China Offers 50% Power Discounts to AI Data Centers Using Domestic Chips in Push for Semiconductor Independence
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5 Sources
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Chinese provinces offer steep power discounts to AI companies using China-made chips -- country continues its aggressive push towards AI independence and homegrown silicon
The war for AI dominance just got a new front of sorts. According to a new report, some Chinese provinces are now offering steep discounts on industrial power pricing to AI datacenters, with only one catch: they have to use homemade chips rather than Nvidia's or AMD's. According to a Financial Times article citing sources "familiar with the matter", the provinces of Gansu, Guizhou, and Inner Mongolia are offering a 50% discount on industrial power price to AI datacenters in the region. These cuts reportedly come on top of direct cash incentives, and ought to bring the price of one kWh of industrial power down to 0.4 Yuan, or around 5.6 cents USD. FT's sources claim the cash incentives alone are good enough to run a data center for about a year. These inner provinces are fairly flush with power generation, and the base pricing is around 30% cheaper than the coastal regions. China's power grid is seemingly well-suited to handling the AI-driven power draw, a fact that's not hard to believe given the country's massive push towards renewable energy sources. This move comes in sequence of the Chinese government outright banning the usage of Nvidia AI chips. The ban immediately pushed AI datacenter power usage by a reported 30 to 50%, as the efficiency of Chinese chips lags behind that of Nvidia's H20. It's worth noting that H20 is from the Grace Hopper generation rather than the fresh Blackwell offerings. The newer chips are export-controlled by the U.S., but the power efficiency delta between Blackwell and Chinese chips would be greater still. China is in the middle of a push for independence from US chip companies, while simultaneously boosting national chip production. The country has long since lagged in chip development but has made long strides in the past decade. Even if the national chips aren't yet quite comparable to Nvidia and AMD's offerings, the speed at which the country is catching up is impressive. Huawei, Cambricon, Alibaba, and Biren all make AI accelerators, with Huawei in the national lead with its Ascend 910C chip.
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China offers tech giants cheap power to boost domestic AI chips
China has increased subsidies that cut energy bills by up to half for some of the country's largest data centres, as Beijing steps up efforts to boost its domestic chips industry and compete with the US. Local governments have beefed up incentives to help Chinese tech giants such as ByteDance, Alibaba and Tencent, which have been hit with higher electricity costs following Beijing's ban on purchasing Nvidia's artificial intelligence chips, according to people familiar with the matter. They added that the new subsidies come after several tech groups complained to regulators about the increased costs of using domestic semiconductors from companies such as Huawei and Cambricon, most of which are less energy-efficient than Nvidia's. Local governments in provinces including Gansu, Guizhou and Inner Mongolia have responded by offering subsidies that slash big data centres' electricity bills by as much as 50 per cent, provided that they are powered by domestic chips. Data centres using chips from foreign vendors such as Nvidia are not qualified for such entitlements, the people said. The move is a further sign of how China is incentivising its tech companies to break their reliance on Nvidia and boost the country's homegrown semiconductor industry so it can compete in an AI race against the US. Electricity required to generate the same amount of tokens -- units of compute power -- from the current generation of Chinese chips is about 30 to 50 per cent higher than Nvidia's H20, according to experts. Huawei, China's leading chipmaker, has sought to overcome the weaker single-chip computing performance of its flagship 910c Ascend chip by combining them into larger clusters, which has added to the operating electricity costs. While tech companies typically lease compute power from third-party data centre operators, they still need to build a significant amount themselves to meet surging demand from AI-driven businesses. Despite the higher energy costs related to using domestic chips, China's more centralised grid network still provides cheaper and greener electricity than the US with no near-term shortage. China's energy-rich remote provinces such as Gansu, Guizhou and Inner Mongolia have become hotspots for data centre clusters. To attract the biggest projects, these local governments have already been competing to offer some energy subsidies as well as cash incentives. Some of these are enough to cover a data centre's operating cost for about a year, said one person with knowledge of the matter. Unit costs of industrial electricity in these provinces are about 30 per cent cheaper than those from the more developed coastal areas in eastern China. With the new subsidies, they will be cut further to about 0.4 yuan, or 5.6 cents, per kWh. This compares to the average industrial electricity cost of about 9.1 cents per kWh in the US, according to August data published by the US Energy Information Administration. Electricity prices vary significantly in different US states due to fragmented grid networks, while US tech groups such as Meta and Elon Musk's xAI are also building their own generators near their data centre clusters in order to lower energy costs. ByteDance, Alibaba and Tencent did not respond to requests for comment. The local governments of Guizhou, Gansu, Inner Mongolia and China's National Development and Reform Commission did not respond to requests for comment.
