Why China no longer wants US AI chips
Chinese companies blocked from purchasing Nvidia's GPUs.
It’s hard to see this as mere coincidence. Last Thursday, after two years of silence, Huawei finally acknowledged the existence of its new Ascend chips, designed for generative artificial intelligence. The company even laid out a roadmap, pledging to double their power every year.
The announcement came just days after Beijing ordered Chinese companies to stop using Nvidia’s graphics cards, long seen as essential for training and running AI models. Officially justified by “security concerns,” the ban is also a clear signal: China wants to boost homegrown alternatives from Huawei, Alibaba, and Baidu, which are now deemed powerful enough to take over. “Competition is undeniably here and only getting stronger,” admits Nvidia.
A twist of irony
Beijing’s move marks a stunning reversal in the chip war. For years, Washington held the upper hand, tightening export rules and deciding which advanced semiconductors Chinese firms could access. Now Beijing is flipping the script. Instead of pleading for access, it is refusing to buy. And in a twist of irony, it is Washington that finds itself cut off from one of the world’s largest technology markets.
Nvidia had worked hard to prevent this outcome. It designed new GPUs that complied with the ever-stricter performance thresholds imposed by the U.S. government. After heavy lobbying, it even won partial clearance this summer to resume exports — albeit with a 15% levy on Chinese sales. None of it was enough.
In August, China’s powerful cyberspace regulator banned the sale of Nvidia’s H20 chips. Last week, it extended the measure to the brand-new RTX Pro 6000D. The shift likely reflects the rapid progress of local players. Once seen as second-rate, domestic alternatives have made striking progress, matching the “watered-down” GPUs Nvidia was allowed to sell in China.
Obstacles remain
According to Chinese media, Alibaba’s latest accelerator rivals the H20 in performance . The e-commerce giant has already secured a major contract with mobile operator Unicom. And Huawei’s next-generation GPUs and supercomputers —potentially packing up to a million chips —are expected to go even further.
China is also advancing quickly on manufacturing. Analysts at SemiAnalysis estimate Huawei could ship 800,000 Ascend chips this year. Much of that output still depends on components illicitly sourced from Taiwan’s TSMC, but Chinese foundry SMIC is expected to step in once Huawei’s stockpiles run dry.
Obstacles remain. SMIC lacks access to ASML’s most advanced lithography tools, crucial to produce the thinnest chips. Chinese firms also don’t yet produce the latest high-bandwidth memory chips, essential for cutting-edge GPUs. Huawei is scrambling to fill those gaps, but for now it remains a step behind the best US processors. The road ahead is long.