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Suppliers of parts for Nvidia’s H200 have paused production after Chinese customs officials blocked shipments of the newly approved artificial intelligence processors from entering China, according to a report.

Reuters could not immediately verify the report, which appeared in the Financial Times citing two people with knowledge of the matter. Nvidia did not immediately respond to a Reuters request for comment made outside regular business hours.

Nvidia had expected more than one million orders from Chinese clients, the report said, adding that its suppliers had been operating around the clock to prepare for shipping as early as March.

Chinese customs authorities this week told customs agents that Nvidia’s H200 chips were not permitted to enter the country, Reuters reported.

Sources have also said government officials summoned domestic tech firms to warn them against buying the chips unless it was necessary.

The sources, who spoke on condition of anonymity due to the sensitivity of the matter, said authorities had not provided any reasons for their directives and had not given any indication if this was a formal ban or a temporary measure.

The H200, Nvidia’s second most powerful AI chip, is one of the biggest flashpoints in US-Sino relations. There is strong demand from Chinese firms, but it remains unclear if Beijing wants to ban the chips outright to encourage domestic chip companies to develop their own; whether the Chinese government is still mulling restrictions; or if it is all a bargaining tactic.

If the import ban is confirmed, it adds to a convoluted situation that includes the Trump administration allowing the US-designed, Taiwanese-manufactured H200 chips to be exported to China, with the US government reportedly to take a share of the profits.

The US government then decreed that instead of the completed chips being sent directly to China from Taiwan, they instead first go to a US laboratory for testing, allowing a 25% tariff to be imposed as they pass through the US. The tariff was also applied to chipmaker AMD’s MI325X processor.

Experts and analysts are split on whether selling the H200 to China is strategically a good idea. Those in favour say its availability might slow China’s progress developing similar chips and keep Chinese companies dependent on US technology; those against say the H200 is, for example, powerful enough to be used in weapons systems that China’s military might one day deploy against the US or its allies.

With Reuters