00:00Cambricon is another example of a domestic player with an AI accelerator product.
00:05It is reliant on SMIC, China's domestic version of TSMC.
00:10And this is an interesting piece of reporting.
00:13Bring us the details, but also technologically speaking,
00:17the differences of where Cambricon and SMIC are versus NVIDIA,
00:21because the scale is completely different.
00:24Yeah, this is exactly what Jensen Wang is talking about.
00:27This is exactly what he's concerned about within China.
00:30That after the Biden administration first decided to cut off shipments of NVIDIA chips into that country,
00:35the government and the companies there saw the market opportunity.
00:39They saw their own vulnerabilities, and they decided to invest very, very aggressively
00:43in their own production technologies for chips and also AI design.
00:47So Huawei is really the primary competitor that we have been talking about.
00:50They have quite a bit of momentum in building these AI chips.
00:53They've been used in a number of different places there.
00:56Cambricon is really the second player.
00:57It's sort of like the AMD for that market.
01:00They're quite small at this point.
01:01They don't have the kind of heft that Huawei does in particular, but they are making a lot of progress.
01:06So what our sources have told us is that their plans are to triple their production of AI chips into next year.
01:12There'll be a pretty significant second to Huawei in supplying those chips.
01:16So to the broader question about what U.S. export controls do to this market, as Jensen Wong is talking about,
01:23it certainly has opened it up for domestic production.
01:26Chinese companies are being told by Beijing that they should buy domestic chips whenever possible.
01:31They've also turned down this idea that they're going to buy NVIDIA's H20 chips.
01:35They don't think that those are good enough for the market.
01:37So as Mike Shepard was talking about earlier, there may be a discussion about H200s, but there's no putting this genie back in the bottle.
01:44China has decided they are going to make their own chips domestically, and they're making a lot of progress.
01:48They're making a lot of progress in designing them, but then they've got to get them spat out by SMIC.
01:53And it feels as though ultimately the production, what you're really garnering, isn't very many.
02:00Yeah, that's a very good point.
02:02They are way, way behind the global standards.
02:05There is some desperation here that if you have to produce at lower standards, you will.
02:09But if you look at some of the details, it's very, very interesting.
02:11So SMIC is still producing these chips at 7 nanometers, so well behind the 3 nanometer that we see from TSMC at this point.
02:19Also, the yields, we've got some insights into the yields, only about 20 percent of the chips they're making right now are actually usable.
02:27So that's only one out of five chips that they produce they're actually able to use.
02:32You compare that with the TSMC, which is up at 80 or 90 percent yields, their economics are just totally different.
02:39But it's a sign of how badly Beijing wants to be able to catch up in this market, that they're just going to eat those costs.
02:44They're going to eat four times the cost of what it would cost some other globally competitive manufacturers to make these chips because they feel like from a strategic standpoint, they need to make this progress.
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