China Suspends Nvidia H20 Imports Amid Security Concerns

Chinese regulators have reportedly ordered large tech companies to suspend purchases of Nvidia's H20 GPUs over security concerns, according to The Information. This move is part of the ongoing AI chip saga between the US and China. The Cyberspace Administration of China (CAC) has reportedly ordered the halt of Nvidia H20 imports due to security issues. The CAC is responsible for regulating the internet and cybersecurity in China.

Chinese regulators have reportedly ordered large tech companies to suspend purchases of Nvidia's H20 GPUs over security concerns, according to The Information. This move is part of the ongoing AI chip saga between the US and China. The Cyberspace Administration of China (CAC), responsible for regulating the internet and cybersecurity in China, has reportedly ordered the halt of Nvidia H20 imports due to security issues.

The H20 chip, designed by Nvidia specifically for China after U.S. export restrictions on its more advanced AI chips took effect in late 2023, has been the focus of scrutiny. Chinese authorities have expressed concerns that materials Nvidia has asked companies to submit for U.S. government review could contain sensitive information, including client data [1]. Despite Nvidia's assurances that the H20 chip is not a military product or for government infrastructure, the CAC has taken a cautious approach [1].

The move comes as part of China's broader campaign to strengthen its semiconductor industry and reduce reliance on U.S. technology. Chinese agencies are encouraging companies to favor homegrown solutions over foreign chips like the H20. Reports suggest that companies received direct inquiries asking why they choose Nvidia's chips over domestic alternatives, whether security concerns influenced their choice, and if domestic chips could meet their needs instead [2].

This guidance underscores China's goal of bolstering semiconductor independence and reducing reliance on U.S. technology. The move is significant for Nvidia, which generated $17 billion from China sales in its fiscal year ended January 26, or 13% of total revenue [1]. The suspension of H20 GPU purchases could threaten Nvidia's recently restored access to the Chinese market and its recovery attempts in China, including a recent deal to pay the U.S. 15% of revenues from H20 sales [2].

While not a formal ban, the guidance carries significant weight in China's regulated environment, effectively narrowing market opportunities for the H20 chip. Chinese companies, including ByteDance, Alibaba, and Tencent, have been ordered by the CAC to suspend Nvidia chip purchases altogether, citing data security concerns [3]. This directive was communicated at a meeting the regulator held with over a dozen Chinese tech firms shortly after the Trump administration reversed the export curbs on H20 chips [3].

The move also affects AI accelerators from AMD, according to Bloomberg. However, it was not clear whether any notices from Chinese authorities specifically mentioned AMD's MI308 chip [1]. The Trump administration last week confirmed an unprecedented deal with Nvidia and AMD, which agreed to give the U.S. government 15% of revenue from sales of some advanced chips in China [1].

China's foreign ministry has expressed hope that the U.S. would act to maintain the stability and smooth operation of the global chip supply chain. The Chinese government has been working on domestic AI chip alternatives, with companies such as Huawei developing processors that rival the H20's performance [1]. However, U.S. sanctions on advanced chipmaking equipment have constrained domestic manufacturers' ability to boost production [1].

In conclusion, the suspension of Nvidia H20 GPU purchases in China is a significant development in the ongoing AI chip saga between the US and China. The move reflects China's broader strategy to strengthen its semiconductor industry and reduce reliance on U.S. technology. The implications for Nvidia's business in China are substantial, as the company's recovery attempts and market share could be threatened by the suspension.

References:
[1] https://finance.yahoo.com/news/china-urges-firms-not-nvidias-053604627.html
[2] https://voice.lapaas.com/china-urges-firms-not-to-use-nvidia-h20-chips/
[3] https://seekingalpha.com/news/4483894-china-orders-halt-of-nvidia-h20-imports-over-security-issues-report