Amid growing geopolitical pressure, Nvidia’s summons by Chinese authorities reveals Beijing’s attempt to strengthen its position in the face of US regulatory measures. With the reversal of the H2O ban, China’s demand for transparency and technical guarantees could act as a counterweight to external impositions, highlighting a global dispute over the governance of artificial intelligence technologies.
China tightens controls on foreign chips after allowing exports
Nvidia NVDA.O said on Thursday its products have no “backdoors” that would allow remote access or control after China raised concerns over potential security risks in the firm’s H20 artificial intelligence chip. The Cyberspace Administration of China, the country’s internet regulator, said it was concerned by a U.S. proposal for advanced chips sold abroad to be equipped with tracking and positioning functions. The CAC’s move cast uncertainty over the U.S. company’s sales prospects in China weeks after a U.S. export ban was reversed.
The regulator said it had summoned Nvidia to a meeting on Thursday to explain whether its H20 AI chip had any backdoor security risks, as it was worried that Chinese user data and privacy rights could be affected. A backdoor risk refers to a hidden method of bypassing normal authentication or security controls. In a statement, an Nvidia spokesperson said, “Cybersecurity is critically important to us. Nvidia does not have ‘backdoors’ in our chips that would give anyone a remote way to access or control them.”
The White House and both houses of U.S. Congress have proposed the idea of requiring U.S. chip firms to include location verification technology with their chips to prevent them from being diverted to countries where U.S. export laws ban sales. The separate bills and White House recommendation have not become a formal rule, and no technical requirements have been established.
Nvidia has been a focus of U.S.-China relations, and China’s move comes shortly after the U.S. this month reversed an April ban on Nvidia selling the H20 chip to China. The company developed the H20 chip for the Chinese market after the U.S. imposed export restrictions on advanced AI chips in late 2023.
Beijing avoids direct confrontation, but maintains strategic pressure on Nvidia
The Chinese government’s strategy is based on pressing for more guarantees, but without completely severing the commercial relationship, which can be interpreted as a real dependence on technologies developed by companies like Nvidia, especially given the lack of domestic alternatives with the same level of performance.
Charlie Chai, an analyst with tech- and consumer-focused 86Research, said Beijing’s warning was likely a symbolic stance against similar objections made by U.S. authorities.
“However, we do not believe Beijing will make excessively harsh demands or introduce regulatory hurdles that will effectively drive Nvidia out of China, for the lack of alternatives. China still needs Nvidia chips for domestic research and applications,” Chai said.
Nvidia’s strategic presence in sensitive sectors
The widespread adoption of Nvidia chips by Chinese research and defense institutions makes the company a critical asset in the country’s technology sector. This penetration into strategic areas helps explain Nvidia’s dual role in China: while valued as a supplier, it is also viewed with caution by authorities.
Nvidia’s products are highly sought after not just by Chinese tech companies but also by Chinese military bodies, state-run AI research institutes, and universities. The company last week placed an order with contract manufacturer TSMC for 300,000 H20 chipsets due to strong demand, Reuters reported.
Chinese demand withstands regulatory pressure
The massive new order from TSMC reinforces the strategic value of the H20 line and indicates that, despite public warnings, the Chinese market continues to rely on the performance of Nvidia chips. The continued presence of these orders suggests that, for now, regulatory concerns have not yet turned into a trade boycott.