China's H3C, one of the country's largest server makers and a key original equipment manufacturer for Nvidia's (NVDA, Financials) AI chips, warned of a looming shortage of the H20 chip, according to a client advisory cited by Reuters. The H20 is currently the most advanced Nvidia AI chip legally allowed for export to China under United States restrictions.
According to the company's advice, H3C's stock of the H20 chip is almost depleted; fresh deliveries are not anticipated until mid-April. The alert ascribed the supply strain to disturbances in raw materials and world trade uncertainty. H3C also said that changing transportation issues and manufacturing limits would keep delivery unpredictable beyond April 20.
Rising acceptance of affordable AI models created by Chinese firm DeepSeek has fueled demand for the H20 chip in recent months.
H3C intends to allocate its leftover chip supply on a profit-first basis, prioritizing long-term clients with higher-margin contracts. According to a source in the sector who spoke to Reuters, chip distributors have struggled to meet orders and often find that anticipated inventory has already been sold for more rates.
Launched when the U.S. government tightened export limits in October 2023, the H20 chip First presented in 2022, the regulations seek to stop China from obtaining modern processors that may enable military expansion.
Analysts predict Nvidia sold around 1 million H20 chips in 2024, bringing in more than $12 billion. Reports say, nevertheless, American authorities are thinking about further H20 sales restrictions to China.
Among the several businesses permitted to sell Nvidia's artificial intelligence processors in China, H3C joins Inspur, Lenovo, and xFusion, a Huawei spin-off. Chinese companies like Huawei and Cambricon, on the other hand, keep creating homegrown substitutes for the H20 to help to lower reliance on American chipmakers.
