In a bid to bolster its semiconductor industry and counter US sanctions, Beijing is reportedly urging Chinese firms to favor locally produced artificial intelligence (AI) chips over those from Nvidia Corp. (NVDA). This move signifies a significant shift in China’s tech strategy.
Chinese regulators are actively discouraging companies from purchasing Nvidia’s H20 chips, crucial for developing and operating AI models. This policy, while presented as a guidance rather than a strict ban, aims to avoid hindering local AI startups and escalating tensions with the US. The initiative intends to empower domestic Chinese AI chipmakers like Cambricon Technologies Corp. and Huawei Technologies Co., enabling them to secure a larger market share and fortify local tech firms against potential future US restrictions.
Earlier this year, Beijing similarly encouraged local electric-vehicle manufacturers to source more supplies from domestic chipmakers, according to Bloomberg. Following this development, Nvidia’s share price dipped by up to 3.9% to $119.26 on Friday.
In 2022, the US government imposed a ban on Nvidia’s sales of its most advanced AI processors to Chinese customers, seeking to curtail Beijing’s technological advancement. Chinese regulators, including the Ministry of Industry and Information Technology, have issued directives to minimize the use of Nvidia, prompting companies to explore domestic vendors like Huawei and Cambricon. However, Beijing will continue to permit the acquisition of foreign semiconductors over domestic alternatives when necessary for local companies to create the most robust AI systems.
Nvidia declined to comment on the matter. Jensen Huang, the company’s CEO, stated that they are dedicated to serving customers in China while adhering to US government restrictions.
This move by Beijing clearly demonstrates its commitment to bolstering its domestic semiconductor industry and reducing dependence on foreign technology. By encouraging local firms to opt for domestic AI chips, China is not only supporting its local chipmakers but also actively preparing for any potential escalation in US restrictions. This development marks a crucial chapter in the ongoing tech war between the US and China, as both nations strive for technological supremacy.
