China raised concerns over potential security risks in Nvidia Corp’s H20 artificial intelligence (AI) chip, casting uncertainty over the company’s sales prospects in China weeks after a US export ban was reversed.
The Cyberspace Administration of China, the country’s Internet regulator, said it was concerned by a US proposal for advanced chips sold abroad to be equipped with tracking and positioning functions.
It said it had summoned Nvidia to a meeting yesterday 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.
Photo: I-Hwa Cheng, AFP
Nvidia did not immediately respond to a request for comment.
US Senator Tom Cotton in May introduced a bill that would direct the US Department of Commerce to require location verification mechanisms for AI chips subject to export restrictions to curb Chinese access to advanced US semiconductor technology.
Nvidia has been in the crosshairs of US-China relations and Beijing’s move comes shortly after Washington 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 US imposed export restrictions on advanced AI chips in late 2023.
“Nvidia chips are now dispensable for China. They can be easily put on the negotiating table,” Gavekal Dragonomics (龍洲經訊) analyst Tilly Zhang (張婷婷) said. “China obviously has more courage and domestic substitution capabilities compared to previous years to not rely on overseas technology.”
Nvidia CEO Jensen Huang (黃仁勳) this month embarked on a very public and effusive visit to China, where he sought to demonstrate his commitment to the Chinese market, met with government officials and praised the country’s AI advances.
The cyberspace administration’s statement did not elaborate on what backdoor security risks there could be or say what the Chinese government was considering to do as a result.
86Research Ltd (八六證券研究) analyst Charlie Chai (柴超毅) said Beijing’s warning was most likely a symbolic stance against similar objections made by US 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 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 chipmaker Taiwan Semiconductor Manufacturing Co (台積電) for 300,000 H20 chipsets due to strong demand, Reuters reported.
Nvidia is also facing an antitrust investigation in China. The State Administration for Market Regulation announced late last year it was investigating the chipmaker over suspected contraventions of the country’s anti-monopoly law.
The regulator said Nvidia was also suspected of contravening commitments it made during its acquisition of Israeli chip designer Mellanox Technologies Ltd, under terms outlined in the regulator’s 2020 conditional approval of that deal.
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