In order to circumvent the U.S. ban, NVIDIA Corporation (NVDA.US) plans to launch a "modified" version of the H20 chip in the Chinese market.

According to three informed sources, after the US government implemented export restrictions on the original chips, NVIDIA Corporation (NVDA.US) plans to launch a special version of the H20 artificial intelligence chip with reduced performance for the Chinese market in the next two months. Two of the sources said that the US chipmaker has informed major Chinese customers, including top cloud service providers, with the goal of releasing this improved version of the H20 chip in July. In the face of the escalating US government restrictions on semiconductor technology exports to China, the release of the downgraded version of the H20 chip signifies NVIDIA Corporations continued efforts to maintain one of its most important markets. Previously, the most powerful AI chip approved by NVIDIA Corporation for sale in China, the H20, was effectively blocked from the Chinese market last month after the US Department of Commerce notified it that additional export licenses were required. One source revealed that NVIDIA Corporation has established new technical parameter standards that will guide the design and development of the improved chip. According to specifications, the new chip will show significant downgrades compared to the original H20, including a significant reduction in memory capacity. Another source added that downstream customers may be able to optimize chip performance by adjusting module configurations. NVIDIA Corporation declined to comment on this matter. The US Department of Commerce did not immediately respond to a request for comment. In the fiscal year ending on January 26, the Chinese market contributed $17 billion in revenue to NVIDIA Corporation, accounting for approximately 13% of its total sales. Last month, after US officials announced new export license requirements for the H20 chip, NVIDIA Corporation CEO Jensen Huang traveled to Beijing to emphasize the strategic importance of China. During meetings with Chinese officials, Huang repeatedly emphasized the importance of China as a core market for the company. Since 2022, the US has restricted the export of high-end NVIDIA Corporation chips to China, and the H20 is a compliant product following the US government's reinforcement of export controls in October 2023. Reports earlier this year indicated that as demand for cost-effective AI models from startups such as DeepSeek continues to grow, Chinese tech giants including Tencent (00700), Alibaba Group Holding Limited Sponsored ADR (BABA.US), and the parent company of TikTok, ByteDance, significantly increased orders for H20 chips. According to the latest statistics from last month, NVIDIA Corporation has already accumulated $18 billion worth of H20 chip orders this year.