China acts to curb Nvidia chip sales after US Commerce Secretary's ‘insulting’ remark: ‘We don't sell them our best…'

By Admin

22 Aug, 2025

In a fresh twist to the ongoing US-China tech rivalry, Beijing has moved to restrict the sale of Nvidia’s H20 processors following controversial comments made by US Commerce Secretary Howard Lutnick. The decision underscores how sensitive technology exports have become in the geopolitical battle for dominance in artificial intelligence (AI) and semiconductor industries.

China’s Restriction on Nvidia’s H20 Chips

According to a report by the Financial Times, Chinese regulators have advised domestic tech companies to halt or reduce their orders of Nvidia’s H20 processor, a version specifically designed for the Chinese market. The H20, though a simplified model compared to Nvidia’s top-tier products, remains crucial for powering AI systems across Chinese firms.

The directive came from the Cyberspace Administration of China (CAC), the National Development and Reform Commission (NDRC), and the Ministry of Industry and Information Technology (MIIT). Regulators cited security concerns as the official reason for discouraging reliance on these chips.

What Triggered the Move?

The action followed Lutnick’s remarks during an interview with CNBC on July 15, a day after the Donald Trump administration lifted restrictions on H20 exports to China. Lutnick bluntly stated:

“We don’t sell them our best stuff, not our second-best stuff, not even our third-best.”

He further added that the strategy was to give Chinese developers just enough access to American technology to ensure they remain “addicted” to the US tech stack.

These statements were reportedly viewed by senior Chinese leaders as “insulting”, prompting policymakers to consider retaliatory measures.

Nvidia Caught in the Crossfire

The restrictions represent a significant setback for Nvidia, which had recently made strides in rebuilding its presence in China. CEO Jensen Huang visited Beijing last month, pledging to stay competitive in the market despite mounting geopolitical pressure. His visit was well-received, with renewed interest from Chinese tech firms encouraging TSMC to resume production of the H20.

However, the CAC soon issued an informal notice termed “window guidance” to tech giants like ByteDance and Alibaba, advising them to suspend new H20 purchases. This was followed by a July 31 meeting where Chinese regulators reportedly confronted Nvidia executives over alleged “serious security issues,” including unverified claims that the chips contain location-tracking functions and could be remotely disabled. Nvidia has denied these allegations.

Push for Domestic Alternatives

The episode also highlights Beijing’s ongoing efforts to reduce dependence on US technology. While Chinese companies such as Alibaba and ByteDance acknowledge that their AI development would suffer without Nvidia’s hardware, policymakers see the latest dispute as an opportunity to double down on domestic chip production.

“Lutnick’s speech gives the coalition [of regulators] one more reason to intensify its efforts to push tech firms to use China’s own chips,” a source close to policymakers told FT.

The Bigger Picture

The H20 episode illustrates how deeply intertwined technology and politics have become in the US-China relationship. For Washington, restricting high-end chip exports is about maintaining a competitive edge and limiting Beijing’s technological rise. For China, every such move accelerates its determination to invest in homegrown semiconductors and reduce reliance on American suppliers.

While the restrictions may cause short-term disruptions for Chinese tech firms, the long-term impact could reshape the global semiconductor landscape fueling both competition and fragmentation. Nvidia, caught in between, faces the challenge of balancing its business interests in China with increasing scrutiny from both governments.