Nvidia recently unveiled a strategy to change its approach to the Chinese market after major changes in US export control policies. The new export control rules have the chip manufacturer feeling buoyed. They think these changes will allow them to be viable competitors at home – both in China and the global market. This comes after a period of heightened restrictions and tariffs between the US and China, affecting trade dynamics in the semiconductor industry.
In fact, in April 2023 the Trump administration did just that—banning Beijing’s sale of Nvidia’s powerful H20 chips. They chose this focus in order to respond to national security priorities. This ban entirely cut Nvidia’s ability to ship H20 chips to China for months. Thanks to a recent announcement by Nvidia, it looks like Washington will be backtracking on this ban and allowing those sales to proceed after all.
Nvidia developed the H20 chip exclusively for the Chinese market. This action follows the Biden administration’s own imposition of new export restrictions earlier this year. The company told the BBC, “We abide by rules that the US government establishes for our participation in global markets. While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide.”
These recent changes in US policy seem to have mirrored—and perhaps even accelerated—a larger trend of rising hostility in trade relations between the two countries. In May, trade officials from the US and China at the very highest levels exchanged multiple visits and briefcases. In late November 2018, the U.S. and China agreed to a tentative 90-day truce in their trade hostilities. While this truce was supposed to end on August 12, no announcement has been received about an extension.
Moreover, the US government has removed restrictions on companies developing chip design software that are based in China. This step is intended to help promote more meaningful engagement between American technology companies and the Chinese market. At the same time, Beijing has thrown another wrench into the competitive landscape for semiconductor manufacturing by relaxing its own controls on rare earth exports.
Nvidia is also interested in using these changes to get back in the game in matrix-y, moldy China. Yet, it has also been quite timid, following the US government’s own rules that govern its programs well beyond the US borders. As Nvidia enters what promises to be a challenging environment, stakeholders will be looking intently to see how these moves pan out.