The US Chip Recalibration And Its Strategic Lessons For India – Analysis
Tech major Nvidia announced that it has received clearance from the United States (US) government to sell its H20 artificial intelligence (AI) chip in China. This development comes on the heels of its CEO, Jensen Huang, meeting the US President Donald Trump. The US Commerce Department had curbed the sales of the H20 AI chip in April 2025, and the relaxation marks a significant shift in the trajectory of Washington’s technology export control regime.
Trade negotiation teams led by US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng have been involved in prolonged talks to defuse trade tensions. Washington and Beijing had agreed to cut tariffs on their goods for 90 days after talks in Geneva in May 2025. A framework to discuss economic and trade relations was to be constituted. During the Geneva talk, China had assured that it would revoke non-tariff countermeasures—a reference to the restrictions on the export of critical minerals used in the production of batteries and other advanced applications.
Despite the truce, industry associations reported that Chinese authorities were dragging their feet on issuing export licences for rare-earths. In turn, Beijing accused Washington of issuing rules that sought to specifically restrict the usage of AI chips by Chinese tech giant Huawei. The issuance of visas to Chinese students also came to the fore with the US announcing that guidelines related to study visas would be changed to improve the scrutiny of applications from China and Hong Kong. Later in June 2025, Treasury Secretary Scott Bessent and Vice Premier He Lifeng signed an accord on implementing the Geneva consensus following negotiations in London.
The Nvidia turnaround has put the spotlight on its Chief Executive Jensen Huang, who was born in Taiwan but moved to the US and became a citizen. In an era where technology has been caught in geopolitical crosshairs, Jensen’s trademark black-leather jacket seems Teflon-coated. Jensen paid US$1 million for a dinner with Trump in April 2025, but despite that, the US administration clamped down on the sale of H20 chips in China.
Unfazed, Jensen dashed to Beijing and assured that he would deal with the situation and ‘unwaveringly serve’ the market. Jensen pledged investments in Saudi Arabia, the United Arab Emirates, and Qatar in May despite the region being fraught with geopolitical risks. Trump refers to Jensen as his ‘friend’, justifiably since the latter has given an undertaking to pump US$500 billion to build AI supercomputers in the US, which power the President’s manufacturing dreams. There is a view that the US turnaround on Nvidia’s H20 chips may have been a result of Jensen emerging as an important bridge between Washington and Beijing.
The turnaround on Nvidia H20 chips leaves geopolitical analysts to ponder over issues related to China’s leveraging its rare-earth capacity. During the past five years, since the first Trump administration’s tariff tensions, China has started work on installing an export-control framework to exploit America’s supply-chain dependencies as bargaining chips in future negotiations. China restricted exports of seven rare-earth elements and magnets—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—that have applications in defence production, energy generation, and vehicle manufacturing sectors.
Having brought the Trump administration to the negotiating table and successfully diluting the technology export-control measures concerning Nvidia’s chips, Beijing may be incentivised to leverage this template further to extract more concessions. Additionally, Trump’s upcoming visit to Beijing may lead Washington to postpone further technology restrictions for the time being. Beijing’s apparent success in getting Washington to blink by weaponising rare-earth may embolden it to use this toolkit elsewhere. There may be implications of this development concerning India-China relations, given that both nations are steadily normalising ties. In the aftermath of China’s military adventurism in Galwan in 2020, India restricted Chinese apps, capital investment, visas, and its tech majors such as Huawei.
Despite the cautious normalisation, many of the measures that mitigate the effects of China’s economic statecraft remain in place. China’s assessment of India’s counter-measures is that they have caused greater pain to New Delhi. Liu Zongyi, Director of the South Asia Research Centre of the Shanghai Institutes for International Studies, argued that India’s motivation to normalise relations with China was due to economic considerations. Liu uses the Chinese idiom ‘xiè mò shā lǘ’ (卸磨杀驴) that translates into ‘one kills a donkey after the grinding is finished’. The insinuation is that India unfairly levied restrictions on Chinese companies doing business in India, and has since regretted its decision. This Chinese evaluation seems to have been bolstered by the Economic Survey 2023-24, making a case for greater economic engagement with China while disregarding the security implications.
In the intervening period, China has begun to up the ante with reports that nearly 300 Chinese workers at factories in Karnataka, Tamil Nadu, and Telangana of Foxconn India, which manufactures Apple iPhones, are being recalled. New Delhi has used the Production-Linked Incentive scheme to invite gadget manufacturers to improve India’s manufacturing base. A total of US$22 billion of iPhones were assembled in India in the financial year ending March 2025.
Automakers have complained that they are unable to access rare-earth magnets from China; as a result, a question mark hangs over New Delhi’s push for e-vehicles. Beijing blocked the supplies to New Delhi of tunnel-boring equipment manufactured by a German company, Herrenknecht, in China. The issue was figured during an interaction between Industry and Commerce Minister Piyush Goyal and Robert Habeck, then Germany’s Minister for Economic Affairs and Climate Action, during the latter’s visit to India in October 2024.
Under the Modi government, several Metro-rail projects in cities such as Delhi, Bengaluru, Chennai, and Kolkata, along with the Ahmedabad-Mumbai bullet train project, and the tunnel-excavating machines are key to these infrastructure projects. Beijing is also slowing down exports of di-ammonium phosphate (DAP), which is widely used as a crop nutrient in India. This has important ramifications for food security and the Indian economy as a whole, considering the majority of the Indian workforce is still engaged in agriculture. Government records indicate that the total DAP stocks were 1.8 million tonnes in May 2025, compared to 2.8 million tonnes in May 2024.
The propensity of policy-makers to box issues of economic security and national security in silos has become the stumbling block in India’s China policy. New Delhi will have to double down on its manufacturing ambitions if it needs to thwart Beijing’s economic leverage.