Why NVIDIA has paused production of its China-exclusive H20 chips
What's the story
NVIDIA has ordered some of its component suppliers to halt production of its China-exclusive H20 general processing units. The move comes as the Chinese government tightens its grip on the US chip giant. According to a report by The Information, the directive was issued after Beijing told local tech firms to stop purchasing these chips over security concerns.
Supplier response
Amkor and Samsung asked to stop production
NVIDIA has reportedly asked Amkor Technology, based in Arizona, and South Korea's Samsung Electronics to stop production. Amkor is responsible for the advanced packaging of NVIDIA's H20 chips, while Samsung supplies the memory for them. Separately, Reuters has reported that NVIDIA had also asked Foxconn to suspend work related to the H20s.
Market impact
H2O return to China doubtful
Responding to a CNBC inquiry, an NVIDIA spokesperson said, "We constantly manage our supply chain to address market conditions." The statement comes as doubts loom over the return of H20s in the Chinese market. This is especially after Washington announced it would issue export licenses for chip exports to China, an action that had been effectively banned since April.
Security scrutiny
NVIDIA summoned by Chinese authorities last month
Last month, China's Cyberspace Administration summoned NVIDIA over national security concerns with the H20s. Beijing is worried that these chips could have tracking technology or "backdoors," enabling remote operation. In response to these fears, US lawmakers have proposed legislation related to AI chips and export regulations, with concerns about illegal shipments.
CEO statement
What did Jensen Huang say?
Speaking to reporters in Taiwan, NVIDIA CEO Jensen Huang admitted that China had raised questions about security "backdoors." He clarified that these do not exist. "Hopefully the response that we've given to the Chinese government will be sufficient. We're in discussions with them," he said, adding that they were "surprised" by these queries.
Product clarification
'H20 is not a military product'
In a statement today, NVIDIA stressed that "the market can use the H20 with confidence." It clarified that "as both governments recognize, the H20 is not a military product or for government infrastructure." The company also noted that China won't depend on US chips for government purposes, just as the US government wouldn't depend on Chinese chips.