China’s H3C Warns of Nvidia H20 AI Chip Shortage Amid Soaring Demand
BEIJING, March 27 (Reuters) – H3C, one of China’s leading server manufacturers, has alerted clients to a possible shortage of Nvidia’s H20 AI chip, the most advanced processor legally available in China under U.S. export restrictions.
The anticipated supply constraints could hinder China’s AI development, as major tech firms ramp up investments in artificial intelligence to stay competitive.
Nvidia H20 AI Chip Faces Supply Uncertainty as H3C Warns of Depletion
H3C has cautioned that the global supply chain for Nvidia’s H20 AI chip is facing significant uncertainties, with current inventory nearly exhausted. In a client notice issued Tuesday, the company cited geopolitical tensions affecting global trade and key material supplies as the primary cause of the disruption.
Despite the uncertainty, H3C stated that new shipments are expected to arrive by mid-April. Following the report, an Nvidia spokesperson declined to comment. However, in a later statement to Reuters, H3C denied issuing the notice or its related content.
Surging Demand for Nvidia H20 Chips Driven by Chinese AI Boom, Supply Faces Uncertainty
Demand for Nvidia’s H20 AI chips has skyrocketed in recent months as companies rush to adopt cost-effective AI models from Chinese startup DeepSeek. Leading tech giants Tencent (0700.HK), Alibaba (9988.HK), and ByteDance have significantly increased their H20 orders since DeepSeek gained global attention in January, Reuters previously reported.
However, H3C has warned that supply beyond April 20 remains uncertain due to raw material policy changes, shipping disruptions, and production challenges. The company stated it would prioritize distribution based on a profit-first model, favoring stable, long-term customers with higher-margin orders.
Nvidia H20 AI Chips in Short Supply in China Amid Rising Demand and U.S. Trade Restrictions
Nvidia’s H20 processors are becoming increasingly scarce in China, according to an industry source distributing AI servers equipped with the chips.
“We were initially told the chips would be available, but when we tried to purchase them, we were informed they had already been sold at higher prices,” the source said, requesting anonymity due to the sensitivity of the information.
The shortage comes as U.S. officials consider further restrictions on H20 chip sales to China, Reuters reported in January. H3C, a key OEM partner for Nvidia in China, joins other major manufacturers like Inspur, Lenovo, and xFusion (Huawei’s former x86 server unit) in supplying AI chips to the domestic market.
The H20, launched after the latest round of U.S. export controls in October 2023, remains the most advanced Nvidia chip legally available in China. However, Washington has restricted exports of Nvidia’s most powerful AI chips since 2022, citing concerns over China’s potential military applications of advanced technology.
Nvidia Ships 1 Million H20 AI Chips in 2024, Generating Over $12 Billion Amid Growing Competition
Analysts estimate that Nvidia shipped approximately 1 million H20 AI chips in 2024, driving over $12 billion in revenue. The H20 remains the most advanced Nvidia chip legally available in China under U.S. export restrictions.
However, domestic competitors such as Huawei and Cambricon are offering alternative AI chips, intensifying competition in China’s rapidly expanding artificial intelligence market.
Good