Nvidia chips face silent ban in China after US comments

New Delhi: China’s regulators have started pressing domestic technology firms to cut back on purchases of Nvidia’s H20 chip, a processor designed specifically for the Chinese market. The move comes after comments from US commerce secretary Howard Lutnick that officials in Beijing described as "insulting”.

According to a report from the Financial Times, the Cyberspace Administration of China (CAC), the National Development and Reform Commission (NDRC), and the Ministry of Industry and Information Technology (MIIT) have taken coordinated steps to push companies like Alibaba and ByteDance to hold back or scale down their H20 orders.

The tension escalated after Lutnick said on CNBC on July 15 (IST July 16), "We don’t sell them our best stuff, not our second-best stuff, not even our third-best.” He went on to add that US policy aimed to keep Chinese developers "addicted to the American technology stack.”

These remarks were not well received in Beijing. Officials considered them disrespectful and responded by sending "window guidance” to tech firms, instructing them to pause or cancel new H20 orders.

The decision is a setback for Nvidia, which had just restarted H20 production lines at TSMC following positive signals from Chinese clients. CEO Jensen Huang had visited Beijing weeks earlier and received strong support from local businesses.

But within days of Lutnick’s comments, the CAC summoned Nvidia executives and accused the chips of having "serious security issues”, including location tracking and remote shutdown capabilities. Nvidia strongly disputed those claims.

Meanwhile, the NDRC urged firms to stay away from all Nvidia chips, not just the H20. This aligns with China’s long-running strategy of boosting homegrown chipmakers such as Huawei and Cambricon.

Chinese companies have increasingly tested local alternatives, especially for "inference” workloads where AI systems respond to queries. Industry insiders said firms like Alibaba are now more willing to shift away from Nvidia for such tasks, even if training still leans heavily on advanced foreign chips.

However, a complete ban on foreign chips is unlikely in the near term. Domestic production capacity is still catching up, though Beijing expects major new lines to launch next year.

Interestingly, not all government agencies are aligned. The commerce and foreign affairs ministries had welcomed Huang’s July trip as a positive sign for trade negotiations with Washington. But regulators such as CAC and MIIT appear determined to accelerate China’s push for semiconductor independence.