China Tells Tech Giants to Halt Nvidia H20 Orders After U.S. Official’s ‘Addiction’ Remark — Chinese leaders call Lutnick's comments 'insulting'

Although China has been trying to move away from foreign chips for several years now, the Financial Times says that this effort has now intensified after being fueled by U.S. Commerce Secretary Howard Lutnick saying the aim was to make China "addicted" to US tech during an interview after Washington allowed Nvidia to resume the sales of its H20 to the country, using a term that holds signifcant cultural undertones in China.

“We don’t sell them our best stuff, not our second-best stuff, not even our third-best. I think fourth best is where we have come out that we’re cool,” Lutnick said during the July 15 CNBC interview. He also added, “So you want to sell the Chinese enough that their developers get addicted to the American technology stack. And that’s the thinking.”

These remarks caught the ire of Chinese authorities, with some of the country’s senior leadership calling it “insulting.” Furthermore, the “addiction” connotation brings back memories of the Opium Wars, when Britain forced China to legalize the drug, leading to an addiction epidemic in the country and the loss of territory to foreign powers, including Hong Kong, the Kowloon Peninsula, and Outer Manchuria. This event is particularly raw among Chinese historians and is often marked as the start of its “Century of Shame.”

China has directed its regulatory bodies, including the Cyberspace Administration of China (CAC), the National Development and Reform Commission (NDRC), and the Ministry of Industry and Information Technology (MIIT), to find ways to force Chinese tech institutions to move away from buying Nvidia H20 chips. The Financial Times says that companies have been holding off on purchases and reducing their orders for Nvidia’s AI GPUs because of this.

This follows some of the broader initiatives already underway. Chinese regulators have recently been pushing companies away from Nvidia AI GPUs, especially the H20, with state media calling it unsafe and outdated, the government telling local companies to avoid it, and mandating that domestic data centers should purchase at least 50% of their AI chips from local manufacturers.

This might be a problem for the company, especially as Nvidia initially reported seeing high demand for the H20 and ordering more chips from TSMC to satisfy this huge appetite from China.

Nevertheless, it’s unlikely that the American AI giant will be completely supplanted by its domestic rivals anytime soon. Although competitors like Huawei and Cambricon are capable of producing chips that, on paper, can compete with what Nvidia has to offer for specific applications, the latter’s tech stack is still the primary reason why Chinese tech companies are hesitant to move away from it.