NVIDIA’s H20 chip sales could be at risk due to new energy-efficiency regulations from China’s NDRC, potentially limiting sales to local firms and impacting substantial revenue. Chinese regulators have advised major tech firms against these purchases. NVIDIA is preparing compliance changes but risks performance loss, while demand remains strong amid concerns of U.S. restrictions.

Recent reports indicate that NVIDIA’s H20 chip sales in China may be jeopardized due to new energy-efficiency regulations imposed by the National Development and Reform Commission (NDRC). These guidelines mandate the use of compliant chips for data center construction and expansion, potentially barring local companies from acquiring NVIDIA’s H20 chips, which contribute approximately USD 17 billion to NVIDIA’s revenue in China.

Chinese regulators have reportedly advised leading tech firms like Alibaba, ByteDance, and Tencent against purchasing H20 chips in recent months. Designed specifically for the Chinese market to circumvent U.S. export restrictions, the H20 chips have, as of now, maintained strong sales despite the anticipated regulatory challenges.

In anticipation of the new rules, NVIDIA is reportedly developing modifications to the H20 chip to ensure compliance with NDRC mandates. However, these modifications are expected to diminish the chip’s performance, thereby potentially weakening its market competitiveness.

NVIDIA is also planning to engage with NDRC leadership, specifically arranging discussions between its executives and Chairman Zheng Shanjie in the upcoming months. It is noteworthy that the new regulations affect only new data centers, prompting some Chinese companies to replace older chips with H20 in existing facilities to circumvent restrictions.

Further analysis reveals that other products like Intel’s HL328 and HL388 chips also do not meet the NDRC’s standards, although their impact on the market is anticipated to be minimal due to lower sales volumes. In a recent surge, major companies such as Tencent and Alibaba have increased orders for H20 chips to meet the rising demand for AI technologies, amidst concerns about potential future restrictions from the U.S. administration. This follows NVIDIA’s encounter with regulatory scrutiny in China, underscored by an antitrust investigation initiated by the State Administration for Market Regulation (SAMR) in December 2024.

In summary, NVIDIA’s H20 chip sales in China are threatened by new regulatory measures from the NDRC, which could impact the company’s substantial revenue in the Chinese market. While adaptations are being planned, potential performance compromises may affect competitiveness. The situation remains dynamic, with efforts underway to engage with Chinese regulatory authorities, and notable demand for H20 chips persists among major tech companies.

Original Source: www.trendforce.com

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