China's leading AI server provider, Inspur Information, has recently partnered with Intel to announce the new generation AI server NF5698G7, equipped with the Gaudi 2 accelerator card, claiming to provide Chinese AI customers with large language model (LLM) training and inference capabilities.
However, Inspur's recetntly released performance warning for 1H23 cannot be ignored, indicating a potential 60-70% year-on-year decline in net profit for the first half of the year, with a possible loss in the second quarter.
According to reports from Chinese media, Inspur stated that the changes in its performance were influenced by factors such as the global shortage of GPUs and related specialized chips. However, Inspur did not elaborate on whether the tight supply of GPUs, including those from Nvidia, was due to factors such as US blacklist sanctions or general supply constraints. Additionally, it remains uncertain whether Intel's China-exclusive AI chips will benefit Inspur's future performance.
Public data shows that Inspur's revenue skyrocketed from CNY 2.191 billion in 2012 to CNY 69.525 billion in 2022 over the past 10 years. However, its gross profit margin dropped from 21.44% to 11.18%. Industry experts speculate if Inspur, touted as the leading domestic server provider in China, is only making marginal profits from assembly. They point out the challenges of obtaining supplies from major players like Intel while facing difficulties in negotiating with major internet companies such as Alibaba, Baidu, and Tencent. Therefore, it remains uncertain whether the company will benefit from the AI trend in 2023.
In addition to the tight supply of GPUs mentioned by Inspur, Chinese media reports also suggest that the high cost of advanced GPUs has forced Inspur to raise prices.
Furthermore, Inspur's LLM application, which mainly focuses on small-scale industrial scenarios and emphasizes the significance of AI conversation, lacks differentiation and competitive advantages compared to authentic AI generated content (AIGC) applications.
It is worth mentioning that since 2023, Inspur Group, the major shareholder of Inspur Information, has significantly reduced its holdings of Inspur Information's stocks. This indicates a lack of confidence and support for the company's future development following the blacklist sanctions imposed by the US.
Despite Inspur's advantageous market position in the Chinese AI server sector, its partnership with Inspur will have implications for its position in the Chinese AI chip market and its potential rivalry with Nvidia.
