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Key takeaways

  • Chinese tech giants ByteDance, Alibaba and Tencent now have permission to purchase Nvidia’s powerful H200 AI chips.
  • Despite the approval, China may impose restrictions on chip purchases in order to promote the development of domestic semiconductors.
  • The decision underlines the balance Beijing is seeking between boosting its own chip industry and securing access to advanced AI technology for its tech firms.

Chinese authorities have given ByteDance, Alibaba and Tencent the green light to acquire Nvidia’s H200 AI chips. This potentially signals a shift in the country’s approach as it seeks to balance its AI ambitions with encouraging domestic chip development. The approvals allow for the purchase of more than 400,000 H200 chips in total, while other companies are still waiting for subsequent approval rounds, according to news agency Reuters.

Ongoing concerns

Sources indicate, however, that the licences come with conditions that are still under discussion, fuelling concerns about how restrictive they may be and hampering the translation of licences into actual purchase orders. The recent visit to China by Nvidia CEO Jensen Huang coincided with these regulatory approvals.

Previously, Chinese officials had urged domestic tech firms to be cautious about buying chips and had even suggested making it mandatory to combine imported chips with a certain percentage of domestically produced chips.

Tech rivalry between the US and China

The H200, Nvidia’s second most powerful AI chip, has become a focal point in the technological rivalry between the US and China. Although there is a US export licence for the H200 and Chinese demand is strong, Beijing’s hesitancy has been the main obstacle to deliveries.

Even though Nvidia’s available supply was outstripped by orders for more than two million H200 chips, Chinese companies initially faced import restrictions, according to customs authorities. The criteria Beijing uses to determine whether companies qualify for subsequent approval rounds remain unclear.

Priority for AI development at major internet firms

The approvals suggest that Beijing may be prioritising the needs of large Chinese internet companies that are investing heavily in data centres to develop AI services and compete with US rivals such as OpenAI.

Although domestic firms have made progress in developing competing AI chips, their performance still lags behind that of the H200.

Balancing access and domestic growth

Reports indicate that Beijing is considering imposing a quota for the purchase of domestic chips as a condition for importing foreign semiconductors. The measure is intended to stimulate the growth of the domestic semiconductor industry while still providing access to advanced technology.

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