China’s largest server manufacturers, H3C, has warned of potential shortages of Nvidia's H20 chip
One of China’s largest server manufacturers, H3C, has warned of potential shortages of Nvidia's H20 chip, the most advanced AI processor legally available in China under U.S. export restrictions. In a client notice seen by Reuters, H3C stated that its current inventory of H20 chips is nearly depleted, and future supply remains uncertain.
The supply crunch could pose a significant challenge to China's AI ambitions, especially as its technology firms continue to aggressively invest in artificial intelligence. H3C cited geopolitical tensions and global trade disruptions as the primary reasons behind the uncertainty, adding that new shipments are expected by mid-April 2025.
Following the publication of this notice, Nvidia declined to comment, while H3C later stated that neither the company nor any of its departments had issued such a notice.
Growing Demand for H20 Chips
Demand for Nvidia’s H20 chips has surged in recent months, fueled by the rapid adoption of Chinese AI startup DeepSeek’s cost-effective AI models. Major Chinese tech giants like Tencent, Alibaba, and ByteDance have significantly increased their H20 chip orders since DeepSeek gained international attention in January.
The client notices reportedly indicated that supply plans beyond April 20 face further uncertainties due to policy changes, shipping disruptions, and production challenges. To manage the shortage, H3C stated it would distribute incoming H20 chips based on a "profit-first" principle, giving priority to long-term, high-margin customers.
An industry insider involved in AI server distribution confirmed that H20 processors are scarce in the Chinese market. "We were told the chips would be available, but when it came time to actually purchase them, we were informed they had already been sold at higher prices," the source revealed.
U.S. Export Restrictions and Future Challenges
The H20 chip is the only Nvidia AI processor currently allowed for sale in China, as Washington has banned exports of Nvidia's most advanced chips since 2022, citing concerns that China could leverage AI technology for military purposes.
In January 2025, U.S. officials reportedly considered imposing further restrictions on the sale of H20 chips to China, which could further disrupt the AI supply chain.
H3C is a key OEM partner for Nvidia in China, alongside Inspur, Lenovo, and xFusion (a Huawei spin-off). The H20 chip was introduced in response to the latest U.S. export restrictions in October 2023, but its future availability remains uncertain amid tightening trade policies.
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