The reason China is urging companies to abandon Nvidia chips is as follows:

Benjinga · 2024/09/30 03:33

In an effort to strengthen the semiconductor industry and counter US sanctions, Beijing reportedly encourages Chinese companies to prioritize locally produced artificial intelligence (AI) chips over Nvidia Corp.'s (NASDAQ: NVDA) chips.
What happened: Chinese regulatory authorities are discouraging companies from purchasing Nvidia's H20 chips, which are used for developing and operating AI models.
This policy is intended to avoid suppressing local AI startup companies or worsening tensions between the US and China, rather than imposing strict bans.

This initiative aims to strengthen Chinese AI chip manufacturers such as Cambrian Technologies and Huawei Technologies. It aims to support them in gaining a larger market share and to help local technology companies prepare for further regulations in the USA. According to Bloomberg, earlier this year, Beijing urged local electric vehicle manufacturers to source more supplies from domestic chip makers.
In response to this movement, Nvidia's stock price fell by up to 3.9% on Friday to $119.26. In 2022, the US government banned Nvidia from selling cutting-edge AI processors to Chinese customers to suppress technological advancement in Beijing.

Chinese regulatory authorities, including the Ministry of Industry and Information Technology, have issued instructions to minimize the use of Nvidia and encouraged companies to rely on domestic vendors such as Huawei and Cambricon. However, Beijing's policy is to continue allowing the procurement of foreign semiconductors if necessary for local companies to build the best possible AI systems.
Nvidia has chosen not to comment on this issue. CEO Jensen Huang stated that they are striving to provide services to Chinese customers while complying with US government regulations.
Key Reason: Beijing's move clearly demonstrates the government's intention to strengthen the domestic semiconductor industry and reduce reliance on foreign technology.

By encouraging local companies to choose domestic AI chips, China not only supports local chip manufacturers but also prepares for the potential expansion of US regulations.
This development is a crucial part of the ongoing tech war between the USA and China, as both countries strive to gain technological superiority.