China Approves ByteDance, Alibaba, and Tencent to Acquire Nvidia's H200 Chips

China's Approval of AI Chip Purchases

Jan 28 (Reuters) - China has given the green light to three of its largest tech companies to buy Nvidia's H200 artificial intelligence chips, four people familiar with the matter told Reuters, marking a shift in position as Beijing seeks to balance its AI needs against spurring domestic development.

Details of the Approval Process

ByteDance, Alibaba and Tencent have been approved to purchase more than 400,000 H200 chips in total, with other firms now joining a queue for subsequent approvals, the sources said, speaking on condition of anonymity. 

Impact on U.S.-China Relations

The Chinese government is only granting approvals with conditions and the sources said they were still being decided upon.

Future of Domestic Semiconductor Industry

A fifth source said that the licenses were too restrictive and customers were not yet converting the approvals to purchase orders.

The regulatory nods were granted during Nvidia Chief Executive Jensen Huang's visit to China this week, one of the sources said.

China's industry and commerce ministries as well as Nvidia had not yet responded to requests for comment at the time of publication. ByteDance, Alibaba, and Tencent had not responded either.

Chinese government officials have told domestic technology companies in previous meetings that they should only purchase chips when necessary, Reuters has reported.

One proposal that Chinese authorities have discussed in the past would require each H200 purchase to be bundled with a set ratio of domestic chips, Reuters has also reported.

The H200, Nvidia's second most powerful AI chip, has emerged as a major flashpoint in U.S.-China relations. Despite strong demand from Chinese firms and U.S. approval for exports, Beijing's hesitation to allow imports has been the main barrier to shipments.

The U.S. earlier this month formally cleared the way for Nvidia to sell the H200 to China, where the company is seeing strong appetite. However, Chinese authorities have the final say on whether they would allow it to be shipped in. 

It was unclear in recent weeks whether Beijing would grant approval as the government wants to balance meeting surging domestic demand for advanced AI chips and nurturing its domestic semiconductor industry.

Chinese customs authorities told agents that the H200 chips were not permitted to enter China, Reuters reported earlier this month.

But Chinese technology firms have placed orders for more than two million H200 chips, far exceeding Nvidia's available inventory, Reuters reported last month.

It remains uncertain how many additional companies will receive approval in subsequent batches or what criteria Beijing is using to determine eligibility.

Huang arrived in Shanghai last Friday for routine annual celebrations with Nvidia's China employees and has since travelled to Beijing and other cities, Reuters reported last week.

BALANCING ACT

The approvals of H200 suggest Beijing is prioritising the needs of major Chinese internet companies, which are spending billions of dollars to build data centres needed to develop AI services and compete with U.S. rivals, including OpenAI.

While Chinese companies such as Huawei now have products that rival the performance of Nvidia's H20 chip, previously the most advanced AI chip it was allowed to sell to China, they still lag far behind the H200.

The H200 delivers roughly six times the performance of Nvidia's H20 chip.

Still Beijing has discussed requiring companies to buy a certain quota of domestic chips as a condition for receiving approval to import foreign semiconductors, Reuters previously reported.

(Reporting by Reuters staff; Editing by Sonali Paul, Sam Holmes and Thomas Derpinghaus)