Nvidia is set to resume sales of its H20 chips in China after the US government gave assurances last month that it would be permitted to resume sales, but analysts expect lower demand due to increased competition and regulatory pressures.

The US government gave assurances to Nvidia regarding the possibility of restarting exports, and Nvidia announced a new chip tailored for the Chinese market after an earlier halt that threatened the company’s revenue.

Global equity research firm Bernstein predicts Nvidia’s share of China’s AI chip market will fall to 54% in 2025 from 66% in 2024, citing both supply issues and the rise of local competitors like Huawei, Cambricon, and Hygon.

Bernstein estimates that Chinese-made AI chips could make up 55% of the domestic market by 2027, up from 17% in 2023.

Nvidia’s renewed access comes as US officials weigh the impact of export controls, while Chinese authorities are signaling continued support for domestic chip development.

China’s Cyberspace Administration also raised security concerns about the H20 chips, which Nvidia denies contain any backdoors.

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🔗 Source: CNBC

🧠 Food for thought

1️⃣ Export restrictions historically accelerate domestic semiconductor development rather than halt it

The current situation follows a pattern where US export controls inadvertently strengthen Chinese domestic capabilities.

China’s push for semiconductor self-sufficiency predates current export controls, with longstanding policies aimed at reducing dependence on foreign technology 1.

For example, when the US targeted Fujian Jinhua in 2018 for allegedly stealing trade secrets from Micron, it pushed China to focus more on domestic memory chip development 2.

Data indicates this acceleration effect: US semiconductor export controls led to a 32.5% decline in China’s imports of manufacturing equipment, but Chinese semiconductor equipment firms have experienced growth supported by government investments during this period 3.

This suggests that market disruptions from export controls often create competitive advantages for domestic players, making it challenging for foreign companies to regain their original market position.

2️⃣ Market share losses during export restrictions prove difficult to recover even after policies reverse

Nvidia’s experience illustrates how temporary market absence can lead to competitive disadvantage, even for dominant players.

Despite maintaining 70% of Chinese AI chip shipments in 2024, Nvidia is projected to lose market share—from 66% to 54% by 2025 according to Bernstein analysts 4.

This reflects broader dynamics where Chinese companies like Huawei gained market experience and customer relationships during Nvidia’s absence.

China’s localization of its AI chip market is expected to increase from 17% in 2023 to 55% by 2027, reshaping competitive dynamics.

Additionally, China’s regulatory scrutiny of Nvidia’s returned H20 chips—including security concerns—suggests Beijing will continue supporting domestic alternatives even as foreign options become available again.

Recent Nvidia developments

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