AI Chip Industry Market Forecast: Domestic AI Chips Expected to Dominate by 2026
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The recently held 2023 Central Economic Work Conference emphasized that next year's economic work should focus on promoting high-quality development, highlighting key areas, and solidifying efforts. Technological innovation should lead the construction of modern industrial systems. It is essential to vigorously advance new industrialization, develop the digital economy, and accelerate the development of artificial intelligence. Strategic emerging industries such as biomanufacturing, commercial aerospace, and low-altitude economy should be fostered.
With AI models accelerating their iterations, intelligent computing power has become a scarce resource. For a considerable period in the future, China's AI server market will remain in short supply, presenting a critical window for the growth of the domestic AI chip market.
AI chips, also known as AI accelerators or computing cards, are specialized chips designed to handle AI-related computational tasks. They serve as crucial building blocks for computing power. As large-scale model development gains momentum, the demand for computing power will further drive AI chip R&D, while deepening integration with fields such as healthcare, education, and transportation.
Since the explosion of ChatGPT, NVIDIA has not only been recognized as the biggest 'shovel seller' in the global AI gold rush but also the most discussed AI chip company across media and social platforms.
Recently, NVIDIA's Q3 2024 fiscal report revealed record-breaking revenue of $18.12 billion, a 206% year-on-year increase and a 34% quarter-on-quarter growth. Net profit also hit a new high at $9.243 billion, surging 1259% year-on-year and 49% quarter-on-quarter.
As the AI boom continues to heat up, an increasing number of manufacturers are also making efforts in the field of AI chips. On one hand, downstream customers such as Amazon Web Services, Microsoft, Huawei, and Baidu are pushing for self-developed chips. On the other hand, AI chip unicorns like Cambricon and Biren are striving to secure a ticket to the AI era.
Data shows that in 2021, China's AI chip market reached 42.7 billion yuan, a year-on-year increase of 124%. In 2022, the market size doubled again to 85 billion yuan.
In recent years, the government has introduced multiple policies to encourage the development and innovation of the AI chip industry, including the "National New Generation Artificial Intelligence Development Plan" and the "Notice on Deepening the 'Mass Entrepreneurship and Innovation' Initiative to Promote Public Entrepreneurship and Innovation."
Key cities such as Beijing, Shanghai, and Shenzhen have successively released policies to support the rapid development of the AI industry, including breakthroughs in AI chip innovation, strengthening R&D in AI chips and smart sensors, and accelerating the construction of intelligent computing power.
Current Status of AI Chip Industry Development
Under the policy guidance of moderately advancing the construction of new infrastructure, investment in AI computing power infrastructure has increased. Internet companies, telecom operators, and governments at all levels are actively involved in the construction of intelligent computing centers. According to incomplete statistics, as of August 2023, more than 30 cities across the country have built intelligent computing centers.
Generative artificial intelligence tools like ChatGPT require processing massive amounts of data during operation. This data must be retrieved from memory chips and sent to processing units for computation. Facing the explosive demand for AI chips driven by the groundbreaking development of large models, tech giants and emerging companies are rushing into the competition track of large models, bringing a new wave of AI chip competition to the surface.
Artificial intelligence data models create enormous demand for high-performance, high-computing-power AI chips. Predictions indicate that the AI chip industry will exceed $400 billion in scale within the next four years. Under this strong demand, tech giants like AMD, Intel, and IBM are all developing AI chips, while companies such as Google, Microsoft, Alibaba, and Baidu are also actively investing in self-developed chips.
Market Forecast for the AI Chip Industry
In the first half of 2023, the accelerated server market reached $3.1 billion, a year-on-year increase of 54%. GPU servers still dominate, accounting for 92% of the market share at $3 billion. Meanwhile, non-GPU accelerated servers (including NPU, ASIC, and FPGA) grew by 17% year-on-year, capturing 8% of the market share at $200 million.
In the first half of 2023, from the perspective of vendor sales, Inspur, H3C, and Ningchang ranked in the top three, occupying over 70% of the market share. From the perspective of server shipments, Inspur, Kunqian, and Ningchang took the top three spots, holding nearly 60% of the market share. From an industry perspective, the internet remains the largest procurement sector, accounting for over half of the total accelerated server market. Additionally, industries such as finance, telecommunications, and government have all seen growth exceeding 100%.
The computing power gap in the Chinese market presents new opportunities for domestic chip development. China's local AI chip manufacturers are in a phase of rapid growth and have achieved remarkable success, attracting significant investment and attention. These companies have developed certain strengths and competitive advantages in AI chip design, algorithm optimization, and manufacturing. Additionally, the Chinese government's policy support has played a crucial role in driving this progress.
In the first half of 2023, the market size of China's acceleration chips exceeded 500,000 units. From a technical perspective, GPU cards accounted for 90% of the market share. From a brand perspective, local Chinese AI chip brands shipped over 50,000 units, representing about 10% of the total market share.
Driven by the wave of large AI models, the market size for AI chips, servers, and data centers is expected to grow significantly. IDC predicts that China's AI chip shipments will reach 1.335 million units in 2023, a year-on-year increase of 22.5%.
Zheshang Securities research reports indicate that AI computing power is expected to accelerate localization. Reviewing the development history of supercomputing and general computing power, the report suggests that domestic AI computing power may follow a similar trajectory, evolving from "usable" to "high-performance." Under the current international situation, the localization process of AI computing power is expected to accelerate. Specifically, 2024 will be the "year of initial customer adaptation," 2025 will be the "year of active customer procurement," and by 2026, domestic AI chips are expected to dominate the market.