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China offers tech giants cheap power to boost domestic AI chips, FT reports
China has increased subsidies that cut energy bills by up to half for some of the country's largest data centres. Local governments have beefed up incentives to help Chinese tech giants such as ByteDance, Alibaba and Tencent , which have been hit with higher electricity costs following Beijing's ban on purchasing Nvidia's artificial intelligence chips. China has increased subsidies that cut energy bills by up to half for some of the country's largest data centres, the Financial Times reported on Monday, citing people familiar with the matter. Local governments have beefed up incentives to help Chinese tech giants such as ByteDance, Alibaba and Tencent , which have been hit with higher electricity costs following Beijing's ban on purchasing Nvidia's artificial intelligence chips, the newspaper reported. Reuters could not immediately confirm the report.
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China Is Actually Subsidizing Electricity to Cover Up the 'Terrible' Power Efficiency of Domestic AI Chips, Slashing Data Center Bills by Up to 50%
China is reportedly providing energy incentives to domestic CSPs to keep them attracted to the 'power hungry' AI chips from Huawei and Cambricon. Well, after voting "100% no" to NVIDIA's AI chips, it seems like the Chinese AI industry is currently reliant on domestic solutions being offered, which are claimed to be 'terrible' when it comes to performance-per-watt figures. Based on a report by the Financial Times, Chinese chips are "30% to 50%" less power efficient compared to the H20 AI chip from NVIDIA, which means that electricity bills have gone through the roof. However, the administration has stepped up to mitigate the problem by providing substantial incentives to data centers that run local AI chips. Local governments in data centre-heavy provinces such as Gansu, Guizhou and Inner Mongolia have responded by offering subsidies that slash big data centres' electricity bills by as much as 50 per cent, provided that they are powered by domestic chips. Data centres using chips from foreign vendors such as Nvidia are not qualified for such entitlements, the people said. One way companies like Huawei pledge to offer performance rivaling NVIDIA's top-end AI solutions is by increasing power consumption numbers or combining 'thousands' of AI chips into a single cluster, which has energy ratings significantly higher than those of systems like Blackwell. However, China's robust grid system appears to be sufficient to run its domestic tech stack, and driven by the incentives local administrations are offering, it seems that the inclination towards Huawei and other Chinese chip manufacturers will increase. It seems that China, as a nation, will not allow the influence of American technology to enter the industry anytime soon, and with that, the domestic industry will be deprived of high-end computing capabilities. It would take the local AI industry years to compete with rivaling offerings from NVIDIA. Apart from just getting the architecture in place, China still needs to establish sufficient production lines, which include semiconductors, HBM, and advanced packaging.
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China Cuts Data Center Energy Costs By 50% With Major Subsidies To Boost Domestic Chip Industry: Report - Alibaba Gr Hldgs (NYSE:BABA), NVIDIA (NASDAQ:NVDA)
China has boosted subsidies for major data centers, slashing their energy bills by up to 50% to support domestic chipmakers and strengthen global competitiveness, according to a report. Chinese Tech Giants Grapple With High Energy Costs Several local governments in provinces with a high concentration of data centers, such as Gansu, Guizhou, and Inner Mongolia, have introduced these incentives, the Financial Times reported on Tuesday. These cater to tech behemoths like ByteDance, Alibaba Group Holding Ltd. (NYSE:BABA), and Tencent Holdings Ltd. (OTC:TCEHY) as these firms have been dealing with soaring electricity costs due to Beijing's prohibition on buying AI chips from Nvidia Corporation (NASDAQ:NVDA). Industry insiders revealed that the subsidies were introduced after tech firms raised concerns over the higher costs of using less efficient domestic chips from Huawei and Cambricon, according to the report. Despite the higher energy costs tied to domestic chip production, China's centralized power grid continues to provide electricity that is both cheaper and cleaner than in the U.S., with no signs of shortage, the FT reported. As a result, energy-abundant remote provinces have emerged as key hubs for data center clusters. See Also: Peter Schiff: Bitcoin Depends On 'Growing Supply Of Fools' -- And Technical Analysis Says He's Not Wrong China Sidesteps Curbs, Pushes AI Self-Reliance China's move is part of a long-term strategy to cut reliance on foreign chipmakers. A top government adviser warned that the Xi Jinping-led nation should abandon the accelerators popularized by Nvidia and instead focus on developing domestic chips for artificial intelligence. In October, a Congress report revealed that China had reportedly managed to bypass U.S. export controls and purchase about $38 billion worth of sophisticated chipmaking equipment from the U.S. and its allies due to gaps in efforts to curb manufacturing. Adding to these developments, Alibaba