China Pressing Tech Giants To Stop Buying Nvidia’s H20 AI Chips

Amid increasing efforts by American chipmaker Nvidia to claw back market share in China, Beijing appears to be turning the screws on the firm by discouraging domestic use of its artificial intelligence chips.

On Tuesday, several media reports described how Chinese authorities were urging local companies to avoid Nvidia’s H20 AI chips, particularly for government-related purposes.

The Financial Times reported Beijing was pressuring China’s large tech firms such as Alibaba and ByteDance over their orders of H20 chips.

Also on AF: Trump Lauds Intel CEO After Meeting Him, Call for Him to Resign

The two companies have been asked by the Ministry of Industry and Information Technology to explain why they need to order H20 chips instead of using domestic alternatives, the report said, citing people familiar with the matter. Some tech companies were planning to reduce their orders as a result of the questions from regulators, the report added.

Meanwhile, The Information reported that Alibaba and ByteDance, along with Tencent Holdings, have been ordered by China’s internet regulator in the past two weeks to suspend their purchases of Nvidia chips altogether, citing data security concerns with the chips.

The directive came from the Cyberspace Administration of China and was communicated at a meeting the regulator convened with over a dozen Chinese tech firms, shortly after the Trump administration reversed the export curbs on H20 chips, according to the report.

The regulator told the companies that new chip purchases had to be suspended until it concluded an investigation into potential security risks from the chips, according to the report, which cited people familiar with the matter.

The security risks were a reference to China’s cyberspace watchdog saying late last month that it had summoned Nvidia to a meeting to explain whether its H20 chips had any backdoor security risks – a hidden method of bypassing normal authentication or security controls.

‘Neither advanced, nor safe’

Reports of Chinese regulatory pushback follow claims by Chinese state-backed media that the chips were ‘neither advanced, nor safe’, adding that domestic firms should avoid purchasing them.

“When a type of chip is neither environmentally friendly, nor advanced, nor safe, as consumers we certainly have the option not to buy it,” Yuyuan Tantian, which is affiliated with state broadcaster CCTV, said in an article published on WeChat.

The article also said Nvidia chips could achieve functions including “remote shutdown” through a hardware “backdoor.” Yuyuan Tantian’s comment followed criticism against Nvidia by People’s Daily, another Chinese state media outlet.

In a commentary earlier this month, People’s Daily said Nvidia must produce “convincing security proofs” to eliminate Chinese users’ worries over security risks in its chips and regain market trust.

Nvidia later said its products had no “backdoors” that would allow remote access or control. The company reiterated its position on Sunday when asked for a comment on Yuyuan Tantian’s article, saying its chips had no backdoors.

Boosting Huawei, SMIC

The pushback from China comes at a time when Nvidia is trying to woo Chinese buyers again after being unable sell its most advanced chips in the country due to US export control policies. It also marks a significant change in China’s policies, considering until last month it had maintained a blockade on critical rare earth shipments to the US, due to mounting export controls on AI chips.

The pushback is likely tied to ongoing tariff friction with the US, which has increased factory worker layoffs in the country. It also speaks to China’s push to promote the use of domestically-developed technologies including AI chips made by Huawei, which has been the biggest winner from Nvidia increasingly being cut-off from China’s AI market.

Huawei’s chips are yet to reach a level that can compete with Nvidia’s most advanced chips in performance and in their manufacturing process. Still, experts have been shocked by the quick progress the company has made in their development — with the backing of billions of dollars worth of state funding.

Shares in China’s top contract chipmaker Semiconductor Manufacturing International Corporation (SMIC) rose 5% on Tuesday on expectations of rising demand for locally-produced chips. SMIC is the primary manufacturer of Huawei’s chips.

H20 artificial intelligence chips were developed by Nvidia for the Chinese market after the US imposed export restrictions on advanced AI chips in late 2023. The administration of US President Donald Trump banned their sales in April amid escalating trade tensions with China, but reversed the ban in July.

On Monday, Trump also suggested he might allow Nvidia to sell a scaled-down version of its next-generation advanced GPU chip in China. “Jensen (Huang, Nvidia CEO) also has the new chip, the Blackwell. A somewhat enhanced-in-a-negative-way Blackwell. In other words, take 30% to 50% off of it,” Trump told reporters in an apparent reference to slashing the chip’s computing power.

“I think he’s coming to see me again about that, but that will be an unenhanced version of the big one,” he added.

His statements followed an unprecedented deal with Nvidia and AMD to give the US government 15% of revenue from sales of some advanced chips in China.

Meanwhile, China’s foreign ministry said on Tuesday it hoped the U.S. would take practical action to maintain the stability and smooth operation of the global chip supply chain.

• Reuters, with additional editing by Vishakha Saxena

Also read:

Nvidia’s Bid To Stop Huawei

Nvidia, AMD ‘Agreed to Pay 15% of China Chip Revenue to US’

US and China Defer Tariff Surge, Extend Trade Truce For 90 Days

Chinese AI Firms, Chipmakers Form Alliance To Ditch Foreign Tech

US Unveils 100% Tariff on Imported Chips But Key Firms Exempt

Nvidia CEO Says US Export Curbs on AI Chips is ‘Flawed’ Policy

Nvidia’s Huang Says China’s Military ‘Can’t Rely on US Tech’

US Lawmakers Push Location-Tracking For High Powered AI Chips

China’s Huawei ‘Hoping Its New AI Chip Can Outpower Nvidia’

China’s Huawei, SMIC ‘to Ramp Up Production’ of Newest AI Chip

Huawei, SMIC Set to Defy US Sanctions With 5nm Chips: FT

Satellite Images Show Huawei’s Expanding Chip Facilities – FT