Defeated in the Chip War Nvidia Reportedly Halts Production of AI Chips for China

Related Vendors

FAULHABER Drive Systems

Taiwan Machine Tool & Accessory Builders' Association (TMBA)

Wuxi InfiMotion Technology Co., Ltd.

Nvidia's China business has apparently finally fallen victim to the chip boycotts from Washington. The company has discontinued production of the H200 chip in Taiwan, which was specially developed for China, according to an exclusive report in the Financial Times.

Based on their sources, the authors of the Financial Times report that Nvidia is apparently finally giving up the production of AI chips for the Chinese market. Instead, the capacities at the Taiwan Semiconductor Manufacturing Company (TSMC) foundry will now be used for hardware of the new Vera Rubin semiconductor generation, the FT wrote, citing well-informed circles.

This was preceded by a long back and forth, consisting of US export controls and Nvidia's attempts to remain in business with China. The company had developed the H200 after Washington banned the export of Nvidia's most powerful AI chip to China. Nvidia's major customers in China, especially cloud providers, were never really happy with this idea. They disliked the idea of having to settle for semiconductors with deliberately limited performance. Some Chinese commentaries even referred to the H200 as a "castrated AI chip".

The Chinese government in Beijing, which was also angered by the US boycotts, had also increasingly encouraged its domestic companies to switch to Chinese-made chips. Huawei and other Chinese companies are now producing AI chips that do not yet match the performance of Nvidia's latest generation, but could perform similar tasks when used in larger clusters.

Trouble with H200

Following a meeting between US President Donald Trump and his Chinese counterpart Xi Jinping in South Korea, it was recently announced that the export of H200s to China would be permitted again. At the same time, new regulations were issued in Washington, according to which it had to be checked whether the chips were being used for military purposes in China. As a result, Nvidia had not been able to sell H200s to China for some time.

"Instead of waiting in a state of limbo, Nvidia needs to move on to what it can achieve with certainty, especially when there is a supply shortage of the more advanced products," the FT quoted a person familiar with the plans in Taiwan as saying. Nvidia's CFO had recently confirmed in a conference call with investors that hardly any H200 chips could be delivered to the People's Republic so far. Colette Kress had said that "no sales" had been achieved in China to date. If this news is officially confirmed, it can only be interpreted to mean that Nvidia is gradually giving up hope of major business in China.

Nvidia As A Pawn in the Chip Dispute

H200 in China: Clarifications, Blockades—A Confusing Situation

Alternatives to the Chinese Market

Demand for the latest Vera Rubin hardware generation is currently growing rapidly. As reported by FT, Nvidia is said to have reserved production capacity for this at TSMC in Taiwan. At the same time, reports are circulating that the Chinese AI company DeepSeek is beginning to spin off from Nvidia. The Chinese company has not made its latest flagship model available to Nvidia for testing as usual, according to the news agency Reuters.

AI developers usually make their latest large-scale models available to leading chip manufacturers several weeks in advance. This is to ensure that the latest LLMs work well on the available hardware. This time, however, DeepSeek is said to have shown its latest model to Huawei, while Nvidia and AMD did not, the agency reported. Analysts suspect that this is a strategy by the Chinese government to give domestic chip manufacturers an advantage over their American competitors.

In the short term, Nvidia does not need to worry too much about the loss of its sales in China, as business in the rest of the world is still going extremely well. In the last quarterly report, the company's net profit rose again by 94 percent year-on-year. Nevertheless, Nvidia CEO Jensen Huang had until recently repeatedly lobbied the US government in Washington for a relaxation of chip export regulations to China. He is concerned that the establishment of its own semiconductor ecosystem in China could also affect Nvidia's international business outside China in the long term. (sb)