Chinese officials are miffed over Commerce Secretary Howard Lutnick’s “insulting” remarks about Nvidia’s H20 computer chip — and are now pressuring domestic firms not to buy it, according to a report Thursday.
During a July 15 appearance on CNBC, Lutnick downplayed the Trump administration’s decision to lift an additional set of export controls that would have barred sales of the H20 – a less-powerful version of Nvidia’s chips that was made specifically to comply with US export controls on the sensitive technology.
“We don’t sell them our best stuff, not our second-best stuff, not even our third-best,” Lutnick said at the time.
“You want to sell the Chinese enough that their developers get addicted to the American technology stack, that’s the thinking,” he added.
Shortly after Lutnick’s CNBC appearance, Beijing began its regulatory crackdown, the Financial Times reported. Top Chinese officials viewed Lutnick’s comments about the H20 chip as “insulting,” two sources with knowledge of the crackdown told the FT in a story published Thursday.
Shares of Nvidia, led by CEO Jensen Huang, were down less than 1% in early trading on Thursday.
Some Chinese tech firms have scaled back their H20 orders in response to the pressure from Beijing, the report added.
“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,” one of the FT’s sources said.
Agencies involved in the pressure campaign reportedly include the Cyberspace Administration of China, the National Development and Reform Commission and the Ministry of Industry and Information Technology.
“As both governments recognize, the H20 is not a military product or for government infrastructure,” an Nvidia spokesperson said in a statement. “China won’t rely on American chips for government operations, just like the U.S. government would not rely on chips from China. However, allowing U.S. chips for beneficial commercial business use is good for everyone.”
The Commerce Department did not immediately return a request for comment.
Nvidia’s chips have become a hot commodity because they are considered the most advanced in the market — and are crucial for powering artificial intelligence models. Some critics fear that allowing sales of even the H20 chip to China will hurt the US’s competitiveness in the AI race.
The situation has unfolded during a period of ongoing trade discussions between the US and China, which have yielded some progress but have yet to result in a full-fledged agreement.
In order to secure the necessary export licenses, Nvidia and fellow chipmaker AMD have agreed to pay the US government 15% of the revenue from their chip sales in China.
