Nvidia, the leading global designer and supplier of AI chips, is making significant strides in the development of custom AI processors tailored for cloud computing firms, data center operators, and service providers. Reports indicate that the company is in discussions with Ericsson to collaborate on a wireless chip incorporating Nvidia's GPU technology. This partnership builds upon their previous collaboration announced in 2019, aimed at enabling telcos to construct high-performing, efficient, and virtualized 5G RAN technologies.
With a dominant presence in the high-end AI chip market, serving major tech companies with its H100 and A100 chips, Nvidia is now seeking to reclaim a portion of the burgeoning ASIC market. This move is driven by the increasing trend of hyperscalers and service providers developing their own chips for specific applications, prompting Nvidia to compete with custom chip builders such as Broadcom and Marvell Technology.
Projections from research firms indicate substantial growth potential in the custom chip market, with the telecom and data center sectors expected to reach annual values of $4-5 billion and up to $10 billion respectively, by 2025. This aligns with the broader custom chip market, estimated to be worth around $30 billion in 2023, representing approximately 5% of global chip sales. Nvidia's strategic shift is further reinforced by the selling price of its H100 chips, which can range from $16,000 to $100,000 per unit, catering to high-volume demands.
Nvidia's custom unit, led by Dina McKinney, aims to make its technology accessible across various sectors including cloud, 5G wireless, video games, and automotive industries. The company's CEO Jensen Huang has emphasized the importance of meeting market demand and increasing supply chain efforts during his recent visit to China and Taiwan, foreseeing a significant year ahead.
In light of the evolving market dynamics, Nvidia is also eyeing opportunities in the automotive and video game sectors, expecting substantial growth in the custom auto market and anticipating increased demand from next-generation consoles. Meanwhile, activities of key personnel within Nvidia and its interactions with major industry players suggest efforts to adapt to market changes and reduce reliance on the company's chips.
As the chip industry operates in cycles of oversupply and under-supply, recent activities of industry players including Nvidia and its partners point towards a potential recovery following a period of supply constraints and high demand triggered by the Covid-19 pandemic. This aligns with expectations of a recovery in the industry signaled by major semiconductor manufacturers like SK Hynix, Samsung, and TSMC.
Nvidia's strategic endeavors to tap into the custom chip market, expand its partnerships, and diversify its target industries reflect a proactive response to evolving market demands and competition, positioning the company for continued growth and innovation.
