The 
government has issued guidance requiring new data center projects that have received any state funds to only use domestically-made AI chips.
In recent weeks, Chinese regulatory authorities have ordered such data centers that are less than 30% complete to remove all installed foreign chips, or cancel plans to purchase them, while projects in a more advanced stage will be decided on a case-by-case basis.
The move could represent one of China's most aggressive steps yet to eliminate foreign technology from its critical infrastructure and achieve its quest for AI chip self-sufficiency.
The latest move by Beijing would dash Nvidia's hopes of regaining Chinese market share, while giving local rivals, including Huawei, yet another opportunity to secure more chip sales.
It is unclear whether the guidance applies nationwide or only to certain provinces.
AI data center projects in China have drawn over $100 billion in state funding since 2021. Most data centers in China have received some form of state funding to aid their construction, but it is not immediately clear how many projects are subject to the new guidance.
Some projects have already been suspended before breaking ground as a result of the directive, including a facility in a northwestern province that had planned to deploy Nvidia chips. The project, being developed by a private technology company that received state funding, has been put on hold.
China discouraged local tech giants from purchasing advanced Nvidia chips over security concerns this year, while showing off a new data centre powered solely by domestic AI chips.
And in 2023, Beijing banned the use of Micron's products in its critical infrastructure, which paved the way for a decision this year by the largest US memory chipmaker to exit the server chip market in China.
Excluding foreign chipmakers like Nvidia from big state projects would eliminate a significant portion of their China revenue, even as a deal is agreed to allow the resumption of advanced chip sales to China.
The new guidance on data centers covers Nvidia's H20 chips, the most advanced AI chip the US firm is allowed to sell to China, but also more powerful processors such as the B200 and H200. While the B200 and H200 are barred from being shipped to China by US export controls, they remain widely available in China through grey-market channels.
With the latest directive, the Chinese government is carving out even more market share for domestic chipmakers. China has a range of AI chip companies, from the most prominent, Huawei, to smaller players such as Shanghai-listed Cambricon and startups including MetaX, Moore Threads, and Enflame.
Products from these Chinese companies already rival some of Nvidia's offerings, but they have struggled to crack the market. Developers used to Nvidia's reliable software ecosystem have been reluctant to adopt domestic alternatives.
While the move would help boost sales of domestically developed chips, it also risks widening the US-China gap in AI computing power.
US tech giants like Microsoft, Meta, and OpenAI have spent or allocated hundreds of billions of dollars to build data centres powered by Nvidia's most advanced chips.
Meanwhile, leading Chinese chip manufacturers like SMIC are facing supply constraints due to US sanctions on semiconductor manufacturing equipment that have hit advanced chip production capacity.
reuters.com/world/china/ch
government has issued guidance requiring new data center projects that have received any state funds to only use domestically-made AI chips.
In recent weeks, Chinese regulatory authorities have ordered such data centers that are less than 30% complete to remove all installed foreign chips, or cancel plans to purchase them, while projects in a more advanced stage will be decided on a case-by-case basis.
The move could represent one of China's most aggressive steps yet to eliminate foreign technology from its critical infrastructure and achieve its quest for AI chip self-sufficiency.
The latest move by Beijing would dash Nvidia's hopes of regaining Chinese market share, while giving local rivals, including Huawei, yet another opportunity to secure more chip sales.
It is unclear whether the guidance applies nationwide or only to certain provinces.
AI data center projects in China have drawn over $100 billion in state funding since 2021. Most data centers in China have received some form of state funding to aid their construction, but it is not immediately clear how many projects are subject to the new guidance.
Some projects have already been suspended before breaking ground as a result of the directive, including a facility in a northwestern province that had planned to deploy Nvidia chips. The project, being developed by a private technology company that received state funding, has been put on hold.
China discouraged local tech giants from purchasing advanced Nvidia chips over security concerns this year, while showing off a new data centre powered solely by domestic AI chips.
And in 2023, Beijing banned the use of Micron's products in its critical infrastructure, which paved the way for a decision this year by the largest US memory chipmaker to exit the server chip market in China.
Excluding foreign chipmakers like Nvidia from big state projects would eliminate a significant portion of their China revenue, even as a deal is agreed to allow the resumption of advanced chip sales to China.
The new guidance on data centers covers Nvidia's H20 chips, the most advanced AI chip the US firm is allowed to sell to China, but also more powerful processors such as the B200 and H200. While the B200 and H200 are barred from being shipped to China by US export controls, they remain widely available in China through grey-market channels.
With the latest directive, the Chinese government is carving out even more market share for domestic chipmakers. China has a range of AI chip companies, from the most prominent, Huawei, to smaller players such as Shanghai-listed Cambricon and startups including MetaX, Moore Threads, and Enflame.
Products from these Chinese companies already rival some of Nvidia's offerings, but they have struggled to crack the market. Developers used to Nvidia's reliable software ecosystem have been reluctant to adopt domestic alternatives.
While the move would help boost sales of domestically developed chips, it also risks widening the US-China gap in AI computing power.
US tech giants like Microsoft, Meta, and OpenAI have spent or allocated hundreds of billions of dollars to build data centres powered by Nvidia's most advanced chips.
Meanwhile, leading Chinese chip manufacturers like SMIC are facing supply constraints due to US sanctions on semiconductor manufacturing equipment that have hit advanced chip production capacity.
reuters.com/world/china/ch