^{Source: Kr Asia}

The U.S. government’s tightening grip on semiconductor exports is beginning to reshape the global AI chip landscape—perhaps not in the way Washington intended.

Last week, the U.S. Commerce Department announced that Nvidia’s H20 AI chips—originally designed to skirt earlier restrictions—would now require an export license to be sold in China. The move effectively halts one of Nvidia’s key products in the world's second-largest economy, forcing Chinese tech giants to turn inward in search of domestic alternatives.

According to industry insiders, this development could be a game-changer for local AI chipmakers like Huawei and Cambricon Technologies, accelerating their path toward becoming viable rivals to Nvidia in the high-stakes global AI race.

$5.5 Billion Blow to Nvidia—China Turns Inward

Nvidia confirmed it has already ceased H20 exports to China and expects a quarterly hit of $5.5 billion due to the new rules. Meanwhile, AMD also faces similar restrictions on its chips bound for China.

That sudden vacuum in the Chinese market is triggering a wave of optimism for local competitors.

“China has been trying to reduce dependency on U.S. tech. This is a major catalyst,” said Brady Wang, associate director at Counterpoint Research. “Huawei, Cambricon, and others are now in a prime position to capture market share.”

Huawei’s Ascend: From Underdog to Contender

Among China’s local players, Huawei is emerging as the front-runner. Its Ascend 910 series, particularly the upgraded Ascend 910C, is gaining traction as a substitute for Nvidia’s restricted GPUs.

“Huawei may be a generation behind in chip architecture, but they’re closing the gap fast in performance,” said Doug O’Laughlin, analyst at SemiAnalysis. “Their hardware is making waves, and the domestic market is beginning to embrace it.”

SemiAnalysis notes that Huawei’s chips are assembled using a hybrid supply chain, involving components from TSMC (Taiwan), Samsung (South Korea), and high-bandwidth memory (HBM) from SK Hynix. Despite being on the U.S. Entity List, Huawei has found innovative ways to continue chip development using foreign tech indirectly.

Cambricon Rides the Wave, Up 400% in 12 Months

Publicly listed Cambricon Technologies, partly state-owned, has also enjoyed a boost. Its shares surged over 10% in just the past five trading days and have skyrocketed more than 400% year-over-year as investors bet big on domestic AI innovation.

Cambricon specializes in GPU and AI accelerator chip designs and is already working with Chinese giants like Alibaba and Baidu for data center deployment.

But Can China Keep Up with Demand?

While the innovation surge is undeniable, supply remains a major bottleneck. TSMC, the world’s most advanced chip foundry, is barred from producing for Huawei due to U.S. export controls. As a result, Chinese firms have turned to SMIC (Semiconductor Manufacturing International Corporation), their largest domestic foundry.

However, SMIC is also under heavy restrictions and lacks access to ASML’s EUV lithography machines—crucial for producing high-end chips. This leaves Chinese companies stuck in a difficult position.

“Huawei is an excellent chip designer,” said Phelix Lee, semiconductor analyst at Morningstar, “but getting enough supply to compete with Nvidia’s scale is another matter.”

Stockpiles, Loopholes, and Strategic Orders

Chinese companies anticipated these controls and reportedly stockpiled over $16 billion worth of Nvidia’s H20 server chips in Q1 of 2025, according to The Information. These pre-purchased inventories give Chinese firms a temporary buffer as they ramp up local production.

“It buys them time,” said Wang from Counterpoint. “But the clock is ticking. Long-term viability depends on how quickly Huawei and others can scale.”

U.S. Controls Under Scrutiny

Despite these efforts, the effectiveness of U.S. export controls is now being questioned.

A Bloomberg investigation revealed that chips fabricated by TSMC for a lesser-known firm named Sophgo closely matched those in Huawei’s Ascend 910B—raising concerns about workaround strategies.

Moreover, Huawei’s chips, though produced at SMIC, still rely on foreign tools and components from Japan, the Netherlands, and South Korea. That’s prompting analysts to argue that sanctions enforcement has major loopholes.

“U.S. measures have done more damage to American firms than to China,” said Paul Triolo, senior VP at DGA Group. “Instead of halting China’s progress, they’ve incentivized domestic innovation and reduced reliance on U.S. tech.”

What’s Next: AI Diffusion Rules on the Horizon

In May 2025, the Biden administration is expected to introduce new “AI diffusion rules,” which could further restrict the export of advanced AI chips and software to China. Analysts predict these will focus not just on hardware, but also on AI model training and deployment capabilities.

If enforced strictly, these could delay China’s AI ambitions—but only temporarily.

“China’s AI chip ecosystem is still maturing,” said O’Laughlin. “But the direction is clear: the more Washington restricts, the harder Beijing pushes to catch up.”

Final Thoughts

While the U.S. aims to choke off China’s access to frontier tech, the unintended consequence may be the rise of a more self-sufficient, innovation-driven semiconductor industry in China. With billions already funneled into homegrown research and development—and a population of 1.4 billion hungry for AI advancement—the battle for chip dominance is far from over.

And for companies like Huawei and Cambricon, the latest U.S. restrictions may be less of a roadblock—and more of a launchpad.

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