Beijing is ramping up pressure on Chinese companies to refrain from purchasing Nvidia’s latest chips and opt for domestic products instead, according to sources cited by Bloomberg on Friday, September 27.
Due to restrictions imposed by the United States, Nvidia is only able to sell slower artificial intelligence chips to China. The US government began prohibiting Nvidia from selling its most advanced AI processors to Chinese customers in 2022, as part of efforts to restrict Beijing’s access to American advanced technology. Nvidia subsequently modified subsequent versions of chips to comply with regulations set by the US Department of Commerce. The H20 series meets these standards.
Sources revealed that Chinese regulatory agencies have been pressuring companies not to purchase Nvidia’s H20 chips, which are used for developing and running AI models.
These policies are issued in the form of guidance rather than outright bans through executive orders, as Beijing aims to avoid hindering the development of its own AI startups while also not exacerbating tensions with the US. Sources declined to be named due to the sensitivity of the matter.
Sources indicated that the move by Chinese regulatory agencies is aimed at helping domestic AI chip manufacturers gain more market share, while enabling local tech companies to prepare for any potential additional restrictions from the US.
Leading manufacturers in AI processor field in China include Cambricon Technologies and Huawei.
Earlier this year, Beijing also urged local electric vehicle manufacturers to procure more supplies from domestic chip makers.
Sources stated that in recent months, multiple Chinese regulatory agencies, including the Ministry of Industry and Information Technology, have issued so-called “window guidance” – non-binding directives – to reduce the purchase of Nvidia chips.
They added that the notification is intended to encourage companies to rely on domestic suppliers like Huawei and Cambricon. Another source mentioned that Beijing further disseminated this information through a local trade group.
For companies looking to develop AI services, Nvidia chips are the gold standard. Top US tech companies such as Meta Platforms Inc., OpenAI, and Alphabet Inc. have been competing to acquire Nvidia’s most advanced products to build cutting-edge AI models.
Prior to the US export controls on China coming into effect, several Chinese tech companies, including ByteDance and Tencent, had also stockpiled Nvidia chips.
According to individuals familiar with China’s AI policies, if this means Chinese companies need to purchase some foreign semiconductors instead of domestic alternatives, Beijing would still tolerate such actions.
One source mentioned that some Chinese companies are turning a blind eye to Beijing’s ban on using H20 chips and are gearing up to rush to buy more H20 chips before the expected US sanctions at the end of this year, while also purchasing domestic chips like those from Huawei to please the authorities.
Beijing has provided billions of dollars in subsidies to the semiconductor industry, but domestic AI chips still lag far behind Nvidia’s capabilities.
Nvidia declined to comment. The Chinese Ministry of Commerce, Ministry of Industry and Information Technology, and the Cyberspace Administration of China did not respond to Bloomberg’s requests for comments.