Nvidia Faces Setback as China AI Chip Launch Delayed Amid Export Compliance Challenges

Launch of H20 Artificial Intelligence Chip, Designed to Navigate U.S. Export Rules, Postponed Until Q1 2023

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Nvidia, a prominent player in the semiconductor industry, is encountering hurdles as it postpones the launch of its new artificial intelligence (AI) chip, the H20, designed specifically to comply with stringent U.S. export restrictions. The delay, revealed by sources familiar with the matter, has been attributed to complications faced by server manufacturers integrating the semiconductor into their products. Nvidia’s shares closed down approximately 1.9% on a shortened U.S. trading day.

The H20 chip, aimed at the Chinese market, is now slated for release in the first quarter of the upcoming year. While Nvidia has not officially commented on the matter, Reuters reported that Chinese customers were informed of the delay by the company.

In October, the U.S. government heightened export restrictions on AI chips destined for China, placing limitations on the export of Nvidia’s A800 and H800 chips, both explicitly tailored for the Chinese market. In addition to the H20, Nvidia is gearing up for the launch of two other export-compliant chips, namely the L20 and L2, as reported by Reuters.

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This setback comes at a critical time for Nvidia, as the company generates around one-fifth of its revenue from the Chinese market. The delay in launching the H20 could pose challenges for Nvidia, particularly as it faces stiff competition from local players such as Huawei in the Chinese semiconductor landscape.

While Nvidia reported a remarkable tripling of its revenue in the September quarter, the company cautioned that sales in regions impacted by export restrictions are expected to “decline significantly” in the current quarter. The delay in the H20 launch adds a layer of complexity to Nvidia’s efforts to navigate the evolving dynamics of the semiconductor industry, marked by geopolitical tensions and stringent export regulations.