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The Chinese artificial intelligence (AI) company DeepSeek succeeded in its domestic market by providing AI models that strengthen the competitive position of local chip manufacturers. Recently, DeepSeek received model support from four firms, including Huawei, Hygon, Moore Threads and EnFlame, backed by Tencent for their "inference" task-optimized AI algorithms. Implementing this approach allows Chinese AI processors to perform as well as U.S.-made chips despite American export restrictions on advanced AI training chips.
DeepSeek optimizes its models to deliver better computational results instead of relying on megahertz-based processing. AI models optimized for inference work efficiently with less powerful chips, thus presenting an economic choice instead of using high-end American hardware. The open-source platform, together with DeepSeek's low fees, has the potential to speed up AI adoption and drive the creation of practical applications, which, according to industry experts, will give Chinese businesses an advantage against US-based companies like Nvidia in the dominant market.
Chinese local companies had to develop distinct solutions because the U.S. government imposed export restrictions on high-performance AI chips destined for China. Nvidia holds the position of leadership in AI chip manufacturing, yet it encounters restrictions on shipping its maximum-performance chips to specific regions. The Chinese market received select modified versions of Nvidia's chips, including the A800 and H800, because these models delivered reduced capabilities for large-scale AI training operations. The AI chip market belongs to Nvidia, although stringent regulations limit its capabilities for certain applications.
Chinese-made chips provide solid performance levels in inference activities, yet they demonstrate inferior capabilities than Nvidia's systems in AI training operations. DeepSeek models enable Chinese firms to depend more on their domestic technology when performing AI workloads. Reducing U.S. chip dependency through this shift would create greater innovation and independence in Chinese AI sector development.
DeepSeek achieves its breakthrough status by implementing an eight-bit floating-point (FP8) format, which optimizes memory storage capabilities. The standard application of AI models relies on a 32-bit floating-point (FP32) format while demanding additional memory space. Using FP8 within DeepSeek allowed memory storage to be reduced four times while maintaining equal computational strength. The use of FP8 improved the accessibility and reduced the costs of developing AI solutions particularly suited for smaller businesses attempting to challenge global leaders such as OpenAI and Meta.
FP8 delivers efficiency benefits that enable DeepSeek AI models to process information more rapidly, thus allowing them to serve real-time applications, including chatbots, voice assistants, and search engines. DeepSeek's R1 model establishes groundbreaking performance benchmarks in AI system processing speed and logic capabilities through its deployment of the FP8 technology.
