Recent reports from the United States indicate that Chinese internet regulatory authorities have instructed domestic companies to halt the purchase of high-end chips from the American company, Nvidia. Despite the concerns raised by the Chinese government regarding potential security risks associated with Nvidia chips, particularly in terms of data tracking and remote shutdown capabilities, Chinese enterprises are still eager to utilize these chips in key artificial intelligence applications.
According to sources cited by ‘The Information,’ China’s internet regulatory agency, the Cyberspace Administration of China (CAC), urged tech giants such as ByteDance, Alibaba, and Tencent to temporarily suspend procurement of Nvidia chips over the past two weeks, citing data security concerns.
The directive issued by the Cyberspace Administration of China was conveyed during a meeting with over a dozen Chinese tech companies by the National Internet Information Office of China.
The Chinese regulatory authorities have insisted on pausing the procurement of new Nvidia chips until potential security risks associated with the sale of these chips in the Chinese market are thoroughly investigated.
Meanwhile, Bloomberg reported that the CAC’s guidance specifically prohibits state-owned or private companies from using H20 chips in any projects related to government or national security, marking a ramp-up of pressure from the Chinese government to switch to domestically-produced chips like those from Huawei.
Despite the tensions surrounding the use of Nvidia chips, industry analysts believe that Chinese AI companies still covet the capabilities of H20 chips for certain critical AI applications. While H20 chips may not match the computing power of Nvidia’s top-tier products, their robust memory bandwidth is well-suited for the inference stage of artificial intelligence development, where models identify patterns and draw conclusions.
In evaluating the potential impact, a Biden administration official expressed concerns that the costs for Chinese enterprises to run inference on advanced AI models could increase significantly if they lose access to Nvidia chips.
Reflecting on the situation, Lee Homin, a senior macro strategist at a Singapore-based bank observed that while the quality of domestic chips in China is on the rise, they may not perform as efficiently as desired in specific workloads within the domestic AI industry.
Looking ahead, it is anticipated that there will continue to be strong demand for Nvidia and AMD chips in China.
In a news conference on Monday, President Trump confirmed that Nvidia will be allowed to sell H20 chips to China under certain conditions, including paying 15% of the sales revenue to the U.S. government. Nvidia’s CEO, Jensen Huang, has maintained that permitting sales of non-high-end chips to China could benefit the U.S. by making China rely on American technology.