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The U.S. Commerce Department has begun granting licences to chipmaker Nvidia to sell its H20 processors to China, a U.S. official told Reuters on Friday. The ruling overturns an April prohibition and eliminates one of the biggest obstacles to Nvidia reaching one of its most significant markets. The H20 chip is being built with China in mind to fall under the U.S. export controls that were introduced by the Biden administration.
The shift follows Nvidia saying that the previous restraints would cut $8 billion in sales in its July quarter. On Wednesday CEO Jensen Huang supposedly met former President Donald Trump, but the company and the White House declined comment. Nvidia had already applied for export licences in July and had been promised the licences will be awarded shortly. It is not clear to what extent the approvals were made, including how many licences were given, the companies to which they were given, and the value of the items shipped.
Nvidia had earlier projected a charge of $5.5 billion because of the H20 restrictions but revised this downwards by $1 billion when they reused some of the materials. During the first quarter of the year, H2O had a $4.6 billion revenue, out of which 12.5 percent of total sales were in China. Even though the other developed AI chips are remaining restricted, the re-entry of the H20 into the Chinese market can lead to a critical revenue stream.
The U.S. sanctions are intended to inhibit the advancement of China in the sphere of artificial intelligence and military technologies, depriving it of access to the latest semiconductors. China, however, is one of the biggest markets in the world when it comes to the semiconductor market, and Huang has cautioned that Nvidia may lose its top position without a presence there. In the meantime, the Chinese manufacturers such as Huawei are aggressively wooing local developers with locally produced chips, which adds fuel to the fire.
