Chinese regulators have taken action to discourage domestic tech companies from purchasing the H20, a simplified processor commonly used for artificial intelligence in China.
The Cyberspace Administration of China (CAC), the National Development and Reform Commission (NDRC), and the Ministry of Industry and Information Technology (MIIT) responded to Lutnick’s comments, made last month, the report said, citing people aware of the development.
What did Howard Lutnick say?
“We don’t sell them our best stuff, not our second-best stuff, not even our third-best,” Lutnick told CNBC on July 15, the day after the Donald Trump administration lifted the export controls on H20 sales, which had been implemented in April.
“You want to sell the Chinese enough that their developers get addicted to the American technology stack, that’s the thinking,” he added.
‘Insulting’ remark
A few senior Chinese leaders found the comments “insulting”, prompting policymakers to explore options to restrict Chinese tech companies from purchasing the processors, two people told FT.
Hence, Chinese tech groups delayed or considerably reduced their H20 orders, it added.
CEO Jensen Huan’s Beijing visit
The action is considered to be a setback to Nvidia, whose CEO Jensen Huang visited Beijing last month and pledged to remain competitive in China despite increasing geopolitical strains with the US.
After Huang’s well-received trip, Nvidia garnered enough interest from Chinese clients for TSMC to resume H20 production lines, the report noted.
Push for domestic chips
In recent years, Chinese regulators have encouraged greater use of domestic chips. However, major tech companies like Alibaba and ByteDance contended that their AI progress would suffer without Nvidia’s chips, jeopardising China’s ability to compete in the technology race against the US.
“Lutnick’s speech gives the coalition [of regulators] one more reason to intensify its efforts to push tech firms to use China’s own chips,” a person close to the policymakers told FT.
A week after his remarks, China’s internet regulator CAC issued an informal notice called “window guidance” to major tech firms such as ByteDance and Alibaba, citing security concerns and advising them to halt new orders for Nvidia’s H20 chips, the report added.
The agency also summoned Nvidia executives on July 31 over alleged “serious security issues”. The CAC alleged that US AI experts reported Nvidia’s chips contain location tracking features and can be disabled remotely, a claim Nvidia strongly denies.
