For years, semiconductors have been at the heart of the US–China technology rivalry, shaping trade negotiations, export controls, and national security debates. Nvidia’s latest struggle to sell its H20 chip in China is the latest chapter in a long-running standoff, highlighting how advanced technology, critical minerals, and industrial policy have become intertwined in global power politics.
The H20 chip, launched last year to help Nvidia maintain access to the Chinese market — which made up 13% of its sales in 2024 — was itself a product of geopolitics. However, in April, Washington told the company it needed a special license to export the H20 chip to China, halting shipments. The chip was believed to have powered DeepSeek, one of China’s most advanced AI models, raising US concerns about national security.
Nvidia reapplied for licenses in July and received assurances that they would be approved. Sales eventually resumed, but only after months of back-and-forth that reflected Washington’s shifting stance: In July, export controls were paused to bolster US-China trade negotiations. In August, the administration oscillated between threatening to block advanced Nvidia sales to China and signalling possible approval for modified versions.
In September, sales restarted, albeit under unusual circumstances: Going forward, Nvidia will give the US government 15% of its chip revenue from China, a deal that’s largely been described as unprecedented. AMD will do the same.
The bigger picture is: China’s controls on rare earth exports became a major focus in the trade talks between Beijing and Washington this summer. Why does it matter? Because chip manufacturing relies heavily on critical minerals like germanium and gallium. The USA is heavily reliant on imports for both of these critical minerals, especially from China, given its dominant role as a major producer and supplier of both products. According to a US Mineral Commodity Summary, no domestic primary (low-purity, unrefined) gallium has been recovered since 1987, and there are no government stockpiles of the mineral. The USA does produce germanium, but as a byproduct recovery from zinc ores, not a primary product, a process that is costly. A strategic stockpile of 5 tonnes of germanium does exist, but it is a paltry number compared to China’s reported 199 tonnes of annual germanium production. (Sidenote: The numbers are, unfortunately, from 2023, but they paint a clear enough picture.)
China, meanwhile, relies on NVIDIA’s chips to stay competitive in the global AI race. Domestic alternatives are still behind in performance, efficiency, and reliability, so using NVIDIA hardware allows China to deploy cutting-edge AI solutions immediately while its homegrown industry continues to scale up.
The USA openly linked chip concessions to rare earths discussions: In exchange for increasing shipments of rare earth minerals from China, the US agreed to lift export curbs on microchip designing software, ethane and jet engines.
The interplay between chip access and mineral supply illustrates a complex trade-off: each side leverages what it has — the USA its semiconductor know-how, China its dominance in rare earth minerals.
Both countries have already tried with export controls, with mixed results. Reports surfaced that more than $1 billion worth of Nvidia chips had already reached China through alternative channels. This prompted the USA to consider embedding trackers into AI chip shipments to monitor possible diversions.
Despite China’s export restrictions, germanium and gallium continue to reach the USA via indirect trade routes, likely through re-exports from countries where China permits their export.
This data underscored doubts about whether export controls could truly contain the spread of advanced technology and prompted each of the players to make moves to position themselves better and reduce their reliance on each other.
