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On July 22, QUARTZ reported that the United States is considering imposing stricter trade controls on allies that sell advanced chip manufacturing equipment to China. Jeffries analysts said the United States may also ban American GPU giant Nvidia from selling its chips designed specifically for the Chinese market.

Jeffries wrote in a report that when the United States conducts its annual review of U.S. semiconductor export controls in October, it is "very likely" that Nvidia's H20 chip will be banned from sale to China, and the H20 chip is one of the three GPUs designed by Nvidia for China that do not require an export control license. He also wrote that the ban could be implemented in three ways: "specific product bans," "reducing the upper limit of computing power," or "limiting memory capacity."

H20 is the most powerful of the three "castrated" GPUs launched by NVIDIA based on H100 specifically for the Chinese market. It can provide up to 296 INT8 TOPS/FP8 TFLOPS computing power, and also has 96 GB HBM3 memory and 4.0 TB/s memory bandwidth, making it competitive with entry-level AI processors. However, compared with H100, its AI computing power is less than 15% of H100, and some performance is even inferior to domestic AI chips, but its HBM capacity is higher than H100, which also makes it still have certain advantages over other domestic AI chips in actual AI training and reasoning.

Forecast data from market research firm SemiAnalysis shows that Nvidia will export more than 1 million new H20 chips to the Chinese market this year, with each chip expected to cost between US$12,000 and US$13,000, which is expected to bring the company more than US$12 billion in revenue.

Some US companies (Intel, Qualcomm, etc.) obtained special licenses to sell products to Chinese chip companies such as Huawei that were included in the so-called "list", but these licenses were revoked in May. Analysts said that even if it is difficult to implement, the United States may also expand chip export controls to other countries near China (such as Malaysia, Indonesia and Thailand), or expand the scope of control to Chinese companies overseas.

Export Control Measures of the "Foreign Direct Product Rule" (Part) eCFR Website

The Biden administration is reportedly discussing the use of an export control measure called the Foreign Direct Product Rule (FDPR), which would affect companies including Japan's Tokyo Electron and Dutch chip equipment maker ASML. That is, if a part of a product contains U.S. intellectual property, officials can invoke the rule to block the export of that product to any country. Global chip stocks fell as the news came out. However, Jeffries and Bank of America analysts said the sell-off in chip stocks was an overreaction by the market, saying that "FDPR considerations may have been misunderstood."

In May this year, when talking about the US export control issues on China, Chinese Foreign Ministry spokesman Lin Jian said that facts have proved that China-US economic, trade and investment cooperation is mutually beneficial and win-win, and both countries and their peoples are beneficiaries. Politicizing, instrumentalizing and ideologizing economic, trade and technological issues, and forcing "decoupling and breaking the chain" will impact the normal trade and investment exchanges and the stability of the production and supply chain between the two countries and the world, and is not in the interests of any party, including the United States.

The spokesperson pointed out that the US should implement its commitments of "not seeking to decouple from China" and "not hindering China's development", stop protectionist practices, stop technological blockades and restrictions on China, and stop disrupting the international economic and trade order. China will take necessary measures to firmly safeguard its legitimate rights and interests.

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