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Post by : Badri Ariffin
The competition for supremacy in artificial intelligence between China and the United States centers on cutting-edge computer chips and processing capabilities. Although Nvidia still maintains a strong presence globally, Huawei is swiftly expanding its foothold in China's AI chip sector.
Nvidia's CEO Jensen Huang drew attention during a meeting between US President Donald Trump and Chinese President Xi Jinping in May, notably while enjoying Beijing's iconic 'zhajiangmian' noodles. Despite this warm reception, sales of Nvidia's premium AI chips have struggled in the Chinese market.
US-imposed export restrictions on advanced technologies, citing national security, initially barred Nvidia from selling its H200 AI chips in China.
Though Huang briefly regained approval from Trump to sell, China had already begun pivoting towards encouraging local AI chip manufacturers like Huawei.
According to Huang, at one point, Nvidia commanded 95% of China's AI chip market before these restrictions began. He reflected, "We had about 95% market share, and our operations were robust in China until the export controls came into play."
He emphasized that while national security remains crucial, the U.S. should also focus on growing its tech industry and exports. "Protecting our nation is paramount, but we must also foster our tech industry and enhance exports," he said.
Huang acknowledged the emergence of formidable Chinese competitors, diminishing the U.S. edge in the realm of AI chips.
Since 2019, following US restrictions on Huawei and other Chinese firms' acquisition of top-tier computer chips and semiconductor manufacturing gear, efforts to establish a self-reliant semiconductor sector have intensified.
Huawei has emerged as the leading AI chip manufacturer in China, with local firms, including DeepSeek, continually enhancing chip performance while decreasing costs.
While Nvidia and AMD still reign supreme in the global AI chip arena, Huawei has made significant headway domestically.
As per research conducted by Bernstein, Nvidia's share of China's AI chip market is expected to decline to around 8% in 2026, with Huawei's ascendance projected to push its market share close to 50%.
Antonia Hmaidi from the Mercator Institute for China Studies remarked, "Nvidia has undeniably lost a significant portion of its market share to Huawei, which now leads domestically."
Industry professionals believe Huawei's Ascend 950 series chips are competitive with Nvidia’s H200 chips in various commercial functions.
He Hui, Director of Semiconductor Research at Omdia, stated, "China's confidence in its semiconductor capabilities is on the rise. They trust their self-sufficiency and supply capacity now more than ever."
Last September, Huawei announced the deployment of cutting-edge AI computing clusters utilizing domestic chips, notwithstanding US export barriers.
He Tingbo, head of Huawei's semiconductor division, commented on the company's advancements, saying, "We have unearthed commendable solutions."
When asked about Huawei's potential to outpace global rivals, she suggested, "Who runs faster? Huawei or others? It's uncertain; only time will tell."
Despite Huawei's rapid rise, market analysts assert Nvidia remains critical for the advancement of AI technologies in China.
The semiconductor industry relies heavily on a global supply network, making it challenging for any nation to independently produce leading-edge AI chips.
Rui Ma, founder of Tech Buzz China, highlighted that the demand for AI chips in China significantly surpasses their availability.
Recent smuggling incidents involving Nvidia's AI processors also spotlight the ongoing interest in the company's tech, despite the constraints on exports.
Nvidia is known for some of the most powerful AI processors, but its production is contingent upon Dutch ASML's EUV lithography machines that incorporate US technology.
TSMC produces many of Nvidia's advanced AI chips using these machines, but China is barred from acquiring the most sophisticated processors or EUV manufacturing equipment.
While Huawei's AI offerings have made notable progress, experts contend that they still do not match Nvidia’s top-tier technologies in several critical aspects.
Training advanced AI models, including those developed by DeepSeek, continues to be heavily reliant on Nvidia hardware. Major technology firms and universities across China are persistently seeking access to chips like the H200 for their research endeavors.
While Nvidia encounters roadblocks in China, the global appetite for AI technology remains robust.
The company anticipates revenue around $91 billion during the May-July timeframe, in comparison to nearly $82 billion in the preceding quarter, not taking into account data center revenues from China.
Nvidia has projected annual revenues nearing $216 billion, while Huawei reported around $126 billion during a similar timeframe.
DeepSeek, a leading Chinese AI firm, recently announced that its latest V4 AI model has been optimized for operation on Huawei’s Ascend chips.
Paul Triolo, DGA-Albright Stonebridge Group partner, suggested substantial collaboration between DeepSeek and Huawei aimed at training future AI models on domestic platforms.
According to Morningstar analyst Phelix Lee, while Huawei chips could potentially replace Nvidia's hardware in the future, an immediate transition is not anticipated. "We don’t foresee a sudden shift toward (Huawei’s) Ascend chips," he said.
To conform with US restrictions, Nvidia also engineered the lower-performance H20 AI chip specifically for the Chinese market and continued shipments until last year, although these have tapered off as noted by Counterpoint Research analyst Brady Wang.
China's stance on Nvidia's H200 chip imports remains ambiguous.
Nvidia has stated it has not sold H200 chips in the Chinese market. At a recent shareholder meeting, Jensen Huang remarked: "Yet to generate any revenue and uncertain if any imports will be permitted in the country."
Having already established itself as the world’s biggest supplier of telecommunications network equipment, Huawei aspires to broaden its semiconductor business on a global scale.
Operating in 170 countries and regions, the company aims to "integrate digital technology into every person, household, and organization for a fully connected and intelligent world."
Nonetheless, industry analysts have pointed out that the domestic demand for sophisticated chips still overwhelms current production capacities.
Brady Wang of Counterpoint Research indicated that as China's manufacturing capabilities progress and costs stabilize, Huawei could potentially penetrate international markets, such as those in Southeast Asia.
He added that China’s overarching strategy to attain technological self-sufficiency and eventually export its technologies will persist, irrespective of Nvidia's ability to expand its chip sales in China.
The landscape of China’s AI chip market is shifting dramatically, with Huawei emerging as the leading domestic player, supported by government action and export limitations reshaping the sector. Although Nvidia remains at the forefront of advanced AI technology globally, its foothold in China has considerably eroded. As these two companies continue to innovate in AI, the rivalry between the US and China in the semiconductor field is anticipated to remain fierce.
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