H20’s “Backdoor” Scandal Unresolved — Why Is NVIDIA Pushing Another China-Specific Chip?

TradingKey - After the partial lifting of export restrictions on its H20 chip in China, NVIDIA is accelerating the development of its next-generation product tailored for the Chinese market. According to Reuters, citing sources on August 19, the company is working on a new AI chip based on its latest Blackwell architecture, tentatively named B30A, which is expected to outperform its current flagship H20. The B30A will feature a single-chip design and could deliver test samples to Chinese customers as early as September.

NVIDIA has stated that all its products are “fully approved” and intended exclusively for “beneficial commercial use.” However, this claim faces growing skepticism. U.S. regulatory approval remains uncertain, and the Trump administration has confirmed that NVIDIA must remit 15% of its revenue from chip sales in China to the U.S. government in exchange for export licenses — a move widely seen as a “protection fee” and a stark example of the complex interplay between geopolitics and technology trade.

The current H20 chip, already on the market, is facing mounting challenges. Labeled a “downgraded” product to comply with U.S. export rules, it is now outperformed by domestic alternatives. According to IDC, China’s share of the domestic AI chip market is projected to surge from 17% in 2023 to 55% by 2027, while U.S. vendors like NVIDIA are expected to see their share drop to 45%. Chinese GPU makers have used the import restrictions as a strategic window to rapidly expand their market presence.

Moreover, the H20 has raised serious security concerns. On July 31, China’s Cyberspace Administration (CAC) summoned NVIDIA officials to provide explanations regarding reported “backdoor” vulnerabilities in the chip. Some analysts suggest the U.S. government has systematically explored embedding backdoors in AI chips, offering export license exemptions as incentives for corporate cooperation. Against this backdrop, the security integrity of the H20 is under intense scrutiny, leading to minimal procurement interest from state-owned enterprises and government-affiliated organizations.

Even more controversially, NVIDIA reportedly plans to pass the 15% “fee” directly to Chinese customers, potentially increasing H20 prices by up to 18%. This strategy appears increasingly out of touch — in a market where security doubts remain unresolved and domestic alternatives are now mature and competitive, a price hike is unlikely to succeed.

NVIDIA is advancing with new products while still entangled in old problems. The approval of B30A remains uncertain, while the H20 is now burdened by security allegations, pricing pressure, and a growing perception of technological obsolescence. Its future in China is clouded by doubt.

This unfolding struggle — a convergence of technology, politics, and trust — is more than a corporate challenge. It is a defining moment for the future of the global AI supply chain.