Nvidia's revenue share in the Chinese market has dropped from about 24% in the 2019 fiscal year to the current level of about 13%.

Earlier this year, there was news that the H20 chip was not selling well in China and had to be sold at a reduced price. It is understood that although the H20 focuses on "cost-effectiveness," due to technological restrictions, it is difficult to create a gap with Chinese competitors, so demand is also somewhat limited.

According to an analysis report from research institution SemiAnalysis, chips specifically launched for the Chinese market also face manufacturing cost challenges. The institution stated that because the H20 has a higher memory capacity, its manufacturing cost is also higher than the H100, but the selling price is about half of the H100, which will lead to a significant decline in profits.

Against the backdrop of global demand for Nvidia's advanced chips and facing production bottlenecks, whether companies still have the motivation to continue developing products with low profits, average sales, and fierce competition is a question Nvidia needs to assess.

Huang Renxun stated at the financial report meeting in May this year that Nvidia is still doing its best to serve the Chinese market. He said, "Our business in China is much lower than in the past, and due to the restrictions on our technology, we are now facing more intense competition in the Chinese market. These are all real things happening. However, we will continue to do our best to serve customers and the market there."

Huang Renxun has recently talked less about China's business, and he is vigorously promoting the shipment of Nvidia's new flagship AI chip, Blackwell, on a global scale. The chip is expected to bring in billions of dollars in revenue for Nvidia in the fourth quarter of this year, and sales are expected to grow significantly next year.

According to Huang Renxun's recent statement during his visit to Hong Kong, Nvidia will continue to "retain" its business in China. Regarding what strategy Nvidia will adopt in the Chinese market in the future, Nvidia stated to reporters, "We do not comment on unreleased products."

In the view of some analysts, Nvidia still has "great potential" in China. Research institution analysts stated, "Now China's demand for AI-related infrastructure is very large, which will promote Nvidia's business in China, and Nvidia will not give up this huge market. In addition to data centers, in fields such as industrial intelligent manufacturing and autonomous driving, Nvidia will also have a larger market space."