How Nvidia's chips became central to the U.S.-China trade war
[August 25, 2025] When
Nvidia CEO Jensen Huang revealed Friday that the company is working with
the Trump administration on a new computer chip designed for sale to
China, it marked the latest chapter in a long-running debate over how
the U.S. should compete with China’s technological ambitions.
The reasoning has sometimes changed — with U.S. officials citing
national security, human rights or purely economic competition — but the
tool has been the same: export controls, or the threat of them.
Nvidia believes it can eventually reap $50 billion from artificial
intelligence chip sales in China. But it so far has been held back by
restrictions imposed by President Joe Biden’s administration and then
reinforced by President Donald Trump before negotiating a quid pro quo
deal.
How did these chip export controls start?
China has its own chip foundries, but they have historically supplied
only low-end processors used in autos and appliances. Beginning in 2014,
the Chinese government tried to change that with a new “Big Fund” that
invested huge amounts of money into hundreds of semiconductor companies.
Meanwhile, the U.S. government, starting in Trump’s first term, began
cutting off China’s access to a growing array of tools to make chips for
computer servers, artificial intelligence and other advanced
applications.
China was particularly irked when it was blocked from buying a machine
available only from a Dutch company, ASML, that uses ultraviolet light
to etch circuits into silicon chips. The restrictions stalled Chinese
efforts to make transistors faster and more efficient by packing them
more closely together on fingernail-size slivers.
Chinese telecommunications giant Huawei became the public face of the
trade tensions, with U.S. claims of its products’ potential use for
espionage a backdrop for a broader struggle for economic and
technological dominance.
“We don’t want their equipment in the United States because they spy on
us,” Trump said in 2020 as the administration tightened restrictions to
block Huawei from accessing chip technology, at the same time as he was
threatening to ban TikTok on similar grounds.
[to top of second column] |
 Biden ups the ante on chip
restrictions
President Joe Biden maintained those restrictions after taking
office in 2021, but also ramped them up with a series of export
controls that blocked sending to China the world’s most advanced
chips and factory equipment.
That affected Chinese sales for California chipmaker Nvidia, the
leading designer of the specialized chips needed for artificial
intelligence technology.
After the first restrictions took effect in 2022, blocking chips
including Nvidia’s H100, the company designed a new kind of chip
that was not quite advanced enough to meet the threshold for
restrictions.
The Biden administration escalated its restrictions in 2023 to block
those newer chips. Then Nvidia again came out with a new kind of
chip that could slip into China: the H20.
Trump’s back-and-forth on the H20
The Trump administration in April halted the sale of the H20 and
other advanced computer chips to China over national security
concerns, but Nvidia and AMD revealed in July that Washington would
allow them to resume sales of their chips, which are used in AI
development.
After taking a $4.5 billion blow to its finances during the
February-April period, Nvidia estimated the export crackdown in
China would cost the company another $8 billion in potential sales
from May through July.
The squandered opportunities fueled Huang’s efforts to persuade
Trump and other administration officials that the restraints would
do more harm than good for the U.S.
“The question is not whether China will have AI, it already does,”
Huang told analysts during a conference call in late May. “The
question is whether one of the world’s largest AI markets will run
on American platforms. Shielding Chinese chipmakers from U.S.
competition only strengthens them abroad and weakens America’s
position.”
Nvidia and AMD also agreed in August to share 15% of their revenues
from chip sales to China with the U.S. government, as part of a deal
to secure export licenses for the semiconductors.
All contents © copyright 2025 Associated Press. All rights reserved |
