Introduction

The demand for Nvidia’s chips in China has been driven by the growing popularity of artificial intelligence in products like ChatGPT and autonomous driving technology. However, recent news of the U.S. planning to ban the sale of high-end semiconductors to China has led analysts to lower their price targets for Nvidia. China accounts for a significant portion of Nvidia’s big data center business and is also a dominant player in the electric car market, where Nvidia sells chips for autonomous driving.

Impact on Auto Chips

Despite concerns about the ban, analysts believe that Nvidia’s Orin X chips, used in the auto industry, will not be significantly affected. The chips meet some of the technical specifications outlined in the U.S. rules, but they still fall short in terms of performance metrics and are not used in data centers. As a result, the existing auto chips, including the Orin chip, should remain unaffected by the new regulations.

Key Players in the Auto Chip Market

China-based electric automakers, such as BYD, Nio, Li Auto, and Xpeng, use Nvidia’s Orin chip in their vehicles. Xpeng, a leading player in the Chinese market, is set to showcase its autonomous driving technology at a tech day event. Additionally, other companies are developing alternative AI computing products to compete with Nvidia. For example, U.S.-based Kneron is using a different approach to AI chips based on neuroscience. The company has partnered with Apple supplier Foxconn for the development of automotive AI.

The Rise of Homegrown Chip Companies

While Nvidia may currently avoid restrictions on automotive chips in China, future advanced chips may require a license from the U.S. government for shipment to China. Chinese companies have been developing their own alternatives, such as Horizon Robotics, which provides chips for autonomous truck driving. These homegrown alternatives are gaining traction in the market and reducing the dependence on foreign chip suppliers.

Other Automation Solutions in China

China is seeing growth in various automation sectors that do not require advanced computing power. Nomura and HSBC analysts have raised their price targets for Inovance, a leading domestic factory automation solution supplier. Inovance’s revenue growth is driven by the expansion of its new energy vehicle and automation businesses. The company has also gained market share in motor controllers and powertrain systems, particularly in the domestic new energy market.