NVIDIA Faces Supply Constraints on AI Chips Amid Export Restrictions

NVIDIA has informed Chinese clients of a limited supply of H20 AI chips due to US export restrictions imposed in April. The company's CEO, Jensen Huang, notes that TSMC has shifted production to serve other customers and that starting from scratch to manufacture H20 chips may take up to nine months. NVIDIA has resumed H20 sales to China pending US export authorization and is developing a new chip, RTX Pro GPU, compliant with US regulations.

NVIDIA has informed Chinese clients of a limited supply of H20 AI chips due to US export restrictions imposed in April. The company's CEO, Jensen Huang, has stated that TSMC has shifted production to serve other customers and that starting from scratch to manufacture H20 chips may take up to nine months. NVIDIA has resumed H20 sales to China pending US export authorization and is developing a new chip, RTX Pro GPU, compliant with US regulations [1].

The US administration, under President Trump, has allowed NVIDIA to resume H20 AI chip sales to China, reversing earlier export bans. This decision is linked to negotiations regarding rare earth element supplies, critical for US manufacturing. The move reflects a strategy of using export controls as bargaining tools in trade talks, securing rare earths in exchange for AI chips [1].

The decision to allow NVIDIA's H20 chips back into China is part of a broader trade deal aimed at reducing mutual tariffs and reopening rare earth supply lines. The US Treasury Secretary, Scott Bessent, has indicated that the export controls on Nvidia have become a "negotiating chip" in broader US-China trade talks [1].

NVIDIA's return to China is a significant reversal of the export controls implemented by the Biden administration. In October 2022, Washington first built a firewall of export controls, followed by progressively higher curbs on Nvidia's AI chips. The H20 chips were seen as dangerous because they worked with Nvidia's CUDA software stack, which is the backbone of most AI development globally [1].

The US administration's decision to lift the ban on H20 chips is part of a broader strategy to secure rare earth supplies. China controls more than 80% of the global supply of these critical elements, which are essential for EVs, smartphones, and weapons. The US has retaliated against China's tariffs by halting rare earth exports, giving Beijing leverage in negotiations [1].

NVIDIA's CEO, Jensen Huang, has defended the company's position, stating that the Chinese market is massive, dynamic, and highly innovative. He believes that American companies should be able to compete and serve this market [1].

The H20 chips are widely believed to have contributed to the rise of DeepSeek, an advanced Chinese AI model. The chip's real power lies in its software compatibility, allowing Chinese firms to access a world-class AI development ecosystem [1].

The US has a long history of using tech as leverage in global power plays. The Nvidia saga is not an outlier. The US has pressured the Dutch government to block ASML from selling its cutting-edge EUV lithography machines to China, and blacklisted Huawei and ZTE, cutting off their access to American tech [1].

NVIDIA's story serves as a warning to other companies and countries about the potential risks of export controls and the shifting geopolitical landscape. While compliance with export regulations is crucial, policies can flip overnight, and access to entire markets can disappear with a single memo [1].

References:
[1] https://m.economictimes.com/news/international/global-trends/donald-trump-nvidia-jensen-huang-china-h20-chip-deal-rare-earth-magnets-us-export-tech-trade/articleshow/122616868.cms