1、M IdeaTracking Chinas Semi Localization|Asia PacificDomestic AI GPU development hype or hope?Morgan Stanley Taiwan Limited+Charlie ChanEquity Analyst Charlie.C +886 2 2730-1725 Daniel Yen,CFAEquity Analyst Daniel.Y +886 2 2730-2863 Morgan Stanley Asia Limited+Daisy Dai,CFAEquity Analyst Daisy.D +852

2、 2848-7310 Morgan Stanley Taiwan Limited+Tiffany YehEquity Analyst Tiffany.Y +886 2 7712-3032 Morgan Stanley Asia Limited+Ethan JiaResearch Associate Ethan.J +852 3963-2287 Morgan Stanley Taiwan Limited+Lucas WangResearch Associate Lucas.W +886 2 2730-2875 Greater China Technology SemiconductorsAsia

3、 PacificIndustry ViewAttractive We see four key factors driving Chinas domestic GPU shipments:1)SMICs 7nm process capacity and yield,2)Chinese CSPs AI chip sourcing strategies,3)Nvidias B40 chip performance/price,4)Chinas AI capex expansion.EW SMIC (foundry for local AI chips)and OW TSMC(foundry for

4、 Nvidia).The new V3.1 model of Chinas DeepSeek supports next-generation local AI chips(Reuters,August 21):DeepSeek mentioned that it adopted a new precision parameter,UE8M0 FP8,aimed at working with next-generation Chinese-made chips.CAICT(China Academy of Information and Communications Technology)r

5、ecently released a list of local AI chips which could be used for DeepSeek,from makers including Huawei,Cambricon,Kunlun,Hygon,MetaX,etc.(Exhibit 1).Spec details of Chinese local AI chips are summarized in Exhibit 3.Advancement locally of AI software ecosystem:DeepSeeks DeepGEMM,released in February

6、 2025,was written in CUDA and has used Nvidias GPU,but with UE8M0 FP8 precision,many local Chinese AI chips could work.Under the UE8M0 FP8 format,accuracy adjustments are more dynamic compared with traditional E4M3 and E5M2 formats,enabling much more efficient computing.Alibaba develops new AI chip;