China pressures firms to drop Nvidia AI chips in push for tech self-reliance

The Chinese government has reportedly imposed an unofficial ban on domestic companies using artificial intelligence chips made by U.S.-based Nvidia. Bloomberg, citing unnamed sources, reported on Sept. 28 that “Chinese regulators have been discouraging companies from purchasing Nvidia’s H20 chips, which are used to develop and run AI models.” The H20 is a lower-performance chip designed by Nvidia to comply with U.S. export restrictions on advanced technology to China. Despite this, the Chinese government is pressuring firms to reduce reliance on U.S. technology.

While the directive is not legally binding, in China’s highly regulated environment, government recommendations often carry significant weight, effectively creating a de facto ban. Bloomberg reported that “the policy has taken the form of guidance rather than an outright ban, as Beijing wants to avoid handicapping its own AI startups and escalating tensions with the U.S.”

Huawei developed Kirin chips in collaboration with its subsidiary HiSilicon./Huawei

In recent months, Chinese regulators issued “window guidance” encouraging companies to purchase chips from domestic manufacturers like Huawei and Cambricon instead of Nvidia, according to Bloomberg. Earlier this year, the Ministry of Industry and Information Technology issued similar instructions to electric vehicle makers such as BYD, urging them to prioritize domestic chips. That directive has now been extended to advanced AI semiconductors, which are more sophisticated than those used in automotive applications.

The move is part of China’s broader efforts to boost self-sufficiency in semiconductor production. The country has set a goal of achieving 70% self-sufficiency by 2025 and has poured substantial subsidies into the industry. In May, China created a new semiconductor investment fund totaling 344 billion yuan (about $47 billion).

These efforts are beginning to yield results. Huawei, through its subsidiary HiSilicon, is supplying Kirin chips and Ascend chips, which were designed to compete with Nvidia’s offerings, to Chinese companies like Huawei and Baidu. Leading Chinese memory chipmaker ChangXin Memory Technologies recently announced that it had successfully developed high-bandwidth memory (HBM) chips critical for AI applications. According to the Wall Street Journal, Huawei has also completed development of its Ascend 910C chip, which is said to rival Nvidia’s H100, with plans for mass production in October.

Nvidia is expected to face a significant hit to its sales in China due to this new policy. Since late 2022, the U.S. government has restricted Nvidia from exporting its most advanced chips, the A100 and H100, to China. Bloomberg reported that “the U.S. government banned Nvidia from selling its most advanced AI processors to Chinese customers in 2022, part of an attempt to limit Beijing’s technological advances.” Nvidia, based in Santa Clara, California, modified subsequent versions of its chips to meet U.S. Commerce Department regulations. The H20 chip falls under those guidelines.

Nvidia’s revenue from China has been shrinking. Company reports show that China’s share of Nvidia’s total revenue fell from 24.6% in the first quarter of 2022 to 12.2% in the second quarter of fiscal 2025. Samsung Electronics may also be affected, as the H20 chip uses Samsung’s HBM3 memory.