Nvidia looking to halt H20 chip production after China cracks down on purchases

Nvidia has asked some of its component suppliers to stop production related to its made-for-China H20 general processing units, as Beijing cracks down on the American chip darling, The Information reported Friday. 

The directive comes weeks after the Chinese government told local tech companies to stop buying the chips due to alleged security concerns, the report said, citing people with knowledge of the matter.

Nvidia has reportedly asked Arizona-based Amkor Technology, which handles the advanced packaging of the company’s H20 chips, and South Korea’s Samsung Electronics, which supplies memory for them, to halt production. Samsung and Amkor did not immediately respond to CNBC’s request for comment. 

A separate report from Reuters, citing sources, said that Nvidia had asked Foxconn — officially known as Hon Hai — to suspend work related to the H20s. Foxconn did not immediately respond to a request for comment.

In response to an inquiry from CNBC, an Nvidia spokesperson said, “We constantly manage our supply chain to address market conditions.”

The news further throws the return of the H20s to the China market in doubt, after Washington said it would issue export licenses to allow the export of the chip to China, after their shipments had effectively been banned in April.  

Last month, the Cyberspace Administration of China had summoned Nvidia over national security concerns related to the H20s and had asked the company to provide information on the chips. 

Beijing has raised concerns that the chips could have certain tracking technology or “backdoors,” allowing them to be operated remotely. In May, Republican U.S. Senator Tom Cotton and a bipartisan group of eight U.S. House representatives introduced the Chip Security Act that would require semiconductor companies like Nvidia to include security mechanisms and location verification in their advanced AI chips.

Speaking to reporters in Taiwan on Friday, Nvidia CEO Jensen Huang acknowledged that China had asked questions about security “backdoors,” and that the company had made it clear they do not exist.

“Hopefully the response that we’ve given to the Chinese government will be sufficient. We’re in discussions with them,” he said, adding that Nvidia had been “surprised” by the queries.

“As you know, [Beijing] requested and urged us to secure licenses for the H20s, for some time and I’ve worked quite hard to help them secure the licenses, and so hopefully this will be resolved,” he said.

Nvidia, in its statement shared on Friday, said “The market can use the H20 with confidence.”

It added: “As both governments recognize, the H20 is not a military product or for government infrastructure. China won’t rely on American chips for government operations, just like the U.S. government would not rely on chips from China. However, allowing U.S. chips for beneficial commercial business use is good for everyone.”

Last month, China had reportedly sent notices to major tech companies and AI developers urging them against the use of the H20s, especially for sensitive uses, particularly for government-related purposes, in what had appeared as a soft mandate. The Information later reported that Beijing had told some firms, including ByteDance, Alibaba and Tencent,  to halt orders of the chips altogether, until the completion of a national security review. 

It had been seen as a major win for Nvidia when Huang announced last month that the U.S. government would allow sales of the company’s H20 chips to China. He had been lobbying against U.S. chip restrictions, which had impacted Nvidia’s business in the lucrative market.

In his comments on Friday, Huang also disclosed some of his discussions with U.S. President Donald Trump over the company’s overseas business, saying that he had “informed the president of the importance of the American AI tech stack.”

“You know, this is the beginning of a new industrial revolution, and during this time, AI developers, AI models, and AI applications supporting the American tech stack is very important,” Huang said.

“I also explained that AI is going to advance around the world, with or without the United States, and it is important for us to maximize our AI export technology at a time when this industry is important,” he added.

Nvidia said it had taken a $4.5 billion writedown on its unsold H20 inventory in May, after export restrictions kicked in, and said sales in its last financial quarter would have been $2.5 billion higher without any curbs.

The national security scrutiny the H20s are now facing from the Chinese side highlights Nvidia’s difficulties in conducting its business amid trade uncertainty between…