Key points
- U.S. President Trump allowed Nvidia to resume sales of its H20 AI chip to China, reversing previous restrictions.
- China’s response has been cool, citing security concerns and promoting domestic chip development.
- While China’s chip industry has advanced, it still lags behind the U.S. in advanced AI processors.
- Experts predict a significant rise in China’s domestic AI chip market share in the coming years.
Despite a surprising reversal of U.S. technology restrictions on China, Beijing’s reaction to the resumption of Nvidia’s H20 AI chip sales has been far from enthusiastic. Last month, President Trump authorized the sale of the chip, a move that seemingly contradicted years of stringent export controls.
However, instead of celebrating, China has expressed concerns about potential security risks associated with the chip, summoning Nvidia for explanations and discouraging its companies from using it. This cautious response reflects China’s ambition to achieve self-sufficiency in its semiconductor industry and the significant strides it has already made in chip technology.
While China’s national champion, Huawei, has developed competitive AI chips, it still lacks the advanced processors readily available from U.S. companies. Experts point out that while Huawei’s chips rival the H20 in processing power, they fall short in memory bandwidth, a crucial aspect of AI chip performance reliant on High Bandwidth Memory (HBM) technology, where U.S. companies still hold a significant advantage.
China’s own HBM technology is still several years behind its American and South Korean counterparts. This technological gap, coupled with Huawei’s limited production capacity and Nvidia’s established ecosystem, keeps the H20 attractive to Chinese firms despite its classification by the U.S. as an older model.
The U.S. justification for the sale centered on maintaining its technological leadership by ensuring its chips remain the global standard, even if it means supplying ostensibly less advanced models to China. This approach, however, has raised questions about the transactional nature of the decision and its potential implications for national security.
China views the situation differently, suggesting that the U.S. is unfairly prioritizing market share over genuine technological collaboration. The perceived “dumping” of seemingly obsolete technology has been met with skepticism and a further push for domestic solutions.
Despite the lukewarm reception and China’s stated goal of self-reliance, the demand for H20 chips remains significant within the Chinese tech industry. The potential market for the chips, even with restrictions, was significant, potentially reaching 1.5 million units this year. This highlights the persistent reliance on U.S. technology, despite the considerable progress made by China’s domestic semiconductor sector.
However, experts project a significant shift in the coming years, with China’s homegrown AI chip market share projected to increase dramatically, fueled by both necessity and opportunity created by previous export controls.
