The rule limits H200 shipments to China to 50% of the quantity already sold for use within the US. This creates a moving target, not a fixed quota, directly linking China's access to the growth of the American domestic market for these chips.
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If China allows H200 imports, it signals that tech giants like Alibaba need advanced chips now. If they ban them, it shows the government is prioritizing the long-term, self-sufficiency goals of domestic chipmakers like Huawei over short-term gains.
The pro-export argument for selling NVIDIA chips to China is strategic: flooding their market with good-enough, affordable chips makes it uneconomical for their domestic industry to compete. This fosters dependency on the U.S. ecosystem and can slow their independent technological progress.
The decision to allow NVIDIA to sell powerful AI chips to China has a counterintuitive goal. The administration believes that by supplying China, it can "take the air out" of the country's own efforts to build a self-sufficient AI chip ecosystem, thereby hindering domestic firms like Huawei.
In a novel deal, the U.S. government granted NVIDIA export licenses for its H200 chips—advanced, but not cutting-edge—to markets like China. In return, NVIDIA pays a 25% fee on those sales. This establishes a new model where the government takes a direct revenue share from strategic tech companies in exchange for controlled market access.
The US has reversed its strict chip controls on China. Instead of a complete ban, it now allows NVIDIA to sell advanced H200 chips but with a 25% tax, effectively turning a geopolitical restriction into a significant revenue stream for the US Treasury, estimated at $5 billion annually.
Allowing H200 chip sales gives China significant AI compute capability. This short-term revenue boost for NVIDIA won't alter China's long-term policy of reducing reliance on foreign tech, effectively helping a competitor in a strategic race.
Despite the U.S. easing export controls, China's government may restrict imports of NVIDIA's advanced chips. Beijing is prioritizing its long-term goal of semiconductor self-sufficiency, which requires creating a protected market for domestic firms like Huawei, even if Chinese tech companies prefer superior foreign hardware.
The US government's reversal on Nvidia H200 chip sales to China, now with a 25% tax, indicates a strategic shift. The policy is no longer a complete blockade but aims to keep China one generation of chips behind while generating significant tax revenue for the US.
China is blocking NVIDIA's H200 chips despite US approval. This isn't just protectionism; it's a strategic move to show they can survive without US tech, support domestic champions like Huawei, and pressure NVIDIA to lobby for access to sell even more advanced chips to the Chinese market.
A complete ban on selling chips to China is counterproductive. The ideal policy allows NVIDIA to sell chips that are one or two generations behind state-of-the-art. This strategy keeps Chinese firms dependent on the NVIDIA ecosystem, funds U.S. R&D with sales revenue, and hinders domestic competitors like Huawei from flourishing.
