China’s Tech Cold War Escalates: Firms Told to Boycott Nvidia’s H20 Chips
Beijing draws a hard line in the silicon sand. Major Chinese corporations are being pressured to blacklist Nvidia's latest AI accelerator—the H20—in what industry watchers call a calculated strike in the semiconductor arms race.
The move comes as US export controls continue throttling China's access to cutting-edge chips. While Nvidia designed the H20 specifically for the Chinese market to comply with restrictions, Beijing appears unimpressed by these 'neutered' alternatives.
Tech giants now face an impossible choice: anger regulators by using Western chips, or sacrifice performance with domestic alternatives. Meanwhile, Nvidia shareholders are left wondering if their golden goose just got cooked—proving once again that geopolitics trumps P/E ratios every time.
Nvidia claims its chips are secure and pose no threat to China’s security
Reportedly, some of Beijing’s messages to companies sought to know why they opted for Nvidia’s H20 chips instead of local equivalents, whether the choice was essential given domestic alternatives, and if they had identified any security flaws.
In recent weeks, state media outlets also raised questions on the H20’s security and reliability. Chinese regulators have conveyed some of those concerns to Nvidia, which still insists its chips have no such vulnerabilities and pose no threat to national security.
The American technology company reassured Chinese authorities: “The H20 is not a military product or for government infrastructure,” adding that the country has never even depended on U.S. chips for government functions.
However, similar security concerns in the past prompted China to limit Tesla cars and Apple iPhones in designated institutions and ban Micron Technology chips from critical infrastructure. Still, Beijing could apply a much tougher stance on Nvidia and AMD, though one source with direct knowledge noted the talks remain preliminary.
Nonetheless, the latest guidance could still complicate Nvidia and AMD’s efforts to sell hardware.
Some Beijing officials also raised concerns that the Nvidia chips might support location tracking or remote disabling, claims the chipmaker dismissed. Even so, TRUMP administration officials are considering pushing for location tracking, seeing that it could help trace chip smuggling in the Asian country.
Some lawmakers have also tabled a bill directing location verification for high-performance AI chips.
Chinese authorities aim to encourage domestic chip supply over American chips
Chinese authorities are still hoping to boost domestic chip sales and reduce reliance on American firms. In September 2024, the government encouraged companies to prioritize domestic chips over Nvidia’s. However, Nvidia’s H20 chips have pulled in demand from top Chinese firms, including Alibaba Group Holding Ltd. and Tencent Holdings Ltd, over their strong memory bandwidth.
With Huawei still struggling to satisfy local demand, Nvidia retains an advantage. Though an AI researcher at RAND, Lennart Heim, also believes that Beijing is using regulatory uncertainty to carve out a captive market that could fully absorb Huawei’s production. He argued, however, that domestic substitutes were still not up to par even as China sought to push out foreign suppliers.
The Biden administration had earlier projected that Chinese companies WOULD see inference costs for advanced AI models jump three to six times if they lost the Nvidia chip. Nevertheless, President Trump recently described the H20 chip as “obsolete,” contending that China already has an equivalent.
Previously, some administration officials also supported resuming H20 sales because Huawei already has chips comparable to the H20.
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