Beijing asked local companies to avoid using Nvidia () H20 processors (), especially for government -related purposes, complicating chip manufacturer’s attempts to recover billions in lost revenue in after management reverses an effective ban on such sales.
In recent weeks, Chinese authorities have sent notes to several companies discouraging the use of less advanced semiconductors, people said familiar with the matter, who preferred not to identify themselves due to the sensitivity of the information. The orientation was particularly strong against the use of H20 for any government -related work or national security by state or private companies, the sources said.
However, the letters did not constitute a total ban on the use of the H20, according to these people. Industry analysts broadly agree that Chinese companies still covet these chips, which perform well in certain crucial AI applications. .
Take your business to the next level with the help of the country’s leading entrepreneurs!
Nvidia and Advanced Micro Devices () have recently been able to approve Washington to resume lower performance AI chip sales to China ,.
But even with the support of Trump’s team, the two companies face the challenge that their Chinese customers are under Beijing pressure to buy home chips. Beijing’s overall impulse affects AMD AI accelerators beyond Nvidia, one of the sources said, although it is unclear if any letter specifically mentioned AMD’s Chip M308.
The actions of Chinese designer of Cambricon Technologies Corp. They fired to the daily limit of 20% with the news of China’s orientation, leading a pairs in pairs such as semiconductor manufacturing international corp.
Continues after advertising
Beijing’s posture can limit Trump’s ability to turn its reversal into export control into a gain for government coffers, an agreement that highlighted the transactional approach of its administration to national security policies, traditionally treated as non -negotiable.
Still, Chinese companies may not be ready to abandon local semiconductors. “Household manufacturers are dramatically improving quality, but they may not be so versatile for specific workloads where China’s AI domestic industry expects to focus,” said Homin Lee, Singapore’s Lumbard Odier macro senior strategist. Lee added that he predicts “strong” demand for chips that the Trump administration is allowing Nvidia and AMD to sell.
Beijing questioned companies about this dynamic in some of their letters, according to one of the sources, asking questions such as buying Nvidia H20 chips instead of local alternatives, if this is a necessary choice given to domestic options, and if they found safety problems at NVIDIA hardware. The warnings coincide with state media reports that launch questions about the safety and reliability of H20 processors. Chinese regulators raised these concerns directly with Nvidia, who repeatedly denied their chips contain such vulnerabilities.
Continues after advertising
At the moment, the sources said, China’s most rigorous guidance on chips is limited to sensitive applications, a situation that resembles how Beijing has restricted Tesla Inc. vehicles and Apple Inc. iPhones in certain institutions and locations for safety concerns. The Chinese government has also prohibited the use of chips from Micron Technology Inc. in critical infrastructure.
Beijing may extend his rigorous guidance on Nvidia and AMD to a larger range of contexts, according to a person with direct knowledge of deliberations, who said these conversations are in early stages.
AMD declined to comment on Beijing’s warnings, while Nvidia said in a statement that “H20 is not a military product or government infrastructure.” China has abundant supplies from household chips, said Nvidia, and “it doesn’t depend or ever depended on American chips for government operations.”
Continues after advertising
China’s Ministry of Information Technology and Information Technology and China Cyberspace administration did not respond to fax requests for commentary on this report, which is based on interviews with more than half a dozen people familiar with Beijing’s political discussions. The White House did not respond to the request for commentary off business hours.
Chinese government attitude raises questions about the Trump administration’s explanation to allow these exports a few months after effectively prohibiting such sales. Several high US employees said the reversal of policy was the result of commercial negotiations with China, but Beijing publicly indicated that the restart of the H20 shipments was not part of any bilateral agreement. Recent Chinese notices to companies suggest that the Asian country may not even have sought this Washington concession initially.
Beijing’s concerns are double. To begin with, Chinese officers fear that Nvidia chips may have location tracking and remote shutdown skills – suggestion that Nvidia has denying vehemently. Trump employees are actively exploring whether location tracking could help contain the suspected counterbase of restricted components to China, and legislators have presented a project that would require location verification for advanced AI chips.
Continues after advertising
Secondly, Beijing is intensely focused on developing their domestic chips capabilities and wants Chinese companies to stop using western chips in favor of local offers. Officers had previously asked Chinese companies to choose domestic semiconductors instead of Nvidia H20 processors, Bloomberg said last September, and introduced energy efficiency standards that the H20 chip does not meet.
NVIDIA has designed the H20 chip specifically for Chinese customers to comply with years of US restrictions on sales of its more advanced hardware, measures to limit Beijing to AI access that could benefit the Chinese army. The H20 chip has less computational power than Nvidia’s main offers, but its strong memory bandwidth is quite suitable for the AI development inference phase, when models recognize patterns and draw conclusions.
This has made it a desirable product for companies such as Alibaba and Tencent in China, where Huawei’s domestic champion is struggling to produce sufficient advanced components to meet market demand. According to an estimate of Biden government officials – they considered but did not implement H20 sales controls – losing access to this Nvidia chip would make three to six times more expensive for Chinese companies to run in advance in advanced AI models.
“Beijing seems to be using regulatory uncertainty to create a sufficiently large captive market to absorb Huawei’s offer, while still allowing H20 purchases to meet real demands,” said Lennart Him, IA -focused Rand researcher on China’s pressure for companies to avoid American AI chips. “This signals that domestic alternatives are still inadequate, even with China’s pressure on foreign suppliers.”
In his statements on Monday, Trump said China’s Huawei already offers Nvidia H20 comparable chips, echoing earlier comments from his administration officers who advocated the decision to resume H20 exports in part on this. The US should maintain the Chinese AI ecosystem dependent on American technology-dependent as long as possible, these officers say, to deprive Huawei from revenue and know-how that would come from a broader customer base.
Other administration officers have opposed this logic strongly, Bloomberg said, arguing that resuming H20 exports will only strengthen China’s technological champions and increase the country’s general computational power.
Trade Secretary Howard Lutnick and other Trump officers also said the H20 measure was part of an agreement to improve American access to rare Chinese minerals – despite previous Trump team statements that such an arrangement was not on the agenda. “As the Chinese deliver their magnets, the H20 will be released,” Lutnick said last month. Treasury Secretary Scott Bessent said at the end of July that the issue of magnets had been “resolved.”
The first licenses for the Nvidia H20 and AMD M308 arrived just over a week after Bessent’s statement – after Nvidia’s CEO Jensen Huang met with the president and both companies agreed to share their revenue from China with the US government.
© 2025 Bloomberg L.P.
