NVIDIA’s Partners Struggle to Restart H20 AI Chip Production Amid Crowded Fabs — What’s Next for Jensen and China?

While the news of NVIDIA’s H20 AI chip ban getting lifted was a great one for many of us out there, it seems like there are a lot of “unnoticed” complications associated with production.

NVIDIA And Its Supply Chain Partners Might Not Restart H20 AI Production, But Will Focus On Newer Solutions

For those unaware, NVIDIA CEO Jensen Huang announced last week that the Trump administration is set to give the “green signal” to sell H20 AI chips to China, and initially, the firm will rely on its inventory to cater to the demand. However, given that China’s AI market has been restricted from accessing NVIDIA’s chips for so long, the need for high-end chips is certainly there, but according to a report from the Ctee, Team Green and its suppliers are facing production issues, since many of them had adjusted their fabs for other products, after the initial export controls came in.

While the markets are anticipating that NVIDIA will see billions being flown into the company’s revenue from China, that might not be the case, at least for a few quarters. It is claimed that firms like TSMC are showing reluctance towards restarting production for wafers needed for the H20 AI chip, saying that the demand for other nodes is currently massive, and even if production lines are prepared for NVIDIA’s H20 chips, the time for them to enter the market would be pretty far ahead, which means that Team Green cannot capitalize on the demand.

It is said that if the AI supply chain doesn’t see the inflow of massive orders of the H20 AI chip, restarting production would have complications. According to estimates by various investment firms, NVIDIA is currently anticipating shipping out millions of units of the H20 AI chip, much of which will come from the company’s existing inventory. However, in terms of newer units, the market isn’t certain for now, however, based on our estimates, here’s one way NVIDIA’s business in China could pan out in the future.

What could happen is that NVIDIA might initially target clearing the H20 inventory to recover the write-offs that happened last quarter and then shift focus to an entirely new solution for the domestic markets. According to reports over the past week, NVIDIA is anticipated to rely on multiple solutions for China’s AI market, including the B20 AI chip, RTX PRO 6000D, and the B30 AI chip, all targeting different streams of the market. This way, suppliers could open up newer production lines, and instead of relying on the H20 chip, NVIDIA could try something different.

While the future does look optimistic for NVIDIA, it is expected that there will be uncertainty in the company’s business in China at least by year-end, since restarting H20 production would be complicated for NVIDIA and its suppliers.