China reportedly discouraged purchase of NVIDIA AI chips due to 'insulting' Lutnick statements

Chinese regulators reportedly dissuaded local companies from purchasing NVIDIA's H20 chips, because they found certain statements by US commerce secretary Howard Lutnick "insulting." According to the Financial Times, the Cyberspace Administration of China (CAC), the National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) teamed up to intensify their efforts to push the use of homegrown chips following Lutnick's remarks in an interview with CNBC. 

The US, if you'll recall, blocked NVIDIA from selling its H20 chips to China back in April out of concern that the Chinese military would use them to develop AI technology. When the US government reversed its decision in July and allowed the company to start shipping its chips to China, Lutnick told CNBC: "We don't sell them our best stuff, not our second best stuff, not even our third best. The fourth one down, we want to keep China using it... The idea is the Chinese are more than capable of building their own. You want to keep one step ahead of what they can build, so they keep buying our chips. You want to sell the Chinese enough that their developers get addicted to the American technology stack. That's the thinking." To note, a previous Times report stated that the government allowed NVIDIA to ship its products to China again after agreeing to hand over 15 percent of its profits.

As a response to Lutnick's remarks, the Times says Chinese authorities sought ways to prevent local companies from buying H20 chips. CAC issued an informal notice instructing China's biggest tech firms, such as ByteDance and Alibaba, to stop new orders for H20 chips until the government is done conducting a national security review. The companies are compelled to comply, because they could face substantial fines from the CAC if they don't. Meanwhile, NDRC also issued an informal notice, asking local tech companies not to purchase any NVIDIA chip. 

Reuters recently reported that NVIDIA is developing a new chip for the Chinese market that's more powerful than the H20, perhaps driven in part by China's move to discourage its purchase. It will be based on the company's Blackwell architecture, but will only be capable of half the computing power of NVIDIA's Blackwell Ultra GPUs. Their regulatory and export approval aren't guaranteed, but the president previously implied that he was aware of the project and said he expects NVIDIA CEO Jensen Huang to talk to him about it. 

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