Chinese municipalities target 70% AI chip self-sufficiency by 2027, with Beijing aiming for 100%. Despite Nvidia’s 80% market dominance, China develops alternatives through Huawei’s Ascend series and other domestic producers. The US now requires a 15% cut of sales from Nvidia and AMD for Chinese market access. While Beijing warns against H20 usage and encourages domestic adoption, Chinese tech companies maintain strong Nvidia demand. Market indicators show positive response, with ChiNext Index gaining 26% since May’s tariff truce, led by supply chain companies like Victory Giant Technology.
According to a report from Nikkei, leading Chinese municipalities have initiatives to achieve 70% artificial intelligence chip self-sufficiency by 2027, seeking to restructure a national supply chain where Nvidia maintains dominance.
The Shanghai municipal government plans call for China to exercise independent control over 70% of the semiconductors utilized by data centers. This ratio encompasses semiconductors that Chinese companies design, manufacture, or both.
The Beijing municipality, which houses numerous central government agencies, has adopted plans to increase its self-sufficiency ratio to 100% by 2027.
Guiyang, an inland city, requests that approximately 90% of semiconductors in data centers under construction originate from Chinese sources. Guiyang hosts concentrated data center operations, including facilities that Apple operates.
Municipal initiatives reflect central government policy directions.
President Xi Jinping stated during a Politburo AI study session in April: “China must leverage the new system for mobilizing nationwide resources, achieving self-reliance and strength as new-generation AI technologies evolve rapidly.”
Xi indicated that government support will target AI semiconductor development and production.
China increasingly utilizes AI services from domestic developers, including DeepSeek, Alibaba Group Holding, and Baidu. However, Nvidia dependency persists in semiconductor procurement. Shanxi Securities reports indicate Nvidia held 80% market share in China’s AI chip sector at 2024’s start.
Huawei Technologies developed its Ascend 910-series AI chips as Chinese alternatives. The current flagship 910B delivers approximately 85% of Nvidia’s H20 computing power, according to Chinese media analysis. The H20 targets Chinese markets specifically.
Local media reports that next-generation 920 chips will provide enhanced performance to replace H20 functionality.
Companies, including Semiconductor Manufacturing International Corp. (SMIC), manufacture Huawei-designed Ascend chips. SMIC operates as China’s primary foundry, backed by government-affiliated funds. Developers advance miniaturization techniques.
Beyond Huawei, Cambricon Technologies and Baidu’s subsidiary, Kunlun, have accelerate their AI chip development programs.
Shanxi Securities projects that Nvidia’s Chinese market share will decline to 50%–60% within five years, while Chinese competitors will grow to a combined market presence of 40%–50%.
State-owned telecom operator China Mobile procured 19.1 billion yuan ($2.65 billion) worth of AI servers between 2024 and 2025, exclusively using Huawei chips, according to China Securities.
China is encouraging major private technology companies to adopt domestically produced chips. ByteDance, TikTok’s Chinese parent company, reportedly is considering Huawei product adoption.
Bloomberg reports indicate Chinese authorities requested domestic companies avoid Nvidia’s H20, particularly urging avoidance in government or national security applications.
A local government source noted: “Public sector and other organizations show accelerating trends toward Chinese company products, even when performance proves inferior.”
Breaking US supply dependency presents challenges. The Financial Times reported DeepSeek AI model development delays. Sources cite delays from Huawei product usage, encouraged by Chinese authorities.
Meanwhile, China requested that Washington ease semiconductor restrictions. July 2024 saw US approval for H20 export resumption to China.
Many analysts expect China to maintain a balance between Nvidia and domestic chips temporarily.
A semiconductor industry expert explained: “China aims to absorb cutting-edge US technology through continued Nvidia imports in areas unrelated to economic security, while simultaneously improving AI computing power capabilities.”
And recently, the US government has stated that Nvidia and AMD may resume sales of tiered special Chinese AI GPUs (e.g., H20) if the companies agree to pay the US government a 15% cut on the sales.
Despite the Chinese government’s public warning regarding alleged security concerns with Nvidia’s H20, a downgraded AI chip that Nvidia specifically designed for Chinese markets, local technology companies maintain strong demand, according to Nikkei Asia reporters Cissy Zhou, Yifan Yu, and Lauly Li.
Subsequently, Beijing summoned Chinese technology companies, including ByteDance, Alibaba, Tencent, and Baidu, to discuss their Nvidia chip usage, while encouraging greater adoption of domestic alternatives, sources confirm.
Nvidia benefits from Beijing’s approach of providing “advice” rather than implementing outright bans on company products. Chinese technology companies demonstrate sustained demand for H20 and forthcoming Blackwell chips, industry sources indicate.
The ChiNext Index, which tracks numerous Shenzhen-listed companies connected to global supply chains, gained nearly 26% since Washington and Beijing established a tariff truce in Geneva on May 12. This performance exceeds the 9% increase in the broader CSI 300 Index benchmark and the 10.5% rise in Hong Kong’s Hang Seng Index during the same time frame. The truce received a 90-day extension on August 12.
China’s high-technology supply chain generates significant winners from this risk-positive investor sentiment. Victory Giant Technology, which supplies printed circuit boards for Nvidia’s AI servers, increased more than 450% this year, with most gains occurring within the past three months, establishing it as the ChiNext Index’s primary performer.
Hiroya Yamauchi, China and Asia market specialist at Nikko Asset Management, observes: “Chinese investors respond favorably to reduced external pressure conditions.”
And most recently, rumors are suggesting Nvidia is working on its next-generation AI GPU, the B30.
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