NVIDIA is seeking permission from the Trump administration to resume exporting its H20 chips to China.
Source: NVIDIA |
Lawmakers are calling upon US President Donald Trump to reconsider his administration's decision to allow the exporting of high-end artificial intelligence processors made by NVIDIA Corp. to China.
Earlier this month, NVIDIA said it was filing applications with the US government to allow the company to resume sales of its H20 GPU in China. "The US government has assured NVIDIA that licenses will be granted, and NVIDIA hopes to start deliveries soon," the company said in a blog post. The announcement marked a reversal of policy from the Commerce Department, which in April had restricted sales of the chip to China. The news from NVIDIA came shortly after the Department of Commerce had also lifted export license requirements for electronic design automation (EDA) software to China on July 2, in a reversal of restrictions imposed by the Bureau of Industry and Security in May.
In a July 18 letter to Commerce Secretary Howard Lutnick, US Rep. John Moolenaar, R-Mich., called the prospect of Chinese tech companies training AI systems using NVIDIA's H20 GPUs a "strategic threat" to the US tech sector. Moolenaar, who is chair of the House Select Committee on China, said giving China access to these chips would help the country capture global AI model market share from the US.
"The Commerce Department made the right call in banning the H20. Now it must hold the line," Moolenaar wrote.
Beyond NVIDIA, the primary beneficiaries of reopening the Chinese market to H20 chips are some of the leaders in EDA software, such as Synopsys Inc., Cadence Design Systems Inc. and Siemens EDA, said Irina Tsukerman, geopolitical analyst at Scarab Rising, in an interview with S&P Global Market Intelligence.
"With access restored to the Chinese market, [the software companies] have recovered a critical revenue stream and reestablished their foothold in one of the world's most rapidly evolving tech environments," Tsukerman said. "The reinstatement of their tools will directly influence chip design across a range of sectors, including artificial intelligence, telecommunications, and military technology."
BIS has retained restrictions on the Huawei Investment & Holding Co. Ltd. Ascend 910B, 910C and 910D, the Chinese telecom giant's most advanced chip and a competitor to NVIDIA. The Guidance on Application of General Prohibition 10, or GP10, presumes that any Chinese companies or entities headquartered in China that produce integrated circuits and export, re-export, transfer, or store chips without prior BIS authorization would violate the Trump administration's Export Authorization Regulations.
"That's a pretty big presumption to put in place within the kind of guidance from the agency," said Josh Gelula, who serves as counsel on the global regulatory team at law firm Hogan Lovells.
A slow re-start
NVIDIA has told its Chinese customers it has a limited supply of H20 chips and is unable to immediately ramp up production because of a lack of capacity from Taiwan Semiconductor Manufacturing Co. Ltd., which is a result of restrictions implemented in April, according to The Information.
Wedbush Securities analyst Matt Bryson said NVIDIA is taking a more cautious approach due to inventory limitations, but the analyst expects the easing of export controls to boost to the company's revenue in the third and fourth quarters, even if it is below the $8 billion NVIDIA was expecting in the second quarter prior to the US ban on chip sales.
Other policy experts suggested that removing tech export restrictions was effectively a quid pro quo in exchange for China resuming rare earth exports to the US, and an indication of the leverage the Chinese had in negotiations with the US in recent meetings in London and Geneva.
"We're essentially being forced to trade away export controls because we lack domestic alternatives for materials essential to our semiconductor industry," said Tahra Hoops, director of Economic Analysis at Chamber of Progress. "Until we build these domestic capabilities, we'll keep finding ourselves in positions where we have to choose between our tech export controls and keeping our own semiconductor industry supplied."
Supporters of reshoring chip production to the US and reducing economic dependence on China for critical elements of their supply chains have pointed to TSMC's investment and growth in the US as a harbinger of the success they believe will come when US chip manufacturing capacity increases.
Mike Kappes, president and chief strategy officer of NEXT Semiconductor Technologies Inc. and former engineer and director at Broadcom Inc., said some companies prefer China's lower-cost alternatives for parts and do not want to divest China's role in their supply chain entirely.
"It's this fascinating, super high-level stakes game, and we're [American companies] basically trying to say, 'Look, keep buying your chips from us,'" Kappes said. "When you create your own chip capability, we're out of the picture. And all our commercial entities don't want to imagine manufacturing products in the US, right? They want to keep leveraging China as a low-cost manufacturer [and] assembler of products."
What's happening this week?
Below is a list of hearings, webinars and other tech, media and telecom-related events taking place virtually and in person in the nation's capital and beyond this week:
July 22
➤ S&P Global Market Intelligence: Talk to the Specialists - Analyzing U.S. datacenter and energy requirements in fast-growing markets, Georgia case study
➤ House Homeland Security Cybersecurity and Infrastructure Protection Subcommittee: Fully Operational — Stuxnet 15 Years Later and the Evolution of Cyber Threats to Critical Infrastructure
➤ Fiber Broadband Association: The Impact and First Week of a Cyberattack
July 23
➤ House Science, Space, and Technology Committee: Full Committee Markup
July 24
➤ Federal Communications Commission: Open Commission Meeting
➤ Senate Homeland Security and Governmental Affairs: Hearings to examine the nominations of Pedro Allende, of Florida, to be Under Secretary for Science and Technology, and Sean Plankey, of Pennsylvania, to be Director of the Cybersecurity and Infrastructure Security Agency
July 25
➤ Multicultural Media, Telecom and Internet Council: 2025 Former FCC Chairs' Symposium
