Nvidia Considers Halting H2O Chip Production Following China’s Purchase Restrictions

Nvidia, the U.S.-based semiconductor giant, has instructed some of its component suppliers, including Amkor Technology in Arizona and Samsung Electronics in South Korea, to halt production of its China-specific H20 general processing units (GPUs). This move comes after Beijing imposed restrictions on the purchase of H20 chips, citing alleged national security concerns. Reuters also reported that Nvidia asked Foxconn (Hon Hai) to suspend H20-related work. These directives follow a series of actions by the Chinese government, including summoning Nvidia over potential “backdoors” or tracking technologies embedded in the chips, which could allow remote access or monitoring.

The H20 GPUs had been slated for export to China, with the U.S. government approving export licenses earlier in the year, effectively permitting shipments that had previously been banned in April due to security concerns. Chinese authorities reportedly warned major tech companies, including ByteDance, Alibaba, and Tencent, against purchasing H20 chips, pending a national security review. The directive to suppliers has created uncertainty over Nvidia’s ability to resume normal shipments to the Chinese market.

Nvidia CEO Jensen Huang emphasized that the H20 chips contain no security vulnerabilities such as backdoors and are intended solely for commercial purposes, not for military or government use. Huang highlighted ongoing discussions with Chinese authorities to address concerns and expressed hope that the situation would be resolved. He also mentioned lobbying efforts in the U.S. to ensure export approvals, which would allow the company to sell its H20 chips to China, a critical and lucrative market for Nvidia.

The company disclosed a $4.5 billion writedown in May due to unsold H20 inventory, underscoring the financial impact of export restrictions. Without such curbs, Nvidia estimated that its sales in the last financial quarter would have been $2.5 billion higher. The combination of regulatory scrutiny, supply chain disruption, and geopolitical tensions between the U.S. and China has complicated Nvidia’s operations and highlighted the challenges of conducting business in an increasingly politicized semiconductor market.

The scrutiny of H20 chips reflects broader concerns over U.S.-China tech competition, national security, and semiconductor self-sufficiency. Analysts suggest that Beijing’s actions are consistent with its strategy to enhance domestic chip production capabilities and reduce dependence on American semiconductor technologies. By limiting purchases of H20 chips, China is signaling its intent to prioritize local chip development while resisting efforts by U.S. policy to maintain dominance in AI hardware.

In parallel, Nvidia has publicly stressed that the H20 chips are safe for commercial use, with no military application, and has sought to reassure the market regarding the legitimacy and security of its products. Huang has also emphasized the global importance of AI technology and the role of American AI hardware in advancing industrial and technological development, noting that AI will progress worldwide with or without U.S. involvement.

The company is actively managing its supply chain in response to these conditions, instructing suppliers to pause production where necessary while continuing efforts to resolve regulatory and market uncertainties. Despite these challenges, Nvidia maintains that the H20 GPUs remain a commercially valuable product and that ongoing dialogue with both U.S. and Chinese authorities aims to ensure a path forward for sales and exports.

Overall, Nvidia’s situation highlights the complex intersection of global trade, national security concerns, and technological competition in the semiconductor industry. The company faces immediate operational challenges, financial impacts from writedowns, and strategic pressures as it navigates U.S.-China trade tensions, while China continues to emphasize self-reliance in critical AI hardware production.