New Regulations Aim to Cap Nvidia Chip Purchases
China is drafting a new regulatory bill that will control how many advanced AI chips local companies can buy from foreign suppliers, specifically Nvidia, according to Nikkei Asia.
This action is part of Xi Jinping’s mission to support state-backed chipmakers over American ones, a strategy intensified since the commencement of the tech and trade war.
Demand for Nvidia chips remains high within China, particularly from large platforms that require significant computing power to run AI models at scale.
Chinese companies have placed orders for more than two million H200 chips, with each unit priced at approximately $27,000. This figure substantially exceeds the available supply. Nvidia is estimated to have around 700,000 units in inventory, creating a considerable gap between placed orders and deliverable stock.
Earlier, the U.S. government confirmed its decision to permit sales of H200 AI computing chips into China, reopening the door for limited exports after a period of uncertainty. However, Chinese regulators are not allowing this without oversight. The draft rules are intended to cap import volumes rather than blocking sales entirely, thereby granting Beijing tighter control over the utilization of foreign hardware within the country.
Beijing Prepares Quotas and Approval Process for H200 Imports
Nikkei reports that Xi Jinping is establishing a system to regulate the total number of high-end AI chips that Chinese firms can purchase. Initial approvals for specific quantities of H200 chips could be issued before the end of the month.
Companies will not receive automatic clearance for these imports. Each buyer will be required to provide justification for their chip needs and explain why local alternatives are insufficient for their specific workloads.
Government agencies have conducted numerous meetings with leading technology firms to assess the current usage of foreign chips. Officials have placed a strong emphasis on inferencing workloads, which involve running trained AI models as opposed to developing them.
The regulatory process is reportedly also examining purchase ratios. Under this proposed framework, companies might face limitations on the number of foreign AI chips they can acquire in comparison to domestic ones. This policy framework is still in its final stages of development. Concurrently, officials have begun inquiring about companies' anticipated demand for Nvidia Blackwell chips, despite these products not yet having received Washington's approval for export.
This policy initiative has already generated confusion on the ground. Chinese customs authorities informed their agents this week that Nvidia H200 chips are prohibited from entering the country. This directive contradicted other signals originating from Beijing. In a separate development, some technology firms were informed that approvals would be granted only under special circumstances, primarily for research and development projects associated with universities.
The renewed access to the Chinese market is projected to generate revenue of up to $50 billion for Nvidia. Additionally, it will benefit the U.S. government, which intends to collect a 25% fee on these chip sales.
Expert Commentary on US Chip Sales Policy
David Sacks, the White House AI czar, had earlier said: “The question of what we sell China will always be complicated, and there’s room for a wide range of opinions on that. But the question of whether we sell to the rest of the world, especially our friends and allies, should be an easy one. The hawkish position with respect to China is to help American companies win the AI race, not to help Huawei create a Digital Silk Road.”