China’s Nvidia Chip Ban Strains US Relations

House Speaker Mike Johnson has sharpened the rhetoric against China, labeling the nation an “adversary” in response to reports that Beijing has instructed domestic tech firms to cease purchasing Nvidia’s advanced AI chips. The move, detailed by the Financial Times, specifically targets the RTX Pro 6000D, a chip tailored for the Chinese market, and is reportedly driven by the Cyberspace Administration of China.

“They steal our intellectual property,” Johnson stated on Wednesday. “They have no regard whatsoever for U.S. trademark law or any of the other provisions that make for fair trade agreements. It is not the fault of the United States that there are these strained relations.”

The Speaker’s condemnation mirrors sentiments expressed by Nvidia CEO Jensen Huang during a press conference in London.

“We can only be in service of a market if a country wants us to be,” Huang commented regarding the imposed restrictions. “I’m disappointed with what I see, but they have larger agendas to work out between China and the United States.” Nvidia’s stock experienced a slight dip following the news.

CNBC has reached out to the Chinese Embassy for comment.

This latest development underscores China’s growing confidence in its domestic semiconductor capabilities and its strategic push for self-reliance in chip manufacturing through amplified wafer production. The substitution of Nvidia’s offerings with domestic alternatives like Huawei’s Ascend 910B signals this shift.

While China is making strides in semiconductor technology, industry analysts at Mizuho point out that it still lags behind in the arena of the most advanced chips. This gap highlights the ongoing challenge for China as it seeks to achieve parity with global leaders in chip technology.

The implications of losing access to the Chinese market are substantial for U.S. chipmakers, potentially costing billions in revenue. This ban is the latest salvo in an escalating conflict between the world’s two largest economies concerning access to and control over advanced AI chips.

Last month, a deal was struck with Nvidia and Advanced Micro Devices (AMD) to resume certain chip sales to China, contingent upon securing export licenses and remitting 15% of sales revenue to the U.S. government. Previously, the Trump administration had informed Nvidia that a license would be mandatory for the sale of its China-designed H20 processors. The H20 was initially developed by Nvidia to navigate earlier export limitations imposed by the Biden administration based on national security considerations.

Huang had previously criticized U.S. chip restrictions, citing that the curbs had nearly halved the company’s market share in China and warning that exclusion from China’s AI market would result in a “tremendous loss” for the company. Nvidia’s most recent quarterly earnings report did not reflect any H20 chip sales to China, indicating the immediate impact of the restrictions.

Analysts suggest that China’s move may be a calculated strategy to accelerate the development and adoption of its domestic AI chip industry, betting on a long-term strategy to reduce reliance on foreign technology. The situation highlights the complexities of the global semiconductor market and the delicate balance between technological innovation, national security, and economic interests.