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Coinpaper 2025-08-13 17:23:20

China Advises Firms to Avoid Nvidia H20 Chips Amid Security Concerns

China Advises Firms to Avoid Nvidia H20 Chips Amid Security Concerns

Key Highlights: China recommends firms avoid Nvidia H20 chips citing security concerns. Nvidia and AMD chips tied to hefty US fees and allegations of backdoors. Beijing presses companies to switch to domestic chips; impact already seen. In recent weeks, Chinese authorities have issued recommendations to several companies advising against the use of certain semiconductors, Bloomberg reported, citing sources. This directive specifically targets Nvidia's H20 chips. The guidance emphasizes that state-owned enterprises and their affiliated private companies should strictly avoid using these chips. However, the letters are recommendations rather than outright bans. This nuance matters as H20 chips remain in demand throughout Asia despite being somewhat outdated. The H20 is Nvidia’s most powerful model approved by the US government for sale in China. Early in 2025, the White House was reported to plan a ban on their supply aimed at crippling China’s AI sector. However, this plan was reportedly abandoned following Nvidia’s commitment to invest heavily in US AI infrastructure. Security and Export Restrictions Despite abandoned plans, restrictions were not fully lifted, causing Nvidia financial losses in early 2025 quarters. Licensing for Nvidia H20 and AMD MI308 chips requires companies to pay up to 15% of revenue from Chinese sales to the US Treasury. Meanwhile, Chinese authorities have accused Nvidia of implanting backdoors in H20 chips sold domestically, allegedly enabling remote tracking and shutdown of equipment. Given these allegations, the recent recommendations for companies to shy away from H20 chips appear plausible. Bloomberg reports that Beijing is also pressuring local businesses to replace foreign semiconductors with domestically produced alternatives. Notably, AMD’s chips were mentioned in letters, though the MI308 model was excluded. Market Impact and Expert Views Some experts believe Nvidia and AMD chips will remain in demand despite political and security headwinds. Commenting for Bloomberg, Homing Lee, a senior macroeconomic strategist at Lombard Odier, said: “The quality of domestically produced chips is improving significantly, but they may not be as versatile for the specific workloads that China’s AI industry hopes to focus on.” The Financial Times reports that Beijing’s recommendations have already had an effect, with some companies planning to reduce purchases of the H20 chip.

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