Exclusive: Nvidia mulls boosting production of H200 chip in response to strong demand from China, sources reveal

Exclusive - Nvidia Considers Increasing H200 Chip Production Due to High Demand from China, Sources Say

Dec 12 (Reuters) - Nvidia has informed its Chinese clients that it is considering boosting production capacity for its H200 AI chips, as current demand surpasses its existing output, according to two sources familiar with the matter.

This decision follows a statement by U.S. President Donald Trump on Tuesday, confirming that the U.S. government would approve Nvidia's exports of H200 processorsits second-fastest AI chipsto China, with a 25% fee applied to these sales.

Demand from Chinese companies for the H200 chip is so strong that Nvidia is leaning toward expanding its production, said one of the sources. Both sources requested anonymity as the discussions are confidential.

"We are managing our supply chain to ensure that licensed sales of the H200 to authorized customers in China will not impact our ability to meet U.S. customer demand," Nvidia said in a statement to Reuters after the story's release.

Several major Chinese firms, including Alibaba and ByteDance, have already approached Nvidia this week with plans to purchase the H200 in large quantities, Reuters reported on Wednesday.

However, there are still uncertainties, as Chinese authorities have not yet approved the H200's purchase. Officials in China held urgent meetings on Wednesday to discuss whether to allow the chips into the country, according to two sources, with a decision expected soon.

Currently, only limited quantities of the H200 chips are being produced, Reuters reported, as Nvidia has prioritized the manufacturing of its most advanced Blackwell and upcoming Rubin chip lines.

China Focused on Promoting Domestic AI Industry

The supply of H200 chips has become a significant issue for Chinese clients, leading them to seek clearer information from Nvidia on availability, according to sources.

Nvidia has also provided these clients with guidance regarding the current supply situation, though no specific numbers have been shared, one of the sources added.

Released last year, the H200 is Nvidia's most powerful chip in the previous Hopper generation. It is produced by TSMC using the company's 4nm process technology.

TSMC has declined to comment on specific customer allocations but has pointed to remarks made by its CEO, C.C. Wei, regarding the company's approach to capacity planning amidst the surge in AI demand.

China's Ministry of Industry and Information Technology (MIIT) has not yet responded to requests for comment.

Chinese companies' strong interest in the H200 stems from its performancecurrently the most powerful chip available to them. The H200 is approximately six times more powerful than the H20, an earlier Nvidia chip designed specifically for the Chinese market and released in late 2023.

The timing of Trump's decision regarding the H200 coincides with China's efforts to promote its own domestic AI chip industry. Since local chip companies have yet to develop products matching the H200's capabilities, there are concerns that allowing the H200 into China could hinder domestic progress.

"Its (H200) compute performance is around 2-3 times that of the most advanced domestically produced accelerators," said Nori Chiou, investment director at White Oak Capital Partners. "I'm already seeing many cloud service providers and enterprise customers placing large orders and lobbying the government to relax restrictions on a conditional basis," he added, noting that Chinese AI demand exceeds the capacity of domestic production.

During the emergency meetings, one proposal suggested that any H200 purchase should be bundled with a required percentage of domestic chips, according to two of the sources and a third source.

For Nvidia, expanding production is challenging at a time when the company is transitioning to its Rubin line while competing with firms like Alphabet's Google for limited advanced chipmaking capacity at TSMC.

Sources:

• Exclusive-Nvidia considers increasing H200 chip output due to robust China demand, sources say