China is rejecting Nvidia Corp.'s H200 artificial intelligence (AI) chips despite Washington's approval for their export, White House AI czar David Sacks said, as Beijing pursues semiconductor independence with a massive domestic support package potentially worth up to $70 billion.
AI Generated Image
Sacks' comments on Friday cast doubt on whether the Trump administration's strategy to challenge Chinese tech champions like Huawei Technologies Co. by bringing American competition to their home market will succeed. The remarks came just days after President Donald Trump announced Monday he would allow shipments of Nvidia's H200 to China.
Bloomberg reported Friday that China is weighing incentives worth as much as $70 billion to bankroll its chipmaking industry,with officials deliberating proposals ranging from RMB200 billion ($28 billion) to RMB500 billion. The program aims to reduce China's reliance on foreign chipmakers and support local companies including Huawei and Cambricon Technologies Corp.
The dual developments underscore Beijing's determination to achieve technological self-sufficiency even as Trump attempts to use export approvals as leverage. Sacks' assessment raises questions about whether Nvidia can recover revenue from China, a market Chief Executive Officer Jensen Huang has valued at $50 billion this year but which the company has removed entirely from its forecasts.
Sacks Questions Export Strategy Effectiveness
"They're rejecting our chips," Sacks said in an interview on Bloomberg Tech, citing an unspecified news article. "Apparently they don't want them, and I think the reason for that is they want semiconductor independence."
The venture capitalist, who joined the administration in January, identified China's desire to prop up and subsidize Huawei as a key reason for the H200 reluctance. Even so, he defended the decision to allow China to access the H200, which he called "lagging" technology no longer state-of-the-art.
"What you see is China's not taking them because they want to prop up and subsidize Huawei," Sacks said. "That was part of our calculation, of selling not the best but lagging chips to China, is that you can take market share away from Huawei, but I think the Chinese government has figured that out, and that's why they're not allowing them."
In a statement from a spokesperson, Nvidia said it continues to work with the administration on H200 licenses for vetted customers. "While we do not yet have results to report, it's clear that three years of overbroad export controls fueled America's foreign competitors and cost US taxpayers billions of dollars," the company said.
Bloomberg Intelligence analysts estimate annual H200 revenue in China could represent a $10 billion opportunity, but only if the nation accepts the U.S. firm's chips. The H200, introduced in 2023 and part of the Hopper generation, is second-best to the Blackwell line and two generations behind the upcoming Rubin series.
Beijing Prepares Massive Chip Sector Support
The scale of China's planned incentives underscores Beijing's resolve to reduce reliance on foreign chipmakers. On the lower end, the proposal approaches the amount Washington set aside for the Chips Act. At the maximum, it would represent the largest-ever state-backed semiconductor incentives program at a time when nations from Europe to the Middle East are seeking to ensure local production of components critical to AI and national security.
The Chinese program will function separately from existing government funding plans such as the $50 billion Big Fund III equity-investment vehicle, people familiar with the matter said. Representatives for the Ministry of Industry and Information Technology (MIIT), which oversees the Big Fund and helps administer support measures, didn't respond to a faxed request for comment.
Chinese President Xi Jinping has pledged to build up the country's semiconductor capabilities with a "whole-nation" approach, harnessing the entire country's resources. Beijing is concerned about the unpredictability of access to US technology given clampdowns on exports by three different administrations, starting with Trump's first term.
That mandate has manifested itself across multiple fronts. Top contract chipmaker Semiconductor Manufacturing International Corp. (SMIC) is steadily expanding its capabilities as Huawei's main partner, even without the advanced equipment needed to make the most cutting-edge chips. Shares of AI accelerator designer Moore Threads Technology Co. have gained more than 600% since its debut in Shanghai.
Trump Decision Motivated by Huawei Assessment
Bloomberg reported Wednesday that Trump decided to allow H200 exports after concluding the move carried lower security risk because Huawei already offers AI systems with comparable performance, including its Cloud Matrix 384 platform, which links hundreds of processors together to compensate for lower performance in individual chips. A person familiar with the matter said some U.S. officials saw the H200 as compromise from Nvidia's earlier push to export a version of the Blackwell chip to China.
The move would give the US an 18-month advantage over China in terms of what AI chips customers receive, with American buyers retaining exclusive access to the latest products. White House officials concluded that pushing the H200 into China would prod Chinese AI developers into building on the US tech ecosystem rather than turning to Huawei or other local chipmakers.
Beijing has yet to publicly agree to allow imports of Nvidia's H200 products, despite the recent U.S. policy change. Earlier this year, China shunned the H20, a significantly less capable chip Trump allowed this summer.
The Financial Times reported Wednesday that MIIT recently included AI chips from Chinese manufacturers including Huawei and Cambricon on its government-approved supplier list, marking the first time domestic AI chips were added to an official procurement list. The Information reported Wednesday that Chinese regulators convened emergency meetings with representatives from companies including Alibaba Group, ByteDance and Tencent Holdings to assess their demand for the H200, with officials promising to inform them of the government's decision soon.
Liu Pengyu, a Chinese embassy spokesperson, said cooperation on technology and the economy is in the common interest of China and the U.S. "We hope the U.S. will work with China to take concrete actions to maintain the stability and smooth functioning of global supply chains," he said in a statement.
