The H20 chip, developed by Nvidia as a less advanced but specialized AI processor for China, was cleared by the U.S. government for export earlier this year after a previous ban was lifted in July. The clearance required Nvidia and AMD to pay 15% of their chip revenue from China to the U.S. government in exchange for export licenses.
Reasons for Suspension
Chinese regulators recently advised major domestic tech firms such as Tencent, ByteDance, and Alibaba to halt new orders for the H20 chip, citing concerns over potential security risks. Allegations surfaced about possible "backdoors" that might enable unauthorized remote access or information leaks, which Nvidia has firmly denied.
In response, Nvidia proactively requested its suppliers to pause H20 chip manufacturing and assembly to comply with evolving market and regulatory conditions.
Impact on Supply Chain
Amkor Technology in Arizona, responsible for advanced packaging of the chip, has stopped production work.
Samsung Electronics in South Korea, which supplies memory chips for the H20, has also halted related activities.
Foxconn, involved in backend processing, has been asked to suspend its work on the chip.
Company Statement
A Nvidia spokesperson said, "We continually manage our supply chain to respond to market conditions." Nvidia clarified that the H20 chip is not a military product nor intended for government infrastructure. The company remains engaged with both U.S. and Chinese authorities to address concerns.
Market and Industry Reactions
The suspension highlights the complex geopolitical environment surrounding advanced AI technology and semiconductor exports. Nvidia shares experienced a slight dip in early trading due to uncertainty over future shipments. The move underscores ongoing tensions between U.S.-China relations impacting global tech supply chains and AI hardware availability.
Outlook
While the H20 chip's future in China is uncertain, Nvidia is reportedly working on newer, more advanced AI chips to meet market demand. The company continues to navigate regulatory challenges to balance innovation, compliance, and market access.
