NVIDIA Will Sell New Chips to China That Remain Compliant With U.S Rules

Nvidia, the U.S. semiconductor giant, has reportedly discovered a method to sell high-end chips to Chinese companies while adhering to U.S. regulations designed to restrict China's access to technology.

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Approximately 20% to 25% of Nvidia's revenue in its largest unit, the data center business, comes from China. According to Chinese financial media Cailian Press, Nvidia is poised to deliver three new chips—HGX H20, L20 PCle, and L2 PCle—to domestic manufacturers in the coming days. These chips are derived from Nvidia's H100 chip.

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The H100 and A100 artificial intelligence chips were initially impacted by new U.S. restrictions last year, aiming to limit sales to China. Nvidia asserted in a September 2022 filing that the U.S. government would permit the development of the H100 in China.

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In the short term, Chinese manufacturers lack better alternatives and are expected to continue purchasing Nvidia's chips while exploring replacements. Previously, companies in China shifted to Nvidia's H800 and A800 chips, but new U.S. restrictions last month tightened control over those sales.

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The computing power of the H20 is reportedly only about 50% of the A100. Despite potential cluster solutions with lower-power chips for large model calculations, there are no ideal alternatives due to cost implications.

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Despite the heightened demand for artificial intelligence computing power in China, some large internet companies have begun purchasing domestically-made AI chips at scale.

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While Nvidia declined to comment, the Financial Times reported the news, citing a document distributed by Nvidia to potential customers. All three new chips from Nvidia operate outside the threshold of U.S. restrictions, according to research firm SemiAnalysis. Nomura analysts also found that Nvidia's Drive AGX Orin chip did not meet all criteria for a U.S. restriction on sales to China.

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The U.S. has emphasized limiting China's advancement in advanced tech for military use, and domestic players are seeking ways to navigate around these restrictions. In August, Huawei released a smartphone with download speeds associated with 5G, featuring an advanced semiconductor chip.

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The specific details regarding the involvement of older equipment or alternative procurement processes in the latest chip production remain unclear.