introduced a new computing pooling system called Aegaeon, which dramatically reduced the reliance on Nvidia GPUs by 82% for AI models. Nvidia's China Woes The increased subsidies come in the wake of President Donald Trump's declaration that Nvidia's advanced Blackwell AI chip will not be available for "other people," as a strategic move to keep the technology out of China's reach. However, Nvidia CEO Jensen Huang stated that China already has a strong semiconductor ecosystem and that collaboration benefits both nations. He described China as an irreplaceable and "dynamic market." Despite the ban, CNBC commentator Jim Cramer argued that the policy still leaves Nvidia with "a lot of latitude" to operate in China, emphasizing that Trump has not "banned Nvidia from China." READ NEXT: Nvidia Rallies As Microsoft Expands AI Infrastructure In Middle East With US Backing Image via Shutterstock Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. BABAAlibaba Group Holding Ltd$167.00-2.01%OverviewNVDANVIDIA Corp$206.602.03%TCEHYTencent Holdings Ltd$80.63-0.91%Market News and Data brought to you by Benzinga APIs
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Chinese provinces are providing substantial electricity subsidies to AI data centers that use domestically-made chips instead of foreign alternatives like Nvidia's, as part of Beijing's broader strategy to achieve semiconductor independence and compete in the global AI race.
Government Subsidies Target AI Infrastructure Costs
Chinese provincial governments are implementing aggressive subsidy programs to support the country's domestic AI chip industry, offering electricity discounts of up to 50% to data centers that exclusively use China-made semiconductors
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. The provinces of Gansu, Guizhou, and Inner Mongolia are leading this initiative, reducing industrial power costs to approximately 0.4 yuan (5.6 cents) per kilowatt-hour for qualifying facilities.
Source: Wccftech
These subsidies come on top of direct cash incentives that sources indicate are substantial enough to cover a data center's operating costs for about a year
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. The targeted provinces are strategically chosen for their abundant power generation capabilities and existing industrial electricity rates that are already 30% cheaper than China's coastal regions.Power Efficiency Gap Drives Policy Response
The subsidy program directly addresses a significant technical challenge facing China's domestic AI chip industry. Current-generation Chinese AI accelerators from companies like Huawei and Cambricon require 30-50% more electricity than Nvidia's H20 chips to generate equivalent computational output
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. This efficiency gap has created substantial operational cost increases for major Chinese technology companies including ByteDance, Alibaba, and Tencent.
Source: Financial Times News
Huawei's flagship Ascend 910C chip, considered the country's most advanced AI accelerator, attempts to compensate for lower single-chip performance by clustering multiple units together, which further increases power consumption
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. Industry experts note that the power efficiency delta would be even greater when compared to Nvidia's newer Blackwell architecture, which remains export-controlled by the United States.Strategic Context of Semiconductor Independence
This subsidy initiative represents a continuation of China's broader strategy to achieve semiconductor independence following Beijing's ban on purchasing Nvidia AI chips
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. The policy creates a clear incentive structure where data centers using foreign chips, particularly from Nvidia and AMD, are explicitly excluded from receiving these benefits.
Source: Economic Times
China's domestic chip ecosystem includes several key players beyond Huawei, including Cambricon, Alibaba's chip division, and Biren Technology, all developing AI accelerators to compete with international alternatives
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. While these companies have made significant progress in recent years, industry observers note that achieving performance parity with leading international competitors will require continued investment and development time.Related Stories
Competitive Positioning and Market Impact
The subsidy program positions China's AI infrastructure costs favorably compared to international markets, with the discounted electricity rates significantly below the average 9.1 cents per kilowatt-hour industrial rate in the United States
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. China's centralized power grid system provides additional advantages in terms of reliability and cost predictability compared to the fragmented networks in other markets.The policy comes as major U.S. technology companies are also seeking to reduce energy costs through various strategies, including building dedicated power generation facilities near data center clusters
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. This creates a competitive dynamic where both nations are leveraging different approaches to optimize AI infrastructure economics while pursuing their respective technological sovereignty objectives.References
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