Chinese authorities have launched an informal campaign to limit the purchase of Nvidia’s H20 processors after statements by US Secretary of Commerce Howard Lutnick regarding chip exports were deemed ‘offensive’.
According to sources familiar with the regulators’ decisions, the Cyberspace Administration of China (CAC), the National Development and Reform Commission (NDRC), and the Ministry of Industry and Information Technology (MIIT) have been pressuring domestic tech companies since July to suspend orders for the H20 chip, a version specifically designed for the Chinese market, reports the Financial Times.
Lutnick stated in a July 15 interview with CNBC that the US does not sell China ‘the best, the second best, or even the third best processors’. He added that the goal is to sell only sufficiently weaker chips to keep Chinese developers ‘tied to the US technology ecosystem’.
Such statements, according to sources in Beijing, have angered parts of the Chinese political elite, accelerating regulatory actions.
A Blow to Nvidia
Nvidia’s CEO Jensen Huang visited Beijing last month, where he received a warm welcome and promised to remain in the Chinese market. After meetings with clients, the company even reopened production lines for the H20 at partner TSMC. However, due to new regulatory pressure, Chinese tech giants like Alibaba and ByteDance have reduced or completely halted orders.
On July 31, the CAC officially summoned Nvidia representatives over alleged ‘serious security risks’. The statement claimed that US experts could track the location of the chips and remotely disable them, a claim that Nvidia firmly denied. The MIIT further conveyed the message to the industry, while the NDRC, as the main state planner, issued guidelines recommending that tech companies refrain from purchasing US chips altogether.
Although the Ministry of Commerce and the Ministry of Foreign Affairs of China have shown greater openness towards Nvidia’s business, especially due to trade negotiations with Washington, the line of regulators responsible for cybersecurity and industrial policy has prevailed.
Adjustment to Domestic Solutions
In recent years, Chinese authorities have strongly encouraged the use of domestic semiconductors. After initial difficulties, key companies are increasingly inclined to switch in the ‘inference’ segment, applying artificial intelligence in response to user demands. Testing has shown progress in chips from manufacturers like Huawei and Cambricon, and planned openings of new production lines in 2026 should alleviate the supply shortage.
However, a complete ban on foreign chips in the short term is not likely. Too many projects are tied to Nvidia’s processors, and the domestic supply still cannot meet the growing demand.
Geopolitical Risks
This case once again shows that advanced processors for artificial intelligence are at the center of the geopolitical competition between China and the US. Donald Trump has already announced a drastic increase in tariffs on Chinese imports, while Washington is discussing new export restrictions on chips.
Despite pressure from some American politicians, Trump has left open the possibility of exporting a weakened version of the upcoming Blackwell generation of chips to China, which could change the dynamics of orders. Some Chinese buyers are therefore waiting for a resolution before fully committing to domestic alternatives.
– Science, technology, and the economy should not be politicized or used as weapons. The policy of suppression and limitation will not stop China’s development – stated the Chinese Ministry of Foreign Affairs.
Nvidia emphasized in a statement that the H20 is not a military product nor intended for state infrastructure and that free commercial access to chips is ‘beneficial for both sides’.
For Nvidia, which generates about one-fifth of its revenue in China, this is a sign that the business model based on ‘customized’ versions of chips faces serious risks. If Chinese regulators gradually force domestic giants to switch to Huawei or Cambricon processors, the loss of market share could be permanent, even if Washington eases restrictions. For China, this case confirms that geopolitical tensions accelerate the process of technological self-sufficiency. While it temporarily slows the development of artificial intelligence, it long-term encourages the creation of its own chip ecosystem, which could change the global balance of power in the semiconductor industry.
