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Nvidia chases $30 billion custom chip market with new unit

Nvidia chases $30 billion custom chip market with new unit

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Nvidia chases $30 billion custom chip market with new unit

Nvidia (NVDA.O), opens new tab is building a new business unit focused on designing bespoke chips for cloud computing firms and others, including advanced artificial intelligence processors, according to nine sources familiar with the company’s plans.

The dominant global designer and supplier of AI chips aims to capture a portion of an exploding market for custom AI chips and to protect itself from the growing number of companies interested in finding alternatives to its products.

The Santa Clara, California-based company currently controls about 80% of the market for high-end AI chips, a position that has sent its market value up 40% so far this year to $1.73 trillion after it more than tripled in 2023.

Its customers, which include ChatGPT creator OpenAI, Microsoft (MSFT.O), opens new tab, Alphabet (GOOGL.O), opens new tab and Meta Platforms (META.O), opens new tab, have raced to snap up the dwindling supply of Nvidia chips to compete in the rapidly emerging generative AI sector.

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Nvidia’s H100 and A100 chips serve as a generalized, all-purpose AI processor for many of those major customers. But the tech companies have started to develop their own internal chips for specific needs. Doing so helps reduce energy consumption, and potentially can shrink the cost and time to design.

Nvidia is now attempting to play a role in helping these companies develop custom AI chips that have flowed to rival firms such as Broadcom (AVGO.O), opens new tab and Marvell Technology (MRVL.O), opens new tab, according to the sources who declined to be identified because they were not authorized to speak publicly.

“If you’re really trying to optimize on things like power, or optimize on cost for your application, you can’t afford to go drop an H100 or A100 in there,” Greg Reichow, general partner at venture capital firm Eclipse Ventures said in an interview. “You want to have the exact right mixture of compute and just the kind of compute that you need.”

Nvidia does not disclose H100 prices, which are higher than for the prior-generation A100, but each chip can sell from $16,000 to $100,000 depending on the volume purchased and other factors. Meta has said it plans to bring its total stock to 350,000 H100s this year.

Nvidia officials have met with representatives from Amazon.com (AMZN.O), opens new tab, Meta, Microsoft, Google and OpenAI to discuss making custom chips for them, according to two sources familiar with the meetings. Beyond data center chips, the company has pursued telecom, automotive and video game customers.

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In 2022, Nvidia said it would let third-party customers integrate some of its proprietary networking technology with their own chips. The company has said nothing about the program since, and Reuters is reporting its wider ambitions for the first time.

A Nvidia spokesperson declined to comment beyond the company’s 2022 announcement.

Dina McKinney, a former Advanced Micro Devices (AMD.O), opens new tab and Marvell executive, heads Nvidia’s custom unit and her team’s goal is to make its technology available for customers in cloud, 5G wireless, video games and automotives, according to a LinkedIn profile. Those mentions were scrubbed and her title was changed after Reuters sought comment from Nvidia.

Amazon, Google, Microsoft, Meta and OpenAI declined to comment.

$30 BILLION MARKET

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According to estimates from research firm 650 Group’s Alan Weckel, the data center custom chip market will grow to as much as $10 billion this year, and double that in 2025.

The broader custom chip market was worth roughly $30 billion in 2023, which amounts to roughly 5% of annual global chip sales, according to Needham analyst Charles Shi.

Currently, custom silicon design for data centers is dominated by Broadcom and Marvell.

In a typical arrangement, a design partner such as Nvidia would offer intellectual property and technology, but leave the chip fabrication, packaging and additional steps to Taiwan Semiconductor Manufacturing Co. (2330.TW), opens new tab or another contract chip manufacturer.

Nvidia moving into this territory has the potential to eat into Broadcom and Marvell sales.

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“With Broadcom’s custom silicon business touching $10 billion, and Marvell’s around $2 billion, this is a real threat,” said Dylan Patel, founder of the silicon research group SemiAnalysis. “It’s a real big negative – there’s more competition entering the fray.”

BEYOND AI

Nvidia is in talks with telecom infrastructure builder Ericsson (ERICb.ST), opens new tab for a wireless chip that includes the chip designer’s graphics processing unit (GPU) technology, according to two sources familiar with the talks.

650 Group’s Weckle expects the telecom custom chip market to remain flat at roughly $4 billion to $5 billion a year.
Ericsson declined to comment.

Nvidia also plans to target the automotive and video game markets, according to sources and public social media postings.

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Weckel expects the custom auto market to grow consistently from its current $6 billion to $8 billion range at 20% a year, and the $7 billion to $8 billion video game custom chip market could increase with the next-generation consoles from Xbox and Sony (6857.T), opens new tab.

Nintendo’s current Switch handheld console already includes an Nvidia chip, the Tegra X1. A new version of the Switch console expected this year is likely to include a Nvidia custom design, according to one source.

Nintendo declined to comment. 

