British semiconductor company Graphcore, once seen as a potential competitor to Nvidia, is withdrawing from the Chinese market and reducing its workforce in the country. This strategic retreat is a direct response to the latest US export restrictions targeting advanced artificial intelligence (AI) chip technology. The tightened regulations, effective from this month, aim to limit China’s access to high-end semiconductor technology, especially focusing on data-center chips used in AI training.
Graphcore, which established its Beijing headquarters in 2019, has been significantly impacted by these new regulations. According to a company spokesperson, the US export controls have rendered it impossible for Graphcore to sell its Intelligence Processing Unit (IPU) systems in China. Consequently, the company is scaling back its operations in the region, although the exact number of affected employees remains undisclosed.
Founded in 2016 in Bristol, England, Graphcore quickly gained prominence in the semiconductor industry, reaching a valuation of $2.8 billion by 2020 after securing $222 million in funding. Despite its early promise and potential to challenge Nvidia, the company faced financial difficulties in 2022, with a 46% drop in revenue and losses totaling $204.6 million for the year.
Graphcore’s withdrawal from China marks a significant shift in the semiconductor landscape. The US export restrictions have broadly affected the global chip industry, with companies like Nvidia also having to adapt by creating custom GPUs specifically for the Chinese market. However, these new models, including Nvidia’s A800 and H800 GPUs, are now subject to the latest sanctions.
In response to the evolving situation, Nvidia has announced plans to develop new AI chips tailored for Chinese customers, a process complicated by the need to comply with US export rules without compromising on client requirements. This development has significant implications for large tech firms like Alibaba Group Holding and Tencent Holdings, whose cloud computing businesses rely heavily on advanced chip technology. Alibaba, for instance, recently scrapped plans to list its cloud unit independently, citing uncertainties due to the export restrictions.
As international chipmakers like Graphcore and Nvidia navigate these challenges, Chinese tech companies are increasingly turning to local suppliers for their hardware needs. In a notable move, Baidu recently placed an order worth $61 million for Huawei Technologies’ 910B Ascend AI chips. This shift indicates a growing trend towards domestic sourcing in the Chinese tech sector, reshaping the dynamics of the global semiconductor market.
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