ByteDance close to deal with Mediatek to acquire data center custom AI chips

ByteDance is in advanced talks to buy custom data center chips from Taiwan’s MediaTek, Bloomberg has reported, with the TikTok owner after another source of AI computing power while US export restrictions continue to block its access to Nvidia’s most advanced processors.

Bytedance wants to secure application-specific integrated circuits (ASICs) chips tailored to a single customer’s computing needs, although Bloomberg has reported that the order volume is still undecided with an agreement not reached yet.

An agreement would make ByteDance MediaTek’s second major ASIC customer after Google, if talks are completed.

Why ByteDance is shopping for custom silicon

US export restrictions have led ByteDance to look at alternatives to Nvidia’s advanced AI chips. Companies such as ByteDance, Alibaba and Tencent are currently unable to acquire Nvidia’s most powerful processors, and domestic suppliers such as Huawei have struggled to meet up to the demand.

Quartz reported that US rules still allow Chinese companies to work directly with chip designers, though, as long as the computing power they acquire stays below a specified threshold.

ByteDance has taken advantage of this approach, agreeing in May to purchase millions of ASICs from Qualcomm for its AI data centers.

MediaTek to gain more ground

The Taiwanese chipmaker is using its mobile processor expertise to expand into data center infrastructure, and a deal of this level would strengthen its foothold and position in a market that has been largely dominated by Qualcomm and Broadcom. Securing a major customer such as ByteDance could even help to further speed up the transition into data center infrastructure.

MediaTek expects AI chip sales to reach about $2 billion this year and is targeting a 15% share of an $80 billion market by 2027, Bloomberg reported. Its ambitions received a further boost in September, when Nvidia announced a $3.5 billion investment in the company done via convertible bonds.

The deal also gave MediaTek access to Nvidia’s NVLink Fusion platform for developing custom accelerator chips, Quartz reported.

With a market value of about $210 billion, MediaTek is Taiwan’s second-largest company by market value, well behind TSMC.

ByteDance’s spending surge behind the push

Bytedance’s larger spending interests has led it to consider capital expenditure of up to $70 billion this year, more than double its spending in the previous year, with outlays potentially approaching $100 billion in 2027 if conditions remain favourable, Bloomberg reported. In September, ByteDance secured a $30 billion loan to help in the financing of this expansion.

ByteDance’s AI strategy is based on flagship models such as Seedance, which compete with other products such as Alibaba’s Happy Horse, Kuaishou’s Kling AI and Google’s offerings.

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