Semiconductor supply chain faces change: growth and risks

The chip industry’s momentum is colliding with climate and trade challenges, a new tariff on copper might derail everything.

Recent policy shifts in both Washington and Beijing are reshaping the global AI hardware and critical minerals landscape. A U.S. decision to grant export licenses for Nvidia’s H20 inference GPU to Chinese customers promises to unlock billions in revenue, while China’s aggressive export controls on gallium threaten a supply crunch. Together, these developments expose the fragility of concentrated supply chains and underscore the need for diversified sourcing and risk monitoring.

Nvidia gains approval to resume H20 GPU sales to China

In a surprising reversal of its previous stance, the Trump administration has announced it will now grant Nvidia export licenses to send its H20 AI accelerator chips to buyers in China. Originally designed to sidestep trade restrictions, the H20 has been shelved for months after Washington tightened the rules the H20 was meant to comply with, stranding Nvidia with another chip it could not sell in China.  

The financial upside of the latest news is significant. Analysts at TrendForce estimate that replenished H20 sales in China could unlock $10 to $15 billion in revenue, potentially pushing Nvidia’s market capitalization toward $5.7 trillion from its current $4.16 trillion valuation. For a firm that has become synonymous with advanced AI chips, regaining access to the Chinese market means both immediate cash flow and an opportunity for long-term strategic positioning.

While the H20 is optimized for inference workloads, Nvidia is not limiting its China strategy to a single product. CEO Jensen Huang also announced the new RTX Pro GPU, a fully compliant chip designed to be “ideal for digital twin AI for smart factories and logistics.” The new offering will serve as a complement to the H20 and is designed to address edge computing in automation-heavy sectors.  

Behind the recent policy shift lies a concerted lobbying effort. Huang recently visited both Washington and Beijing to argue that AI is a foundational infrastructure as critical as electricity or roads. His messaging emphasized the strategic value of maintaining U.S. technology leadership and reinforced the importance of open-source AI.  

Talking to reporters in D.C. after meeting with President Trump, Huang said, “General-purpose, open-source research and foundation models are the backbone of AI innovation. We believe that every civil model should run best on the U.S. technology stack, encouraging nations worldwide to choose America.”  

Leaning into both inference and industry-specific applications, Nvidia aims to balance U.S. policy compliance and appeasing its Chinese customers—all while maintaining its position as the go-to global leader in AI. For Chinese firms, regaining access to the H20 chip and the forthcoming RTX Pro offers immediate relief as they work around restricted access to higher-end silicon like Nvidia’s H100 and H200.  

As shown by relaxed U.S. trade rules, AI hardware availability in today’s market is dictated by both demand and politics. To stay ahead of these developments and the disruption they bring, buyers need robust monitoring tools and an agile supply chain. Sourceability supports enterprises navigating ongoing market changes with end-to-end visibility and strategic sourcing guidance to ensure uninterrupted access to critical AI components amid regulatory volatility.

China’s gallium export controls tighten supply chains

As Nvidia regains limited access to China’s AI market, Beijing is doubling down on its leverage in global trade negotiations by tightening access to gallium exports. Gallium is a critical input in semiconductors and is found in everything from consumer devices to military equipment. Recent attention has focused on Chinese export controls over rare earth materials given its dominance in that arena. However, China also has a virtual monopoly on gallium production and exports, controlling some 98% of the market.  

In 2023, Beijing made an aggressive move in trade negotiations by introducing a licensing requirement on gallium exports. Those restrictions have since been expanded to include certain advanced technologies used to extract and process the mineral.  

The implications for global supply chains are profound. Gallium demand is rising across telecom, defense, and AI verticals, among others, with buyers struggling to acquire enough supply. Already, stockpiled inventories are thinning as manufacturers draw down their supplies, and market pricing is beginning to reflect market scarcity. Any long-lasting bottleneck would be disastrous.

Concerningly, the supply crunch is not one that can be resolved without diplomatic negotiations. Western economies are largely absent from upstream gallium production due to limited reserves and weak incentives to invest in extraction or processing.  

According to recent analysis by the Center for Strategic and International Studies (CSIS), meaningfully changing this reality will require coordinated investment into new extraction projects, recycling technologies, and alternative research—none of which can scale in the short term.  

Of course, this isn’t just about gallium. Beijing’s actions reflect a broader geopolitical trend of resource restrictions as a key negotiating lever. Other crucial inputs, including copper, silicon, and rare earth metals, have also found themselves in the crosshairs. China has successfully demonstrated how material dominance can be used as a countermeasure to western export restrictions, giving the U.S. and its allies something to ponder before slapping new restrictions on high-value technologies like AI.

For procurement leaders, gallium supply troubles highlight the urgency of building resilience into every level of component sourcing. Sourceability’s market intelligence platform empowers customers to map supplier risk, monitor geopolitical developments, and identify trusted alternative sources that are at minimal risk of supply chain disruption.