Why will H20 be banned （discouraged）in China?

[DanX]

Why will H20 be banned （discouraged）in China?



Huawei is a very powerful company in China. The Chinese government has put its faith for the IC industry in Huawei. This is why that H20 will be banned/discouraged in China

Here is the total revenue of Huawei in 2024, (all numbers are in RMB, which is equivalent to 0.14 USD)

Under Consumer, it’s mostly the mobile phones. In 2024, Huawei overcame the 7nm production, which led to an increase in smartphone sales. In 2025, since Huawei can not upgrade the 7nm, the smartphone sales will be close to same as 2024, but with much lower profit margin.

Under Cloud computing and Digital Power, 2025 sales will increase a little over those of 2024. Huawei automotive solution caused a lot of accidents in 2024 , and this leads to a movement of a government campaign to promote road safety. This will slow down the growth of automotive solution，but I still expect Huawei will have 50B sales in automotive solution in 2025.

Most of the revenue and profit still come from ICT infrastructure. But the big three carriers: China Mobile, China Unicom, and China Telecom, all cut their expenses in 2024. And they all project lower expenses in 2025.

The rumors are that the Ascend 910B is selling at a price of $120,000 and has sold 400,000 units in 2024. This is how Huawei can have a sale 353*0.9 + 0.12*400 ~= 366B ICT in 2024. Since Ascend is the only AI card for customers, it has a much greater profit margin.

Based on the engineers’ feedback, the H20 is much easier to develop and is also cheaper than Ascend. Nvidia’s 1.3M H20 AI card (700K from inventory and 600K from new orders) will be catastrophic case for Huawei. Huawei is planning to have 120 billion AI cards revenue with a projected profit of 60 billion in 2025.

Huawei's cash flow in 2024 was very tight. It was forced to distribute dividends of 82B under a net profit of 62B. (Because the virtual shares are actually debt.)

With 60B in profits, Huawei’s financial status in 2025 will be similar to 2024. But without the 60B profits, Huawei's profit may be negative 130B in 2025 (80B dividends + 50B debt). This could destroy market confidence in Huawei and make it very hard to raise debt in the future.

Between Huawei's collapse and the ban on H20, I think the government would unhesitatingly choose to ban H20..

 

[samwilde]

It is not just Huawei. Cambricon is also selling AI solutions. As are others like Biren.

The AI chip industry in China now has its own trade association. And they might also push common standards eventually.

 

[DanX]

It is not just Huawei. Cambricon is also selling AI solutions. As are others like Biren.

The AI chip industry in China now has its own trade association. And they might also push common standards eventually.

They are too small.
They will be Huawei’s challengers in five years.
As an example, Cambricon has a revenue of 1.1B in 2024 while Huawei is around 50 B.

 

[samwilde]

Huawei started cooperating with SMIC much earlier. People talk about the Kirin 9000 in 7nm a lot. But they forget the Kirin 710A in 14nm FinFET several years before. The chip never made as much of a splash because it was not 5G capable. But that was the first major application for the SMIC FinFET process.

SMIC being capacity constrained gave priority to more reliable customers like Huawei. But supposedly the Chinese government is now forcing SMIC to cater more for other AI chipmakers. They don't want a Huawei monopoly either.