Nvidia CEO Jensen Huang visited Beijing amid U.S. restrictions requiring the company to obtain a license for selling its H-20 chip to China, raising concerns about its market operations in the region. The Chinese government has advised local tech firms against purchasing the H-20 chips, potentially leading to a shift towards domestic alternatives and impacting Nvidia’s sales in China.
Nvidia CEO Jensen Huang recently visited Beijing, which is a routine trip for him as Nvidia has a significant presence in China. Reports indicate that he met with the Chinese vice premier during his visit, and notably, he was dressed in a suit rather than his usual leather jacket. This visit comes in the context of recent U.S. government actions requiring Nvidia to obtain a license for certain chip sales to China, specifically the H-20 chip, which has raised questions about the implications for the company’s operations in the region.
The U.S. government has not declared the H-20 chip illegal but has mandated that Nvidia apply for a license to sell it. This requirement has led to speculation that Nvidia may not pursue the license, as evidenced by their recent $5.5 billion write-down on inventory related to the H-20. This financial move suggests that the company is preparing for potential challenges in the Chinese market, although the exact timing and consequences of these developments remain uncertain.
A significant point raised in the discussion is the influence of the Chinese Communist Party on domestic companies. It was noted that the Chinese government has advised its tech firms against purchasing Nvidia’s H-20 chips, which could have a substantial impact on sales. In China, such advisories are often taken seriously, and companies are likely to comply with government recommendations, which could further limit Nvidia’s market access.
The advisory from the Chinese National Development and Reform Commission indicated that the H-20 chips may not meet certain regulatory standards related to energy and supply chain requirements. Despite this, major Chinese tech companies like Alibaba, Tencent, and Bytedance had previously been significant buyers of the H-20, suggesting that they had built up inventories before the advisory was issued. The current situation leaves these companies with limited options for sourcing similar technology.
As a result of the U.S. export restrictions and the Chinese government’s advisory, there is a potential shift in the market dynamics. With the H-20 chips becoming less accessible, Chinese tech firms may turn to domestic alternatives, such as Huawei’s similar accelerator technology. This shift could inadvertently bolster China’s domestic tech industry, as companies seek viable solutions to replace the Nvidia chips they can no longer procure.