China’s revised energy efficiency rules for data center chips could limit Nvidia’s (NVDA, Financials) access to a market that contributes roughly $17.1 billion, or 13% of the company’s annual revenue, according to a report from the Financial Times.
China is increasing its energy efficiency criteria for data center CPUs, hence challenging Nvidia’s flagship H20 processor. Beijing pressures local businesses to use chips that satisfy revised environmental criteria, hence the law would limit Nvidia’s ability to sell into one of its most important markets.Reportedly, the H20 chip does not satisfy China’s new energy efficiency requirements as it was created expressly to fit U.S. export limits. This progress endangers Nvidia’s capacity to keep its present presence in the nation. The Financial Times estimates that China makes around 13% of Nvidia’s yearly income, or around $17.1 billion.Nvidia is looking for talks with high-level Chinese authorities and is changing the H20 chip to fit the new regulations, the Financial Times said, reacting to the legislative changes.The change in policy highlights increasing semiconductor industry tensions between China and the United States. Chinese businesses have been promoting the use of older, locally manufactured CPUs in artificial intelligence systems as part of a larger industrial plan. Though less powerful, these parts are cheaper and more easily accessible, hence allowing local companies to depend less on international suppliers.As geopolitical instability raises scrutiny and restricts access for American chipmakers in worldwide markets, this regulatory evolution aggravates Nvidia’s problems. Though the local chip sector speeds up its own growth, the scenario underlines the strategic risk connected to the company’s reliance on Chinese income.
This article first appeared on GuruFocus.
