Chinese tech giants ordered billions of dollars worth of H20 accelerators from Nvidia before the ban on their supply was introduced

U.S. export control rules were modified during Donald Trump’s second term in office in such a way that Nvidia’s H20 accelerators, which were built by Nvidia for shipment to China in late 2022, were banned. The company’s Chinese customers reportedly ordered more than $12 billion worth of the accelerators before the sanctions were announced.

Image source: NVIDIA

According to Nikkei Asian Review, major Chinese tech companies had no illusions about their ability to endlessly receive Nvidia H20 accelerators from the US, and therefore reserved about 1 million of the corresponding units from the manufacturer in advance, which roughly corresponds to their annual production volume. The cost of such a batch exceeded $12 billion, and ideally Nvidia should have delivered the bulk of the accelerators by the end of May, but export restrictions came into force earlier, and therefore the company will not be able to fully fulfill its obligations. It notified US regulators about this, mentioning the need to write off about $5.5 billion for one quarter of this year.

Among the affected customers of Nvidia were, among others, Chinese companies ByteDance, Alibaba and Tencent. H20 accelerators retain the Hopper architecture, but compared to the original H100, they are five to ten times slower, depending on the application. In the current conditions, Chinese customers of Nvidia are ready to use these accelerators in reasoning systems of artificial intelligence. They tried to train their language models on old stocks of more powerful H100 and H800 accelerators. From this point of view, H20 will be easier to replace with Chinese analogues, but such a restructuring will still slow down the development of the Chinese AI industry.

In the last fiscal year, 13% of Nvidia’s total revenue was generated in China, although the year before its share reached 17%. The possibility of transporting prohibited accelerators to China through Singapore and Malaysia is also covered up by local authorities in cooperation with the American ones. On the other hand, this allows the same Huawei to count on increasing its share of the domestic market for computing accelerators.