China reportedly probes Tencent, ByteDance over Nvidia chip buys

Chinese regulators have questioned major tech companies, including Tencent, ByteDance, and Baidu, about their purchases of Nvidia’s H20 AI chips, according to sources.

Officials from the Cyberspace Administration of China and other agencies asked why these firms were acquiring Nvidia chips instead of using domestic alternatives.

They raised concerns about potential information risks but did not issue a formal order to stop buying the H20 chip.

Sources said authorities worry that information submitted to Nvidia for US government review could include sensitive client data.

Nvidia said the H20 is not a military or government chip, and China does not rely on American chips for official operations.

The US lifted its ban on Nvidia’s H20 sales to China in July, after restricting more advanced AI chips in 2023.

China has increased efforts to develop local AI chips, but domestic manufacturers face challenges due to US restrictions on advanced chipmaking equipment.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ China’s semiconductor scrutiny reflects two-decade push for tech self-sufficiency

The questioning of why Chinese companies need Nvidia chips when domestic alternatives exist aligns with China’s long-term technology strategy that began in 2002.

Since that time, China has been in what researchers call “Phase 4” of its technology policy, emphasizing high technology industrialization and self-sufficiency after earlier phases focused on heavy industry and basic research 1.

This strategic direction now includes concrete targets: China aims to achieve 55% market share in its domestic AI chip sector by 2027, a significant increase that would reduce dependence on foreign suppliers 2.

The timing suggests urgency, as analysts predict Nvidia’s market share in China will decline from 66% in 2024 to 54% by 2025, indicating that domestic alternatives are already gaining ground 2.

Chinese authorities’ questions about purchasing foreign chips despite domestic availability align with this broader industrial policy of reducing technological dependence on other nations.