Key Takeaways
- The Chinese government has set strict conditions for technology companies wanting to use Nvidia’s H200 AI chips.
- The conditions include only approving purchases for university research and buying chips only when "necessary", although the meaning of "necessary" is unclear.
- China remains cautious about fully reopening the Chinese market to American chip giant Nvidia.
- Nvidia has denied reports that it requires upfront payment for H200 chips, stating that it "would never require customers to pay for products they do not receive".
- Chinese technology companies have placed orders for over 2 million H200 chips, exceeding Nvidia’s inventory of 700,000.
Introduction to the Situation
The Chinese government has reportedly set strict conditions for technology companies wanting to use Nvidia’s H200 AI chips. According to a report in The Information, the government has told some tech companies that it would only approve their purchases of Nvidia’s H200 AI chips under special circumstances, such as for university research. This move signals that China remains cautious about fully reopening the Chinese market to American chip giant Nvidia. The report claims to cite two people with direct knowledge of the situation, and it is unclear what the future holds for Nvidia’s H200 AI chips in the Chinese market.
China’s Caution with Nvidia
The Chinese government’s decision to set strict conditions for the use of Nvidia’s H200 AI chips is a clear indication of its caution when it comes to dealing with American technology companies. The report states that the government issued a "deliberately vague" directive, telling some technology companies to buy chips only when "necessary" but was unclear as to what that means. This lack of clarity has led to confusion among technology companies, and it is unclear how the situation will unfold. The Chinese government reportedly plans to hold additional meetings with more companies to deliver the purchase directive, although it is unclear whether those sessions will include any new guidance.
Contrasting Reports on Nvidia Chips
There have been conflicting reports regarding Nvidia’s H200 AI chips in China. A report in Reuters claimed that Nvidia has set strict advance payment requirements for Chinese companies buying H200 AI chips, including a full payment upfront. However, Nvidia has denied this report, stating that it does not require upfront payment for H200 chips. The company said it "would never require customers to pay for products they do not receive". This denial has added to the confusion surrounding the situation, and it is unclear what the truth is. Nvidia CEO Jensen Huang recently claimed huge orders for the company’s H200 chips from China, with Chinese technology companies reportedly placing orders for over 2 million H200 chips.
China’s Prioritization of Domestic Companies
The Chinese government’s strict conditions for the use of Nvidia’s H200 AI chips are part of its larger effort to prioritize domestic companies in its race to dominate AI against America. China has been investing heavily in its domestic technology industry, and it is clear that the government is keen to reduce its reliance on American technology companies. Chinese chipmakers like Huawei have developed AI processors, including the Ascend 910C, although their performance still lags behind Nvidia’s H200 for large-scale training of advanced AI models. The Chinese government’s decision to set strict conditions for the use of Nvidia’s H200 AI chips is a clear indication of its commitment to supporting domestic companies.
Impact on Nvidia and the Technology Industry
The Chinese government’s decision to set strict conditions for the use of Nvidia’s H200 AI chips will likely have a significant impact on the technology industry. Nvidia’s H200 AI chips are highly sought after, and the company’s inability to sell them in China could have a major impact on its revenue. The situation is also likely to have a broader impact on the technology industry, as companies begin to reassess their relationships with Chinese technology companies. The US-China trade war has already had a significant impact on the technology industry, and this latest development is likely to add to the uncertainty. As the situation continues to unfold, it is clear that the technology industry will be watching with great interest.