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ByteDance confirms layoff plan at its Indonesian unit

ByteDance confirms layoff plan at its Indonesian unit

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ByteDance confirms layoff plan at its Indonesian unit

China’s ByteDance will lay off staff at its Indonesian unit following a deal where it bought a local e-commerce firm and combined it with its TikTok operation, a spokesperson said on Friday.

ByteDance, the owner of TikTok, did not say how many employees would be affected. Bloomberg had earlier reported there would be 450 jobs cut.

In January ByteDance completed a deal to buy a majority stake in Tokopedia, an Indonesian e-commerce firm, from the GoTo group.

ByteDance spokesperson Nuraini Razak told Reuters in a statement the company would “make necessary adjustments” as a result of the combination of TikTok and Tokopedia.

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“We identified areas to strengthen our organisation and better align our teams with company goals,” she said, adding the company would “aim to support employees throughout this transition”.

ByteDance had its own e-commerce operation in Indonesia via its TikTok app, but that was banned under an Indonesian rule that social media applications could not operate as an e-commerce platform.

Tokopedia is one of the leading e-commerce platforms in Southeast Asia’s largest economy.

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Indonesia minister threatens to shut down X over adult content

Indonesia minister threatens to shut down X over adult content

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Indonesia minister threatens to shut down X over adult content

Indonesia is prepared to shut down social media platform X if it does not comply with a regulation barring adult content, the country’s communications minister said on Friday. Indonesia, the world’s biggest Muslim-majority country, has strict rules that ban the sharing online of content deemed obscene.

Minister Budi Arie Setiadi told Reuters he had sent a warning letter to X related to this matter.

“We will certainly shut its services down,” he said, pointing to Indonesia’s electronic information and transaction (ITE) law that can carry a six-year jail sentence if someone spreads pornographic content.

His comments in an interview come after the social media platform recently updated its policies to permit consensually produced adult content.

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X, owned by billionaire Elon Musk, has not responded to Indonesia’s warning letter, Budi said, adding the government would send more letters before deciding on a potential closure.

X, formerly known as Twitter, did not immediately respond to a request by Reuters for comment.

Indonesians are big users of social media and X has 24.85 million users in the country, according to data gathering business Statista.

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Japan watchdog recommends action on MUFG units over sharing of client data

Japan watchdog recommends action on MUFG units over sharing of client data

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Japan's securities watchdog recommended on Friday that the banking and securities units of Mitsubishi UFJ Financial Group opens new tab (MUFG) be penalised for what it said was unauthorised sharing of client information. The Securities and Exchange Surveillance Commission (SESC) made the recommendation to the banking regulator, the Financial Services Agency (FSA), which hands out such punishments in Japan. The recommendation, which was widely expected, followed the SESC's investigation into MUFG's banking arm, MUFG Bank, and its two brokerage ventures with Morgan Stanley (MS.N), opens new tab. The investigation found that confidential client information had been shared between MUFG Bank and one of the two securities firms on at least 26 occasions between 2020 and 2023. MUFG Bank also illegally offered preferential lending rates to clients that did business with the group's two securities brokerages, the SESC said. Japan's "firewall" regulations prohibit banks and securities companies in the same group from sharing customer data with one another without the customer's consent. The investigation found no evidence of insider trading, but monitoring and internal controls were lacking, the SESC said. MUFG group companies will make every effort to strengthen control systems in light of the recommendation and will take measures to prevent recurrence, the parent company said in a statement. The two brokerages were established in 2010, two years after MUFG invested in Morgan Stanley at the height of the global financial crisis in 2008. MUFG owned around 23% of Morgan Stanley as of March 2024.

Japan’s securities watchdog recommended on Friday that the banking and securities units of Mitsubishi UFJ Financial Group  opens new tab (MUFG) be penalised for what it said was unauthorised sharing of client information.

The Securities and Exchange Surveillance Commission (SESC) made the recommendation to the banking regulator, the Financial Services Agency (FSA), which hands out such punishments in Japan.

The recommendation, which was widely expected, followed the SESC’s investigation into MUFG’s banking arm, MUFG Bank, and its two brokerage ventures with Morgan Stanley (MS.N), opens new tab.

The investigation found that confidential client information had been shared between MUFG Bank and one of the two securities firms on at least 26 occasions between 2020 and 2023.

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MUFG Bank also illegally offered preferential lending rates to clients that did business with the group’s two securities brokerages, the SESC said.

Japan’s “firewall” regulations prohibit banks and securities companies in the same group from sharing customer data with one another without the customer’s consent.

The investigation found no evidence of insider trading, but monitoring and internal controls were lacking, the SESC said.

MUFG group companies will make every effort to strengthen control systems in light of the recommendation and will take measures to prevent recurrence, the parent company said in a statement.

The two brokerages were established in 2010, two years after MUFG invested in Morgan Stanley at the height of the global financial crisis in 2008. MUFG owned around 23% of Morgan Stanley as of March 2024.

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