China’s AI chipmakers report first profits, but will the trend continue?
China’s pure-play artificial intelligence chipmakers crossed an important milestone in the third quarter as several firms swung into profit, but severe supply chain hurdles and soaring memory costs cloud their long-term growth prospects. Domestic graphics processing unit (GPU) developers including Moore Threads, MetaX and Iluvatar CoreX are racing to fill the market void left by Nvidia, whose…
China's AI chipmakers have achieved a significant milestone, with several firms reporting profits for the first time in the third quarter of the year. This surge in earnings, driven by a 1,774% year-on-year increase in revenue for Moore Threads, marks the company's first profitable quarter. However, the industry faces numerous challenges that could impact long-term growth.
Severe supply chain issues, particularly a shortage of high-bandwidth memory (HBM) components, have led to soaring prices, threatening the profit margins of these domestic developers. The cost surge for 36GB HBM3e modules has pushed grey market prices to over $4,000, more than 8 times the pre-memory squeeze cost. This has forced chipmakers to contract their gross margins year on year.
Additionally, limited adoption by top-tier cloud service providers (CSPs) and production delays further hinder the growth prospects of these companies. Despite securing orders from firms like JD.com, MetaX remains reliant on government and regional computing projects, indicating a cautious pace of scaling up. The competitive landscape is also intensifying, with new players like Iluvatar CoreX vying for market share with their advanced GPUs.
However, the financial strain of securing a stable supply chain poses a significant challenge for even the most ambitious Chinese AI chipmakers.
Brief written by urgent.news from South China Morning Post's own syndicated text. Machine-written — may contain errors; check the original before relying on it.
