Nvidia Faces Cold Reception in China Despite H20 Export Approval.
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What’s Happening?
U.S. Policy Shift: Trump Clears Way for H20 Exports
In July 2025, President Trump reversed prior stringent export restrictions, authorizing Nvidia (and AMD) to export downgraded AI chips such as Nvidia’s H20 and AMD’s MI308 to China. This came with a stipulation: U.S. chipmakers must surrender 15% of the revenue from these exports to the U.S. government. Trump initially demanded a 20% cut, but the figure settled at 15% after negotiation with Nvidia CEO Jensen Huang. The chip H20 is a deliberately degraded, export-compliant version of Nvidia’s high-end Hopper processors, designed to observe U.S. export control restrictions.
China’s Response: Suspicion and Pushback
Security Concerns: Authorities in China have voiced fears that the H20 chip could contain hidden vulnerabilities such as remote “backdoors” or a “kill switch”.
Suspension Orders: Major tech companies ByteDance, Alibaba, Tencent have been instructed to halt purchases of H20 chips pending a security review.
Promotion of Domestic Alternatives: The Chinese government is actively promoting homegrown chipmakers like Huawei and Cambricon, as part of a broader self-reliance push.
State Media Criticism: Chinese outlets have criticized Nvidia’s chips as technologically inferior, insecure, and environmentally harmful.
Advantages & Benefits of This Move
For Nvidia & the U.S.
Revenue Boost for U.S. Treasury
A direct 15% cut of chip sales flows to the U.S. government a novel source of export-related revenue.
Restored Market Access
Nvidia regains a foothold in China, a vital market: the H20 chip alone had generated billions in sales and represented a sizable chunk of total revenue.
Strategic Leverage
The arrangement signals how export policy can be used tactically in broader trade diplomacy securing rare-earths while softening semiconductor restrictions.
For China
Maintained Technological Momentum
The H20, while downgraded, still offers strong AI inference capability urgently needed in commercial AI deployments.
Room to Grow Domestic Industry
This interlude gives China time to invest in and scale up domestic chipmakers like Huawei, Cambricon, and others supporting its strategic goal of semiconductors self-reliance.
Pros and Cons
Pros
U.S. Government: Generates revenue via the 15% export cut; gains leverage in trade negotiations.
Nvidia & AMD: Regains access to lucrative Chinese market; mitigates significant projected revenue losses.
Chinese Firms: Gains access to capable AI chips needed for commercial development; time to transition to domestic alternatives.
Technology Ecosystem U.S.: Demonstrates flexibility and diplomatic leverage; China accelerates chip independence and local innovation.
Cons
Security & Trust Concerns
Beijing’s concerns like alleged backdoors or kill switches have created mistrust and may limit uptake.
Undermining Integrity of Export Controls
Critics see the 15% revenue requirement as setting a troubling precedent of trading national security for revenue potentially weakening institutional safeguards.
Chinese Resistance & Strategic Push
Regulatory pressure to avoid these U.S. chips accelerates adoption of domestic alternatives, eroding Nvidia’s long-term market share.
Revenue Trade-offs
While Nvidia benefits in the short term, China’s push for homegrown tech could reduce future demand and profits for U.S. firms.
Legal and Policy Risks
The revenue-sharing mechanism’s legality is questioned; it’s seen by some as a quasi-tax or “pay-to-play” that could erode the credibility of U.S. export policy.