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Chinese regulators have recently encouraged local companies to replace NVIDIA's H20 chips in national security-related projects. Government officials are concerned about potential security threats associated with the use of H20, arguing that it does not meet the standards set by Chinese-made alternatives. This initiative could significantly impact NVIDIA, potentially leading to a revenue gain of up to $23 billion in the Chinese market.
This comes after formal requests were sent to various firms that have placed orders for NVIDIA H20 chips, seeking reasons why they prefer the stationery technology over local cell, and whether the technology presents any exposure to security. It is reported that the chip has at most 20% of the computing power of the NVIDIA H100 model, and its energy efficiency is below the national standards.
It is reported that the US government inserted tracking devices in groups of high-end chips that were likely to have been smuggled into China. According to the sources, the chips are similar in size to smartphones, and they were found during an inspection of the servers of companies such as Dell and Super Micro.
This is another step toward reaffirming the US's growing focus on technology transfers, which backs up Beijing's fears regarding the use of foreign technology.
Nonetheless, analysts think Chinese firms might still bid for NVIDIA chips for specific AI applications. The domestic substitutes are also said to perform below standards in the case of specialized loads, and hence, transitioning completely is not easy.
According to analysts at Bernstein, NVIDIA is expected to sell about 1.5 million H20 chips in China in 2025, a total that would translate to a total turnover of about $23 billion. The move by Beijing against the chip may compel NVIDIA to adjust these predictions downward. Also, continuous antitrust inspections held by Chinese authorities present a threat of significant fines, which might amount to as much as 5 billion dollars in 2024.
Moreover, the Biden administration's recent estimates imply that prohibiting the NVIDIA H20 chip would push up the prices of AI model operations by three to six times. NVIDIA and AMD are now paying the American government 15% of their revenues earned from high-end chip sales in China.
Also Read: NVIDIA, AMD Agree to Share 15% of China Chip Revenue with US
