China Prioritizes Domestic AI Chips, Reportedly Rejects Nvidia H200 Despite US Export Approval

China Opts for Homegrown Solutions Over Nvidia H200

Despite recent approval from the United States government for the export of Nvidia's H200 AI chip to China, reports indicate that Beijing is largely rejecting widespread adoption of the advanced semiconductor. This move underscores China's strategic commitment to fostering its domestic semiconductor industry and achieving technological independence, even as geopolitical tensions continue to shape the global tech landscape.

White House AI czar David Sacks stated on December 12, 2025, that China is reportedly declining the H200 in favor of domestically developed semiconductors, attributing this stance to China's desire for 'semiconductor independence.'

US Greenlights H200 Export with Conditions

On December 9, 2025, US President Donald Trump announced that Nvidia would be permitted to sell its H200 AI chips to 'approved customers' in China. This decision marked a significant shift from previous strict export controls, with a condition that 25% of the revenue from these sales would go to the US government.

The Nvidia H200, built on the Hopper architecture, is a powerful AI accelerator featuring 141 gigabytes (GB) of HBM3e memory and a bandwidth of 4.8 terabytes per second (TB/s). While highly capable, it is considered a 'previous-gen' chip, significantly outclassed by Nvidia's latest Blackwell architecture, which remains prohibited for export to China. This calibrated approach aimed to allow China to meet immediate computing needs while preserving a technological gap.

China's Accelerated Drive for Semiconductor Self-Sufficiency

China's reported rejection of the H200 is a clear manifestation of its long-term strategy to bolster its indigenous semiconductor capabilities. Beijing has been pouring billions into its chip fabrication industry, with approximately $150 billion invested since 2014, and a new incentive package reportedly worth up to $70 billion in the pipeline.

This national effort aims to reduce reliance on foreign technology, particularly from the US, and cultivate a robust domestic supply chain. Chinese companies like Huawei are at the forefront of this initiative, developing their own AI chips such as the Ascend series. Huawei's Ascend 910C processors, integrated into systems like the CloudMatrix 384, are being positioned as direct alternatives to Nvidia's platforms, demonstrating significant progress in closing the performance gap.

Incentives and Controls Shape Market Dynamics

To further encourage the adoption of domestic chips, Chinese provinces are implementing substantial incentives. Local governments in regions such as Gansu, Guizhou, and Inner Mongolia are offering electricity subsidies that can cut energy bills for large data centers by up to 50%, specifically for those utilizing homegrown AI chips. Crucially, facilities using foreign chips, including those from Nvidia, are excluded from these subsidies. This policy aims to offset the higher energy consumption of some Chinese chips and make domestic alternatives more economically attractive.

Furthermore, Chinese regulators have reportedly held 'emergency meetings' with major tech companies, including Alibaba, ByteDance, and Tencent, to assess their demand for H200 chips. Officials are considering measures to limit access, potentially requiring companies to justify why local chips cannot meet their needs and possibly barring public sector access to the foreign chips.

Implications for the Global AI Landscape

This development has significant implications for Nvidia, the global semiconductor market, and the trajectory of AI development in China. While Nvidia CEO Jensen Huang had previously expressed uncertainty about Chinese companies purchasing the H200 even if restrictions were eased, China's firm stance reinforces its commitment to self-reliance.

The ongoing competition highlights a growing fragmentation of the global semiconductor market into distinct technological ecosystems, with AI becoming a critical geoeconomic battleground. China's aggressive push for domestic innovation, supported by substantial state incentives and regulatory controls, signals a long-term strategy to achieve leadership in AI hardware independent of foreign suppliers.