• Nvidia plans to release a downgraded version of its H20 chip in July 2023 for the Chinese market.
• The modified chip aims to comply with US export restrictions that blocked the original model.
• China accounted for $17 billion, or 13%, of Nvidia's total sales last fiscal year.
• Major tech firms in China, including Tencent and Alibaba, have increased orders for the H20 chip.
• The changes to the H20 chip include reduced memory capacity and modified performance capabilities.

Nvidia is preparing to launch a modified version of its H20 artificial intelligence chip specifically for China, targeting a release in July 2023. This decision follows US export restrictions that have effectively blocked the sale of the original model. The company has communicated its plans to major Chinese tech customers, including leading cloud computing providers, indicating that this modified chip is crucial for maintaining its market presence despite these restrictions, according to Reuters and South China Morning Post.

The new design of the H20 chip will include several significant downgrades, primarily related to memory capacity. According to reports, Nvidia has established new technical thresholds that necessitate these changes, effectively meaning the modified chip will be less powerful than its predecessor. Additionally, downstream customers might still be able to configure the module to better suit their performance needs, which could mitigate some of the impacts of these reductions, as noted by Reuters and Times of India.

Nvidia's dependency on the Chinese market is evident, with the country accounting for 13% of the company’s total sales, estimated at $17 billion in the last fiscal year. This strategic importance was underscored by a visit from Nvidia CEO Jensen Huang to Beijing just days after US officials imposed new export license requirements. During this visit, Huang highlighted the significance of the Chinese market to Nvidia's operations, reinforcing the company's commitment to maintaining its presence in this key market, according to Reuters, South China Morning Post, and Times of India.

Major Chinese tech companies such as Tencent, Alibaba, and ByteDance have reportedly ramped up orders of the H20 chip, with demand for cost-effective AI models increasing, further driving the urgency of Nvidia's modification efforts. By the end of the previous month, Nvidia noted an accumulation of approximately $18 billion worth of H20 orders from these Chinese giants, as detailed by Reuters and South China Morning Post.