H3C, one of China’s biggest server makers, warned of possible shortages of Nvidia’s H20 chip. Because of export rules, this is the most advanced AI processor that can legally be sold in the U.S.
The company said in a notice, “H20’s international supply chain faces significant uncertainties.” They added that it was almost out of stock. This is a result of a huge increase in demand for H20 chips as businesses rush to adopt DeepSeek’s cost-effective AI models.
Now, a possible shortage of supplies could make it harder for China to reach its AI goals at a time when its tech firms are aggressively expanding their investments in AI.
The Chinese company said that plans for supply after April 20 are also unclear because of changes in the rules for raw materials, problems with shipping, and problems with production.
Therefore, the notice read that H3C would distribute incoming H20 chips based on a profit-first concept. This means it will give priority to stable, long-term customers whose orders would bring in more profit. The company said that new shipments are expected by mid-April this year.
Not only does H3C sell Nvidia’s AI chips in China, but so do Inspur, Lenovo, and xFusion, Huawei’s spin-off x86 server unit.
The increased demand in China for H20 chips
The U.S. has not let Nvidia’s most advanced chips go to China since 2022. This is because the U.S. is worried that China could use these technologies to make its own defense stronger. To that end , the H20 is the main chip that Nvidia can sell in China. It came out after the most recent round of U.S. export limits started in October 2023.
Analysts think that Nvidia sold about a million H20 units in 2024. This brought in more than $12 billion for the business.
An insider in the AI server business who sells servers with H20 chips, said that H20 processors are hard to find in China right now. This is because since DeepSeek, the Chinese AI company, became famous around the world in January, Tencent, Alibaba, and ByteDance have all ordered a lot more H20.
The insider said, “We were told the chips would be available, but when it came time to actually purchase them, we were informed they had already been sold at higher prices.”
Among other fears, the U.S. is considering limiting the sale of H20 chips to China. In China, Huawei and Cambricon are two other options besides H20.
According to papers examined by the Financial Times, the National Development and Reform Commission of China has asked companies in the country to use energy-efficient chips in new data centers and expansions of existing ones.
The H20 chip, which Nvidia made to work with U.S. export rules, apparently doesn’t meet the new rules put in place by the economic planning agency. According to reports, Nvidia executives are seeking a meeting with Zheng Shanjie, the chair of the commission, to discuss the rules. Apparently, it has also adjusted the chip to meet the energy efficiency rules.
Nvidia said in a statement, “Our products provide superb energy efficiency and value in every market we serve […] As technology moves rapidly, export control policy should be adjusted to allow U.S. firms to offer the most energy-efficient products possible, while still achieving the Administration’s national security goals.”
People who spoke to the Financial Times said that the commission told companies like Alibaba and Tencent not to buy the less powerful Nvidia chips. People said that H20 sales are not being affected right now because the rules have not yet been closely followed.
Nvidia’s Form 10-K shows that China and Hong Kong are its fourth-largest markets, bringing in about 13% of its annual income, or $17.1 billion, for fiscal 2025. Meanwhile, Nvidia shares are down by around 6%.
Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More
