Chinese government tells domestic AI companies to boycott NVIDIA chips to counter US sanctions

The Chinese government is urging domestic AI companies to refrain from purchasing Nvidia chips in an effort to bolster its semiconductor industry and counter U.S. export controls, the economic newspaper Bloomberg reported.

China Urges Local Companies to Stay Away From Nvidia's AI Chips - Bloomberg
https://www.bloomberg.com/news/articles/2024-09-27/china-urges-local-companies-to-stay-away-from-nvidia-s-ai-chips

Bloomberg reported on September 28, 2024 that Chinese regulators are urging companies not to buy NVIDIA's 'H20' chips, which were developed with the aim of developing and running AI models.

The policy is not a complete ban but rather a form of 'guidance,' and behind it is the Chinese government's desire to 'avoid putting domestic AI startups at a disadvantage and escalating tensions with the United States,' said an anonymous source.

High-performance chips are essential for the development of AI, but the US government has imposed strict export restrictions on NVIDIA chips and other products in 2022 due to concerns that domestic semiconductor products may be diverted by China for military use.

Meanwhile, NVIDIA, which places importance on the Chinese market, has developed the HGX H20, a GPU that avoids regulations by reducing performance, and launched it in early 2024.

NVIDIA starts pre-orders for new AI chip 'H20' exclusively for China, priced at around 1.8 million to 2.2 million yen - GIGAZINE

According to a person familiar with the matter, since the beginning of 2024, several regulatory authorities, including the Ministry of Industry and Information Technology of China, have issued non-binding instructions, known as 'window guidance,' to reduce the use of NVIDIA products.

The guidance, aimed at encouraging companies to rely on Chinese semiconductor vendors such as Huawei and Cambricon, was communicated indirectly through industry groups, the people added.

On the other hand, Chinese authorities expect domestic companies to develop the best possible AI systems, and are likely to tolerate the purchase of foreign-made semiconductors to achieve this, say experts familiar with China's AI policy.

China's Ministry of Commerce, Ministry of Industry and Information Technology and Cyberspace Administration did not respond to Bloomberg's requests for comment.

NVIDIA also declined to comment, but in a separate interview with Bloomberg on September 27, 2024, its CEO Jensen Huang said, 'The first thing we have to do is comply with the policies and regulations that are imposed on us. And in the meantime, we'll do our best to compete in the markets that we serve. We have a lot of customers who rely on us, so we'll do our best to support them,' he said, highlighting the company's commitment to serving Chinese customers while complying with U.S. government regulations.

Despite the delay in the launch of the H20, which NVIDIA released for China, which was originally scheduled for 2023, as of July 2024, more than 1 million orders have been placed, showing that sales are twice as high as those of Huawei AI chips, which are being introduced by some major Chinese companies such as Baidu, and that NVIDIA chips in China are still very popular.

NVIDIA plans to sell 1 million H20 chips in China in 2024 and earn 2 trillion yen in sales, selling twice as many AI chips as Huawei to show its presence - GIGAZINE

To compete with NVIDIA, the Chinese government has injected huge subsidies into the semiconductor industry, but Chinese semiconductor manufacturers still lag behind NVIDIA.

'Some companies are ignoring instructions to refrain from buying H20 and rushing to procure it before tougher US regulations expected at the end of the year, but they are also buying domestically made Huawei chips to please the Chinese government,' one of the people said.

It has also been reported that Chinese AI companies and research institutes are procuring high-performance chips through brokers and exploiting loopholes in regulations using the cloud to access high-performance chips made in the United States.

Reports that Chinese companies are accessing American high-end GPUs through Amazon and Microsoft clouds - GIGAZINE