Why a China-tailored chip reveals that Nvidia can't quit its second-largest market

NVIDA CEO Jensen Huang has repeatedly emphasized that further restrictions could inadvertently strengthen Chinese competitors, particularly Huawei Technologies.

Nvidia finds itself navigating an increasingly complex balancing act between US export restrictions and preserving its foothold in China, a market that generated 14% of the company's revenue last year.

The semiconductor giant's latest move—developing a China-tailored B30 chip designed to comply with Washington's tightened controls—underscores the strategic importance of the world's second-largest economy to its business model.

The company plans to produce over one million units of the new B30 chip this year, according to The Information. This initiative represents Nvidia's continued efforts to design products that push as close as possible to US regulatory limits while remaining legal for Chinese markets.

The chip, expected to launch in July and likely based on Nvidia's Blackwell platform, demonstrates the company's commitment to maintaining its Chinese market presence despite mounting geopolitical pressures.

Recent regulatory changes have significantly impacted Nvidia's operations. The company revealed in April that new US export controls on its H20 chips—previously designed specifically for Chinese customers—would require export licenses.

These restrictions led to an immediate US$4.5 billion charge in the first quarter due to excess inventory and purchase obligations, with projections of an additional $8 billion revenue loss in the second quarter.

However, Nvidia's reluctance to abandon China extends beyond immediate financial considerations. CEO Jensen Huang has repeatedly emphasized that further restrictions could inadvertently strengthen Chinese competitors, particularly Huawei Technologies.

Huang recently described Huawei as "one of the most formidable technology companies in the world," acknowledging the rapid advancement of Chinese AI chip capabilities. Huawei's progress presents a tangible competitive threat.

The company has developed AI chips with capabilities that are quickly approaching Nvidia's standards and is actively promoting its Ascend AI processor-based Supernode 384 architecture as an alternative to Nvidia's NVL72 system.

The Trump administration's recent designation of Huawei's Ascend processors as violations of US export controls "anywhere in the world" highlights the growing competitiveness of Chinese alternatives.

Huang has characterized US chip restrictions aimed at limiting China's AI development as "deeply uninformed," arguing that preventing American companies from competing in China would help the country build a "rich ecosystem" that excludes US firms.

This perspective reflects broader industry concerns about the long-term consequences of technological decoupling. The stakes extend beyond Nvidia's immediate market share. China represents not just a significant revenue source but also a crucial component of the global semiconductor supply chain.

Walking away would create a vacuum likely to be filled by domestic Chinese alternatives, potentially accelerating China's semiconductor independence and reducing global market opportunities for US companies.

Nvidia's strategy of developing compliant chips for China reflects a calculated risk. While these products may offer reduced capabilities compared to unrestricted versions, they allow the company to maintain relationships, gather market intelligence, and position itself for potential future regulatory changes.

The alternative—ceding the market entirely—could prove far more costly in the long term.