Qualcomm-ByteDance AI Chip Supply Deal...Shakes Nvidia's Dominance

Qualcomm-ByteDance AI Chip Supply Deal...Shakes Nvidia's Dominance

ASICs below regulatory threshold create bypass to China...HBM demand expected to benefit

Qualcomm has signed a contract to supply custom application-specific integrated circuits (ASICs) for artificial intelligence (AI) data centers to ByteDance, the operator of TikTok. This agreement, made amidst US export restrictions on AI chips to China, is seen as a strategic breakthrough for Qualcomm to expand its presence from the smartphone chip market into the AI infrastructure market.

Bloomberg reported on the 26th (local time), citing sources, that ByteDance plans to purchase millions of Qualcomm's ASICs, which will be used to power AI agent software.

Qualcomm's stock price surged up to 8.3% immediately after the news, reaching an all-time high.

This contract is noteworthy because it was concluded amidst US export restrictions on AI chips to China.

Bloomberg reported that if Qualcomm's chips are below the US export allowance threshold, there would be no issue under current regulations for them to be supplied to ByteDance through contract manufacturers such as TSMC. It is interpreted that Qualcomm has created a legal technological bypass by supplying large quantities of ASICs for specific purposes, rather than high-performance Graphics Processing Units (GPUs), with performance just below the 'Computing Threshold' approval criteria stipulated by US law.

With this, Qualcomm has secured a major client for the first time in the 'AI chips for server and data center infrastructure' market, where it was previously most vulnerable.

A trend of cracks appearing in Nvidia's dominant position is also being observed. While AMD, Broadcom, and Google are rapidly expanding their market share in the AI chip market, where Nvidia holds over 90% monopoly, Qualcomm is also seen as having laid the groundwork for entering this high-growth sector.

This contract is also expected to be a boon for the domestic memory semiconductor industry. The proliferation of ASIC-based AI chips leads to an increase in demand for High Bandwidth Memory (HBM). UBS forecasts that the total HBM demand this year will reach 32.9 billion gigabits, an 88% increase from the previous year. SK Hynix and Samsung Electronics account for most of the global HBM supply.

ByteDance, which operates 'Doubao' (豆包), ranked first in AI chatbot downloads in China last year, has set its AI infrastructure budget for this year at 200 billion yuan (approximately 44.6 trillion won), a 25% increase from the previous year.