It looks like China is making things difficult for chipmaker Nvidia. Chinese authorities have urged local companies to avoid using Nvidia’s H20 chips, particularly for government-related purposes, Nvidia said in a statement on Tuesday that the H20 chip was “not a military product or for government infrastructure.”
“China has ample supply of domestic chips to meet its needs. It won’t and never has relied on American chips for government operations, just like the U.S. government would not rely on chips from China,” the statement said.
Bloomberg News reported on Tuesday, a move likely to hamper the firm’s efforts to revive its slumping China sales.
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The U.S. government imposed export restrictions on Nvidia’s advanced AI chips, notably the H20 series, limiting the company’s ability to sell these critical products in the Chinese market. This led to a substantial $5.5 billion charge for Nvidia, reflecting excess inventory and purchase obligations tied to these restricted chips. Although a policy adjustment under the Trump administration allowed Nvidia to resume limited sales of the H20 chips to China, the impact of U.S. export controls and geopolitical friction has constrained growth prospects.
Meanwhile, China has taken a firm stance to protect its domestic technology sector by advising state-affiliated companies to avoid using Nvidia’s AI chips, citing national security concerns. This directive, coupled with increased competition from Chinese chipmakers and stricter regulations, has further pressured Nvidia’s market share and long-term prospects in the region.
A range of firms were sent official notices discouraging the use of the H20, a less-advanced chip, particularly for any government or national security-related work by state enterprises or private companies, the report said, citing people familiar with the matter.
Despite these challenges, Nvidia continues to explore ways to adapt and maintain its presence in China, recognizing the country’s critical role in the global semiconductor ecosystem.
The H20 curb also follows comments on Monday from President Donald Trump, suggesting that he might allow Nvidia to sell a scaled-down version of its advanced Blackwell chip in China, despite deep-seated fears in Washington D.C. that Beijing could harness U.S. AI capabilities to supercharge its military.