China’s Self-Sufficiency in AI Chips Rises Despite US Export Controls

Despite the United States intensifying its export restrictions against China in the semiconductor sector, China’s self-sufficiency rate in advanced products such as domestic artificial intelligence (AI) chips is increasing faster than expected.

Market research firm TrendForce reported on Dec. 12 that China-based Huawei recently launched the AI chip Ascend 910B, establishing a foundation for the AI semiconductor chip ecosystem within China. The Ascend 910B is gaining traction as a substitute for Nvidia’s A100 among Chinese companies struggling to import AI semiconductors due to U.S. sanctions.

Chinese internet giant Baidu placed a large order last month for 1,600 units of the Ascend 910B. Huawei’s partner company iFlytek is using these chips to train AI models.

TrendForce noted, “Due to U.S. sanctions, the four major cloud service providers in China -- Baidu, ByteDance, Alibaba, and Tencent, collectively known as VVAT -- are actively investing in AI chip development.” Baidu, in particular, has developed its own Kunlun AI chip in 2020 and plans to release the Kunlun 3rd Generation by 2024.

TrendForce also mentioned, “Alibaba plans to enhance its independent design capabilities for next-generation Application-Specific Integrated Circuits (ASICs) for Alibaba Cloud’s AI infrastructure by utilizing more internal resources from this year onward. China still holds significant potential to improve and build a complete AI ecosystem.”

However, the market views Huawei’s Ascend 910B as slightly lagging in performance compared to Nvidia’s A800 series and lacking in software ecosystem dominance. TrendForce pointed out that SMIC, the producer of Huawei chips, is still facing issues due to U.S. sanctions on the adoption of Extreme Ultraviolet lithography equipment. Another industry insider analyzed, “China’s advanced semiconductor technology has its limits, and it will likely end up focusing on developing generic products.”

Amid the possibility of intensified U.S. sanctions, advice has emerged for South Korean fabless semiconductor companies to capitalize on this situation and explore the Chinese market. Non-sanctioned advanced products in China, including those needed for AI and autonomous driving, are seeing increased demand, highlighting the need for South Korean fabless companies to expand their market share in China. Indeed, these companies are currently seeking cooperation with Chinese enterprises like Alibaba, Baidu, and Tencent.

Meanwhile, Samsung Electronics and SK hynix are contemplating their exit strategies from China due to ongoing uncertainties and regulations on equipment imports in their Chinese fabs amid U.S.-China tensions. Another industry source said, “Considering the relationship with China, they must be pondering their exit strategies. Especially in advanced memory, where competitors like YMTC and Changxin Memory are facing difficulties due to U.S. regulations, it’s crucial to widen the technology gap.”