AsianFin -- China reportedly takes further steps to address possible security risks raised from Nvidia Corporation’s scaled-down artificial intelligence (AI) chips made for the country.
Credit：Yicai Global
The Chinese government over the past weeks has sent notices to a range of domestic companies discouraging use of the less-advanced semiconductors, Bloomberg cited people familiar with the matter on Tuesday. It was said that the guidance was particularly strong against the use of Nvidia’s H20 chips for government or national security-related work by state-own companies or private firms.
The reported letters notifying the notices didn’t constitute an outright ban on H20 use, but it complicated the chips’ return to China when the Trump administration on Friday has started issuing licenses for the sale of H20 chips to China on Friday.
H20 is the microprocessor that Nvidia had specially tailored to the Chinese market to comply with the Biden-era AI chip export controls. U.S. President Donald Trump on Monday confirmed reports that Nvidia will be allowed to sell H20 chips to China, in exchange for giving the U.S. government 15% of the revenue they get from the sales.
In some of the reported notices, Beijing posted questions such as why they buy Nvidia H20 chips over local versions, whether that’s a necessary choice given domestic options, and whether they’ve found any security concerns in the Nvidia hardware, according to one of Bloomberg’s sources.
As another sign that China is cautioning local companies over Nvidia’s H20 chips, the Financial Times earlier Tuesday reported Beijing is demanding Chinese tech firms, including Alibaba and ByteDance, justify purchases of Nvidia’s H20 AI chips. China would prefer that the firms buy domestically.
The tech companies have been reportedly asked by regulators such as the Ministry of Industry and Information Technology (MIIT) to explain why they need to order Nvidia’s H20 chips instead of domestic alternatives. Some of firms, which were the main buyers of Nvidia’s H20 chips before their sale in China was restricted by the U.S. government, were reported to plan to scale back their orders as a result of the questions from regulators.
One Chinese data center operator said the purchase of H20 is not prohibited, but “has kind of become a politically incorrect thing to do”, per the report.
The reports highlights the growing skepticism toward foreign tech companies amid rising trade tensions between China and the U.S. Chinese authorities in late July summoned Nvidia to discuss alleged security risks related to its H20 chips.
China’s Cyberspace Administration (CAC) on July 31 called Nvidia representatives into a meeting to discuss what it deemed serious security vulnerabilities with the H20 chip. The internet regulator in a statement cited comments by U.S. lawmakers about the need to install tracking capabilities into advanced chips sold to other countries. The agency asked staff to explain potential risks and provide documents as needed, the CAC said in the statement.
Nvidia firmed denied allegations of “backdoors” or remote access capabilities in its H20 AI chips. A company spokesperson emphasized that cybersecurity remains a top priority and asserted that Nvidia’s chips do not contain any features that would allow unauthorized remote control, as Chinese authorities seek explanations about potential risks in the chip widely used across China’s AI sector.
But Nvidia’s response didn’t seem to reassure Beijing. China’s state media outlet People’s Daily on August 1 criticized Nvidia for the security concerns. In a commentary published on August 1, the paper called for Nvidia to provide "convincing security proofs" to allay fears of potential risks in its chips and win back market trust.
Yuyuan Tantian, a social media account affiliated with the state-run broadcaster China Central Television (CCTV) on Sunday in an article posted on WeChat had flagged security concerns over Nvidia’s H20, citing potential backdoor access in the chips.
The article claimed the chips are neither advanced technologically speaking, nor environmentally friendly or secure. “When a type of chip is neither environmentally friendly, nor advanced, nor safe, as consumers, we certainly have the option not to buy it,” the article concluded.
