According to recent reports, semiconductor giant Nvidia has directed its major manufacturing partners to cease production of the H20 AI chip designed specifically for the Chinese market. The company instructed both Arizona-based Amkor Technology and Samsung Electronics from South Korea to halt their involvement in the chip’s production process this week, sources familiar with the matter revealed.
The decision follows mounting pressure from Beijing authorities, who have expressed security concerns about the H20 chips and urged domestic companies to avoid their use. Amkor, responsible for the advanced packaging phase of production, and Samsung, which provides high-bandwidth memory components, have reportedly received direct communications from Nvidia regarding the suspension.
The development has led to an accumulation of partially completed H20 chips at Amkor’s facilities. Responding to the situation, Nvidia released a statement emphasizing their ongoing management of supply chain dynamics to address market conditions, while maintaining that allowing U.S. chips for commercial use benefits all parties involved.
This suspension highlights the complex challenges Nvidia faces in the Chinese market, particularly following recent policy shifts. The situation became more complicated after President Trump reversed an earlier ban on H20 sales, allowing their distribution under the condition that the federal government would receive 15% of the revenue generated.
Tensions escalated last month when China’s Cyberspace Administration confronted Nvidia regarding alleged “backdoor” security
vulnerabilities in the H20 chips. These claims were strongly refuted by Nvidia’s CEO Jensen Huang, who maintained that the chips present no security risks.
The controversy intensified following comments made by U.S. Commerce Secretary Howard Lutnick on July 15, who stated on CNBC that the U.S. withholds its premium technology from China, referring to the H20 chips as neither first, second, nor third-tier products. Chinese officials reportedly found these remarks offensive.
The market response to the news saw Nvidia’s shares decline
approximately 1% in premarket trading, though the company’s stock remains near historic highs, having gained 30% since the beginning of the year through Thursday’s close.
Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hernandez Tejada suggest that while the production halt creates uncertainty regarding Nvidia’s China business recovery, strong U.S. hyperscaler demand and Blackwell adoption could offset potential impacts this year. They had previously anticipated H20 shipments to China would not resume until at least year-end.
The suspension marks a significant shift in Nvidia’s Chinese market presence, which has already seen substantial changes. The company’s revenue from China has decreased significantly, dropping from 26% to 13% of total revenue amid ongoing trade tensions and technological restrictions.
This latest development underscores the broader challenges facing technology companies operating in the complex landscape of U.S.-China relations, where business decisions are increasingly influenced by geopolitical considerations and national security concerns. The situation continues to evolve as both countries navigate their technological and economic relationships while maintaining their respective security interests.