In taking H200 chips, Beijing balances self-reliance goals with AI growth

The US administration’s highly controversial decision to allow exports of Nvidia’s H200 GPU chip to China has been met with muted response from Beijing. The H200 is an advanced AI chip, more than six times more powerful than the H20, the previous Nvidia AI chip awarded permission for export to China. This could help Chinese entities developing cutting-edge large-scale AI models advance their research and stay globally competitive. 

Beijing is being cautious – allowing a few important AI players building foundational models to buy the H200 chips, but it has limited imports. Instead, it is pushing for self-sufficiency in AI chips and directing its tech companies and data centers to buy from local chipmakers like Huawei and Cambricon. But there are signs that this strategy cannot keep pace with the computing needs required to meet its ambition to be a global innovation leader in AI.

Chinese tech giants have cautiously signaled their need for Nvidia chips, mindful of the political sensitivity. The vice chairman of the China Semiconductor Industry Association Shaojun Wei said in an interview that importing advanced chips can alleviate the demand pressures on AI research and other fields. Chinese AI chips are not yet plentiful or powerful enough to supply local demand, especially the large players that are building foundational AI models. 

Alibaba, ByteDance and Tencent are the first batch of companies approved by Beijing in January to order some 400,000 H200 chips. Smaller companies with less acute computing needs are being lured to the domestic ecosystem, and the general uncertainty is benefitting Chinese chipmakers.

The fundamental ambiguities in both Beijing and Washington remain unresolved. Recent exports have reportedly been delayed by additional security reviews, showing that some in Washington are still resisting the export ban lift.

Wendy Chang, Senior Analyst, MERICS: “China quietly allowing its tech giants to purchase H200s is a reality check for its AI chip ambitions. Despite claims about advances in homegrown semiconductors and their manufacturing equipment, the top AI players still need Nvidia chips to keep pace. Beijing will continue to balance the goals of developing cutting-edge AI and switching to domestic AI chips while US policy allows the export of Nvidia chips.”