Nvidia plans to modify a downgraded version of its H20 artificial intelligence chip for China in the next two months. This move comes after the U.S. imposed export restrictions on the original model. Three sources familiar with the matter informed Reuters about the development.
New Downgraded Chip Version for China
According to the sources, Nvidia has notified major Chinese customers, including leading cloud computing providers, about the modified H20 chip. The company aims to release the new version in July. The decision to downgrade the H20 chip comes as Nvidia seeks to maintain its position in the Chinese market despite increasing U.S. export restrictions on high-tech semiconductor products.
A Response to Export Challenges
The original Nvidia H20 chip a powerful AI product is cleared for China sales, However, U.S. officials informed the company last month that it would require an export license to sell the product to China. As a result, Nvidia has developed a modified chip with new technical specifications, including significantly reduced memory capacity. One source noted that customers in China could potentially adjust the chip’s configuration to meet performance requirements.
Nvidia has not provided any official comment on this matter. Meanwhile, the U.S. Commerce Department did not respond to a request for comment from Reuters.
China’s Strategic Role for Nvidia
In the fiscal year ending January 26, China accounted for $17 billion of Nvidia’s revenue, or 13% of the company’s total sales. This underscores the importance of China as a strategic market for Nvidia. CEO Jensen Huang visited Beijing last month, just days after U.S. officials imposed new export restrictions on the H20 chip. During his visit, Huang emphasized China’s importance as a key market for Nvidia’s business.
Impact of U.S. Export Controls
The U.S. has restricted exports of Nvidia’s most advanced chips to China since 2022, citing national security concerns about their potential military applications. The H20 chip was introduced after the U.S. tightened export controls in October 2023. Despite the restrictions, Chinese technology giants like Tencent, Alibaba, and ByteDance have increased their orders for the H20 chip. They are seeking more affordable AI models to meet growing demand.
Nvidia had accumulated $18 billion in H20 orders by January. This highlights the substantial demand for the product in China despite the U.S. restrictions.
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