My post yesterday about prospects for sales to China of Nvidia’s H200 chip is already out of date. Not the conclusion, disputing the notion that the Chinese government or Chinese companies were set to “reject” the H200—but the suggestion that we must wait and see what Chinese regulators do before we can know whether many Chinese companies will order the chips.
China’s regulators are still pondering exactly what to do to protect the domestic chip industry if and when Chinese firms lurch to grab the H200. But lots of Chinese companies are already getting in line for the H200. Nvidia is planning to increase production “as Demand from China Explodes” (VOI, December 15, 2025).
Nvidia is reviewing plans to increase production capacity of H200 artificial intelligence chips after receiving a surge in orders from major Chinese technology companies, exceeding current production capacity.
This move comes shortly after US President Donald Trump announced that Washington would allow exports of H200 chips to China, provided that the US government charges a fee of 25% for each sale.
Industry sources said demand from China was so strong that Nvidia was inclined to increase production capacity to meet the market. A number of Chinese technology giants, including Alibaba and ByteDance, are said to have contacted Nvidia this week to express interest in making large-scale purchases.
The H200 chip, which began mass production last year, is the fastest processor in the Hopper family and is the second fastest AI chip ever produced by Nvidia. This chip is made by Taiwan Semiconductor Manufacturing Company (TSMC) using a very advanced 4 nanometer fabrication technology, making it a crucial component for the development of large-scale AI models….
The Chinese government is reportedly still considering the impact of the entry of H200 chips on the domestic semiconductor industry….
One of the schemes being discussed…is requiring Chinese companies that buy H200 to bundle the purchase with domestically produced chips in a certain ratio. The goal is clear: protect the local industry from being left behind by superior foreign technology.
So there’s still some uncertainty. Is it prospective demand alone that is “exploding,” so that we won’t know whether actual demand explodes until Chinese regulators finalize how they will treat the H200?
If the party-state does end up requiring purchase of “domestically produced chips in a certain ratio” to number of H200 chips purchased, this amounts to a tax. Companies that can afford to pay the tax might buy the H200 plus mandatory domestic chips, then throw the latter in the trash and rely entirely on the H200.
The government of the Republic of China would be justified in refusing to let Taiwan-based TSMC manufacture the H200 for Nvidia if Nvidia would sell any of those chips to China. But such a prohibition does not seem to be a possibility that has occurred to Taipei, at least not publicly.
The benefit would be keeping the H200 out of the hands of the People’s Republic of China, whose military is constantly sending ships and planes into the Taiwan Strait to practice blockading and invading Taiwan. The cost would be whatever the cost of crossing the Trump administration might be. Also, Beijing might stop liking Taipei so much.
Also see:
Wall Street Journal: “Nvidia AI Chips to Undergo Unusual U.S. Security Review Before Export to China” (December 9, 2025)
“Nvidia’s H200 AI chips that are part of the deal would mainly be manufactured in Taiwan. From there, they would travel to the U.S. for a national-security review, people familiar with the matter said. The chips would then be sent on to China….
“Trump said Monday when he announced the agreement that only approved buyers would receive AI chips, but smuggling and diversion have made it challenging to fully enforce such restrictions in the past. That same day, the Justice Department said it had charged two businessmen for trafficking export-controlled Nvidia chips, including the H200, to China and other countries.”
