China has reacted coolly to a surprise US policy reversal allowing Nvidia to sell its H20 AI chip in the Chinese market, underscoring Beijing’s focus on semiconductor self-sufficiency even as demand for advanced processors remains high. According to CNN, President Donald Trump last month permitted the resumption of H20 sales after previously banning the part in April.
Beijing questions H20 as it touts domestic progress
Rather than welcoming the move, Chinese authorities labeled the H20 a security risk, summoned Nvidia for explanations, and urged companies to avoid the chip, CNN reported, citing prior reporting by Bloomberg on official guidance. China’s cyberspace watchdog and industry ministry raised alleged risks such as “tracking and positioning” and “remote shutdown,” which Nvidia denies, stating it does not include backdoors and arguing that blocking H20 would harm US leadership without national security benefit.
Analysts and industry figures quoted by CNN said Beijing’s stance reflects confidence in rapid domestic advances and a drive for a secure, homegrown supply chain. Xiang Ligang, an advisor to China’s Ministry of Industry and Information Technology, said the episode highlights the importance of relying on domestically produced chips.
Trump calls H20 “obsolete” amid export control shifts
CNN noted that Trump justified allowing H20 sales by calling the chip “obsolete” compared with Nvidia’s cutting-edge processors like Blackwell and H100. Commerce Secretary Howard Lutnick said the US wants Chinese developers “addicted to the American technology stack.” The H20 was originally designed to comply with Biden-era controls limiting high-performance exports.
Demand persists despite capacity and ecosystem gaps
Despite official caution and reduced performance versus Nvidia’s top-line parts, H20 remains coveted. Bernstein estimated shipments to China could have reached 1.5 million units this year, or about $23 billion in revenue, absent restrictions, with ByteDance, Alibaba, and Tencent among major buyers, CNN reported. Huawei’s latest AI chips can match or surpass H20 in some metrics, but trail in memory bandwidth tied to High Bandwidth Memory (HBM). China’s CXMT is still several years behind leaders such as SK Hynix, Samsung, and Micron, according to Counterpoint Research cited by CNN.
Supply constraints persist for domestic alternatives, including limited production capacity and advanced packaging bottlenecks. Bernstein estimated Huawei’s 2025 shipments at around 700,000 units—far short of national demand. Nvidia’s integrated hardware-software ecosystem also presents switching costs for developers. CNN reported projections that homemade AI chips could rise from 17% in 2023 to 55% by 2027, with US suppliers declining accordingly, as Nvidia CEO Jensen Huang acknowledged China’s rapid progress and said, “We’re very, very close.”
