Nvidia Requires Full Upfront Payment for H200 AI Chips in China

Nvidia is requiring Chinese customers to make full upfront payments for its H200 artificial intelligence chips. This stringent policy hedges the company against ongoing uncertainty regarding Beijing’s approval of the shipments.

Credit: NVIDIA

The US chipmaker has imposed strict terms, demanding full payment for orders with no options for cancellation, refunds, or configuration changes after placement. In special circumstances, clients may provide commercial insurance or asset collateral as an alternative to cash payment.

Nvidia’s standard terms for Chinese clients previously included advance payment requirements. However, customers were sometimes allowed to place a deposit rather than making a full upfront payment.

The company has been particularly strict in enforcing H200 conditions due to the lack of clarity on whether Chinese regulators will authorise the shipments. This stepped-up policy enforcement has not been previously reported.

Chinese technology companies have placed orders for more than 2 million H200 chips. Each chip is priced at around USD 27,000, and orders exceed Nvidia’s inventory of 700,000 chips.

While Chinese chipmakers, like Huawei, have developed AI processors, including the Ascend 910C, their performance still lags behind Nvidia’s H200. This is particularly true for large-scale training of advanced AI models.

China plans to approve some H200 imports. These approvals could occur as soon as this quarter, according to reports.

Chinese officials are preparing to allow purchases for select commercial uses. However, they will bar the military, sensitive government agencies, critical infrastructure, and state-owned enterprises due to security concerns.

Beijing recently asked some Chinese tech companies to temporarily pause their H200 chip orders. Regulators are still deciding how many domestically produced chips each customer will need to buy alongside each H200 order.

The Information first reported the pause. Nvidia Chief Executive Officer Jensen Huang stated customer demand for H200 chips was "quite high," and the company had "fired up our supply chain" to ramp up production.

Mr. Huang said he did not expect China’s government to make a formal declaration on approval. Instead, "if the purchase orders come, it's because they're able to place purchase orders," he noted.

These strict payment requirements highlight the delicate balancing act Nvidia faces. The company attempts to capitalise on surging Chinese demand while navigating regulatory uncertainty in both countries.

The Biden administration previously banned advanced AI chip exports to China. President Donald Trump later reversed that policy, allowing H200 sales with a 25% fee payable to the US government.

Credit: NVIDIA

Nvidia has faced financial setbacks previously. The company recorded a USD 5.5 billion write-down in inventory after the Trump administration banned sales of the H20 chip to China.

The H20 chip was previously Nvidia’s most powerful product available there. While the US reversed its decision regarding the H20 chip, China has since banned H20 shipments.

The payment structure for the H200 effectively transfers financial risk from Nvidia to its customers. They must commit capital without certainty that Beijing will approve the chip imports or that they can deploy the technology as planned.

Chinese internet giants, including ByteDance, view the H200 as a significant upgrade over currently available chips. The H200 is currently Nvidia’s second-most powerful chip.

It delivers roughly six times the performance of the now-blocked H20 chip. This H20 chip was specifically designed by Nvidia for the Chinese market.

Nvidia plans to fulfil initial orders from existing stock. The first batch of H200 chips is expected to arrive before the Lunar New Year holiday in mid-February.

The company has approached contract chipmaker Taiwan Semiconductor Manufacturing Co. about ramping up H200 production to meet Chinese demand. Additional manufacturing is expected to begin in the second quarter of 2026.

Adding new capacity is challenging for Nvidia. The company is transitioning from its current most-powerful chip, Blackwell, to the even more advanced Rubin.

Nvidia also competes with companies, including Alphabet’s Google, for advanced chipmaking production capacity at TSMC.

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• Nvidia requires full upfront payment for H200 AI chips from Chinese customers.

• The payment policy includes no options for cancellation, refunds, or configuration changes.

• This measure addresses uncertainty over Chinese regulatory approval for shipments.

Source: REUTERS