Chinese tech giants rely on domestic AI hardware due to the changes in supply-demand chains and market spectrum. The bounce back higher, TikTok owner ByteDance plans to collaborate with several Chinese chip makers for AI chips. According to the sources, the company is in talks with Shanghai-based Iluvatar CoreX while facilitating a similar deal with Baidu. The negotiations emphasize how the country’s leading organizations redevelop their AI architecture and look for AI chips for inference workloads. This also aims to achieve self-reliance and dominate the foreign market. The talks are underway, but emphasize a comprehensive push in AI computing.
Who All Are Involved in the Potential Negotiations?
Bytedance aims to expand its AI architecture to source chips for inference workloads. The company negotiates with Iluvatar CoreX, a Shanghai-based processing unit supplier, while also talking to Baidu, according to sources.
According to Reuters, Iluvatar CoreX could become the third major domestic supplier after Huawei and Cambricon. ByteDance also plans to use Baidu’s Kunlunxin server chips, adding that Tencent is already a customer of those products. None of the organizations has revealed significant details as the negotiations are not confirmed yet.
The negotiations are regarding AI chips for inference workloads, while also supporting generative AI services rather than large training models. Iluvatar 4X is expected to deploy at least 50,000 chips to ByteDance if the negotiation is successful, with most of the chips earmarked for inference use.
These AI chips would be used as ByteDance expands its consumer base for its AI chatbot, Doubao. The Iluvatar CoreX product includes the Tiangai series, which is created for AI training, and the Zhikai series, which is customised for inference. A Huatai Securities research note calculates the average selling price of the Zhikai inference chip is about 12,000 yuan or $1,775. The negotiations are subject to change, emphasizing that the talks are still at the base level.
Why Are the Domestic Markets Gaining Momentum?
The talks depict how Chinese AI chip makers push local technology to promote self-reliance. This push comes amid U.S. export controls on high-end semiconductors. With the limited access to AI chips, Chinese GPU and AI chip makers constituted 41% of China’s AI accelerator server market last year, as reported by Reuters in April. This position was once held by NVIDIA.
NVIDIA’s market share in China has fallen substantially, according to CEO Jensen Huang. At the same time, similarly, Chinese AI chips will be produced in huge quantities by the second half of this year, Tencent’s chief strategy officer James Mitchell said. Against this issue, major tech giants such as ByteDance redevelop their supply-demand chains and engage with domestic producers.
For Iluvatar CoreX, negotiating with ByteDance would assert dominance and facilitate commercial benefits. The company has provided AI chips for government projects, as quoted by one of the sources, securing ByteDance as a customer would represent serving private sector clients with huge AI architecture needs. Illuvatar CoreX was listed in Hong Kong in the month of January and reported 1 billion yuan of revenue, with about 90% coming from GPU sales.
The company benefited from surging demands for domestically produced AI hardware. According to Huatai Securities, Iluvatar CoreX’s revenue projections are about 3.04 billion yuan this year, with AI chip sales expected to rise 139% to more than 100,000 units. According to Reuters’ report, as per the Reuters report, the shares of Illuvatar CoreX rose by 12% in Hong Kong trading.
ByteDance, in talks with Iluvatar CoreX and Baidu, represents a massive shift in China’s AI infrastructure. As technology giants look for domestic AI chip suppliers for inference workloads, China walks on the path of self-reliance. While the talks are uncertain, they signal a growing stakeholder confidence in developed AI hardware and reflect changing market conditions. If the deals are facilitated, it can strengthen the domestic chip market in China and push it towards greater self-reliance.
