One of the key aspects of the evolution of the artificial intelligence market is the production and use of high-capacity chips, a key component of the global race between the United States and China. Huawei, a Chinese technology company, has announced plans to significantly expand the production of its AI chips in the coming years. In a context where the United States imposes restrictions on the export of advanced chips to China, this decision aims to create space for local solutions.
Huawei wants to accelerate production to meet pent-up demand in the country
According to recent reports, Huawei aims to nearly double production of Ascend 910C chips by 2026, reaching 600,000 units. The product is considered the main alternative to Nvidia’s H20 chip, which has stopped being exported freely to China following restrictions imposed by the United States, increasing the need to encourage domestic production.
This shift has a significant impact and strategic weight for local companies like Alibaba and DeepSeek, which rely on advanced chips to train and run AI models and now require domestically manufactured solutions. The increased demand generated by the shortage of Nvidia chips creates a market gap that’s ripe for Huawei to take the lead in a multi-billion dollar market that shows no signs of slowing down.
Although there are still performance gaps when compared to Nvidia chips, the advantage of large-scale production capacity favors Chinese-made products. For manufacturers, having quick and consistent access to domestic chips may be more important than waiting for external alternatives.
Chinese supply chain gains speed and reduces external dependence
It’s not just China that has the opportunity to benefit from this high domestic demand. Chip production also involves SMIC, one of China’s largest semiconductor manufacturers, which uses 7-nanometer process technology to meet part of the demand. This is yet another example of internal mobilization that reinforces the strategy of creating a more independent Chinese supply chain, thereby reducing the impact of constant regulatory pressure from Washington.
Some hardware startups like Moore Threads and Iluvatar CoreX are also not far behind. Although they still don’t have the same performance as their American rivals, these companies are seizing the opportunity to advance their own solutions, helping to consolidate solutions that offer diversified alternatives to the domestic market. This rapid pace shows that, out of necessity, but also for strategic reasons, China is committed to transforming external constraints into opportunities to strengthen its local technology base.
China faces production challenges and seeks to reduce global technology gap
But of course this process is not without challenges. There are some limitations that impact the market, such as the production utilization rate, which isn’t yet sufficient, in addition to the need for constant evolution to close the gap with global competitors. Even so, the trend is accelerating: Huawei has already announced plans to launch more powerful chips in the Ascend line over the coming years.
AI race highlights the broader tech rivalry between China and the U.S.
The dispute over artificial intelligence chips isn’t just about trade; it’s one of the central issues underlying the rivalry between China and the United States. Washington has restricted Chinese companies’ access to Nvidia’s most advanced chips, citing concerns about the military use of these technologies. This has directly impacted the decision to increase incentives for the development of local companies.
Huawei’s increased chip production is both a necessary and strategic step in its attempt to reduce China’s dependence on foreign suppliers, particularly North American ones. Despite current technological limitations, the decision is seen as an investment in the future, and Huawei is preparing to be a leader in this competition.