EXCLUSIVE-ByteDance developing AI chip, in manufacturing talks with Samsung, sources say

By Liam Mo, Fanny Potkin and Che Pan

BEIJING/SINGAPORE, Feb 11 (Reuters) - China's ByteDance is developing an artificial intelligence chip and is in talks with Samsung Electronics 005930.KS to manufacture it, two people familiar with the matter said, as the TikTok parent seeks to secure supply of advanced processors.

ByteDance aims to receive sample chips by end-March, they said. The company plans to produce at least 100,000 units of the chip, designed for AI inference tasks, this year, according to one of the sources and another person. One of the sources said Bytedance is looking to progressively ramp production to up to 350,000 units.

Negotiations with Samsung include access to memory chip supplies that are in exceptionally short supply amid the global AI infrastructure build-out, making the deal particularly attractive, one of the sources said.

The information about ByteDance's in-house chip project is inaccurate, a spokesperson for the company said in a statement, without elaborating. Samsung declined to comment.

The work would mark a milestone for ByteDance, which has long sought to develop chips to support its AI workloads. The company's chip efforts date back to at least 2022, when it began hiring chip-related staff in earnest.

Reuters reported in June 2024 that ByteDance was working with U.S. chip designer Broadcom AVGO.O on an advanced AI processor, with manufacturing planned to be outsourced to Taiwan's TSMC 2330.TW.

Global tech giants including Alphabet's GOOGL.O Google, Amazon AMZN.O and Microsoft MSFT.O have developed their own AI chips to reduce reliance on Nvidia NVDA.O, the dominant supplier of advanced chips essential for AI development.

For Chinese tech companies, U.S. export controls on advanced chip sales to China have also added urgency to develop their own AI chips.

While Bytedance has yet to launch its own chip, its rivals Alibaba 9988.HK and Baidu 9888.HK are ahead in AI chip development: Alibaba last month unveiled its Zhenwu chip for large-scale AI workloads. Baidu sells chips to external clients and plans to list its chip unit Kunlunxin soon.

The chip project, codenamed SeedChip, is part of ByteDance's broader push to channel resources into AI development, from chips to large language models, betting the technology will transform its business portfolio spanning short video, e-commerce and enterprise cloud services.

The company founded Seed in 2023 to develop AI models and promotes their applications.

ByteDance plans to spend over 160 billion yuan ($22 billion) on AI-related procurement this year, with more than half allocated to purchasing Nvidia chips, including H200 models, and advancing its in-house chip, one of the sources said.

ByteDance executive Zhao Qi told employees at a January all-hands meeting that the company's AI investment would benefit all divisions, according to a fourth source briefed on the meeting.

Zhao, who oversees ByteDance's Doubao chatbot and its overseas version Dola, acknowledged the company's AI models lagged behind global leaders like OpenAI but pledged continued support for AI development this year, the person said.