US Government Restricts Exports of NVIDIA’s China-Exclusive H800 & A800 AI GPUs To China

To put the rapid AI growth in China on hold, the Biden administration has started implementing much more "vigorous" sanctions, starting by blocking access to China-exclusive NVIDIA H800 and A800 GPUs.

Before going into depth, it takes a look at what actually promoted the US Government to take such action. With the influx of AI developments globally, Chinese firms such as Alibaba were at the very top when it came to integrating genAI into mainstream applications. This paved the way for the entry of AI into several sectors of China, which resulted in a huge demand for necessary equipment to cater to the needs of the industry. It was reported that the Chinese AI server markets could exceed the $16 billion mark in the span of just four years, and such indicators bothered the US, who believed that the "nation" balance was disrupted.

CNBC reports that the US has officially implemented steps to hinder the growth of AI in China, by cutting off the supply of one of the necessary components, AI GPUs. According to U.S. Commerce Secretary Gina Raimondo, the sanctions are in place to thwart the "military" growth of China through artificial intelligence applications, and the actions taken in no way are directed towards the "Chinese economy". Here is what the official had to say:

The updates are specifically designed to control access to computing power, which will significantly slow the PRC’s development of next-generation frontier model, and could be leveraged in ways that threaten the U.S. and our allies, especially because they could be used for military uses and modernization.

-U.S. Commerce Secretary Gina Raimondo

How big of an impact will this step have on Chinese AI markets? Well, this question is too early to ask for now, but reports have suggested that China will be blocked from accessing NVIDIA's H800s and A800s, which were already cut-down variants previously developed by NVIDIA to comply with the US trade policies. Since access to high-end H100s was already put to a halt, the change in US policy will certainly prevent the growth of AI markets in China, given that the government is also able to cater to the "loopholes" in their policy, which is a primary reason why China's AI industry is currently in the dominant position that it shouldn't have been.

″“We comply with all applicable regulations while working to provide products that support thousands of applications across many different industries,” an Nvidia spokesperson told CNBC. “Given the demand worldwide for our products, we don’t expect a near-term meaningful impact on our financial results.”

-NVIDIA Rep to CNBC

If we look at the impact on suppliers such as NVIDIA, it will surely be something to get bothered about, since Team Green holds a major share of demand from China. NVIDIA's officials have already expressed concerns that such sanctions will have a "long-term" impact on revenue figures as well as relations with the nation. However, this will in the end prompt to generation of "loopholes" yet again, since restricting the supply of a certain product always has its own impact, especially when it is a hot-demanding one.

Item 8.01 Other Events On October 17, 2023, the U.S. Government, or USG, announced that it submitted the Interim Final Rule, “Implementation of Additional Export Controls: Certain Advanced Computing Items; Supercomputer and Semiconductor End Use; Updates and Corrections” (the “Interim Final Rule”) for publication in the Federal Register.

The Interim Final Rule amends ECCN 3A090 and 4A090 and imposes additional licensing requirements for exports to China and Country Groups D1, D4, and D5 (including but not limited to Saudi Arabia, the United Arab Emirates, and Vietnam, but excluding Israel) of the Company’s integrated circuits exceeding certain performance thresholds (including but not limited to the A100, A800, H100, H800, L40, L40S, and RTX 4090). Any system that incorporates one or more of the covered integrated circuits (including but not limited to NVIDIA DGX and HGX systems) is also covered by the new licensing requirement. The licensing requirement includes future NVIDIA integrated circuits, boards, or systems classified with ECCN 3A090 or 4A090, achieving certain total processing performance and/or performance density.

The licensing requirement applies to the export of products classified ECCN 3A090 or 4A090 to a party headquartered in, or with an ultimate parent headquartered in, Country Group D5, including China.

The licensing requirement may impact the Company's ability to complete development of products in a timely manner, support existing customers of covered products, or supply customers of covered products outside the impacted regions, and may require the Company to transition certain operations out of one or more of the identified countries.

To the extent that a customer requires products covered by the new licensing requirements, the Company may seek a license for the customer but has no assurance that the USG will grant any exceptions or licenses, or that the USG will act on the request in a timely manner.

The Company’s third quarter of fiscal 2024 ends on October 29, 2023. The Interim Final Rule is effective thirty days after its publication. Given the strength of demand for our products worldwide, we do not anticipate that the additional restrictions will have a near-term meaningful impact on our financial results.

SEC

It is disappointing to see the "tech industry" getting dragged into politics and hostilities of two nations, and this results in a halt in innovative developments in either region. We do hope that the US-China conflicts settle for once since they certainly have an adverse impact on the industry.

News Source: CNBC