China is intensifying efforts to reduce reliance on foreign technology by targeting at least 70% self-sufficiency in AI chips by 2027. The move comes as U.S. company Nvidia, which dominated around 80% of China’s AI chip market in early 2024, faces increasing competition from domestic players.
Guiyang Takes Lead with Domestic Chip Mandate
Guiyang, a key inland hub known for its large concentration of data centers — including those used by Apple — has introduced a new requirement: about 90% of chips used in upcoming facilities must be locally made. This policy highlights China’s growing determination to establish control over its AI infrastructure.
Huawei, Baidu, and Cambricon Drive Local Innovation
Local tech giants such as DeepSeek, Alibaba, Baidu, and Huawei are expanding their AI capabilities with homegrown processors. Huawei’s Ascend 910B chip, delivering nearly 85% of the performance of Nvidia’s H20, has emerged as a strong alternative. The upcoming Ascend 920 series, expected to be manufactured by Semiconductor Manufacturing International Corp (SMIC), promises even greater performance for China’s AI ecosystem.
Shifting Market Share in China’s AI Chip Industry
According to Shanxi Securities, Nvidia’s dominance in China could drop significantly within the next five years. The company projects Nvidia’s market share may decline to 50%–60% by 2029, as local semiconductor leaders including Huawei, Cambricon Technologies, and Baidu’s Kunlun chips grow their combined market share to around 40%–50%. This expansion will be fueled by progress in chip miniaturization, advanced design, and government-backed investments in semiconductor innovation.
China’s Push Towards Strategic Tech Independence
This push for self-sufficiency reflects a broader strategy by China to secure its technological future, especially in sensitive fields like artificial intelligence, data centers, and computing power. By strengthening domestic chip development, China aims to reduce vulnerability to U.S. export restrictions while boosting its position in the global semiconductor race.
With supportive policies, rapid innovation, and investment in chip manufacturing, China is moving closer to its goal of becoming a self-reliant AI powerhouse by 2027.
Beijing Pushes Back on Nvidia’s China-Only AI Chip
China has moved to limit sales of Nvidia’s H20 processor, a chip designed specifically for the Chinese market, after U.S. commerce secretary Howard Lutnick made comments on chip exports that officials in Beijing considered disrespectful. Regulators such as the Cyberspace Administration of China (CAC) and the National Development and Reform Commission (NDRC) have quietly advised major tech players, including ByteDance and Alibaba, to avoid placing new H20 orders. Their reasoning ties both to national security concerns and the push for greater self-reliance in advanced technology.
The move comes just weeks after Nvidia CEO Jensen Huang’s trip to Beijing, where he emphasized Nvidia’s commitment to China and signaled enough demand to restart H20 production with TSMC. Still, some Chinese companies are holding back, waiting to see if Nvidia’s next-generation Blackwell chip will be made available. Meanwhile, certain policymakers are urging a more sweeping policy—calling for a complete shift away from foreign chips in AI inference, which remains the largest driver of demand in the industry.
Nvidia Asks Foxconn to Pause Work on H20 Chip
Update: August 22, 2025
Nvidia has asked its supplier Foxconn to stop work on the H20 AI chip, sources told Reuters. The H20 is the most advanced chip that Nvidia is currently allowed to sell in China under U.S. trade rules. Foxconn, also known as Hon Hai Precision Industry, handles backend processing for the chip.
In a brief statement, Nvidia said it regularly adjusts its supply chain in response to market conditions but did not share any specific reasons behind the decision. The pause comes as the company continues to navigate restrictions and changing demand in the Chinese market.
China’s Semiconductor Spending to Surge, Says Goldman Sachs
Update: August 28, 2025
Goldman Sachs expects China’s investment in semiconductors to rise steadily over the next few years. In a new research note, the firm projected that China’s annual chip-making capital expenditure could reach $43–46 billion by 2030, up from about $41 billion in 2024. The analysts highlighted that future spending will increasingly go into memory chips and advanced-node technologies, as Chinese companies push to strengthen their position in global markets. To meet growing demand, China may need an estimated 2,261 additional lithography machines, which are essential for chip production. Despite rapid progress, domestic firms currently account for only 7% of the global semiconductor market, leaving significant room for growth in the local supply chain.
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