Huawei Challenges Nvidia's Dominance in China's AI Chip Market
US export controls have created an opening for domestic Chinese chipmakers, with Huawei emerging as a leading competitor to Nvidia in its home market.
Chinese technology giant Huawei is increasingly challenging U.S. chipmaker Nvidia's dominance in China's artificial intelligence hardware market, a shift accelerated by U.S. export controls. Once holding a near-monopoly, Nvidia's market share in China for advanced AI chips is projected to decline significantly as domestic competitors, led by Huawei, gain ground.
Nvidia CEO Jensen Huang has acknowledged the changing landscape, stating that Chinese competitors have become "giants" in the advanced AI chips market. Prior to U.S. export controls imposed in 2019, Nvidia held approximately 95% of the Chinese AI chip market. However, a report by Bernstein estimates Nvidia's market share could shrink to around 8% this year, while Huawei's could rise to approximately 50%.
Domestic Push and Export Controls
The U.S. government's restrictions on exporting advanced technology to China, initially aimed at national security, have inadvertently spurred China's drive for technological self-sufficiency. While Washington sought to limit China's access to cutting-edge chipmaking technology, Chinese firms have intensified efforts to develop their own advanced chips and manufacturing capabilities.
Nvidia, along with rival AMD, dominates the global AI chip sector. However, Huawei has made significant inroads within China, supported by local AI companies like DeepSeek, which are pushing for improved chip performance and cost-effectiveness. Huawei's Ascend 950 series chips are considered by industry analysts to be roughly comparable to Nvidia's H200, one of its most powerful products.
"China now believes in its own self-sufficiency and supply capabilities," said He Hui, director of semiconductor research at Omdia. Huawei has also announced the development of powerful AI computing clusters, relying on domestically produced semiconductors.
Evolving Market Dynamics
Despite the growth of Chinese competitors, demand for AI chips in China continues to exceed supply. Reports of smuggling Nvidia chips into China illustrate the persistent appetite for the company's technology. Nvidia designs its advanced chips, which are manufactured using equipment from Dutch company ASML and produced by Taiwan's TSMC. China is barred from acquiring Nvidia's most powerful chips and ASML's advanced lithography machines.
While Huawei's chips are seen as gaining traction, some analysts note that cutting-edge Chinese AI technologies, such as those developed by DeepSeek, still rely on Nvidia chips for training. Chinese universities and major tech companies also continue to seek high-performance chips like the H200 for research and development.
Nvidia has attempted to comply with U.S. restrictions by developing less powerful versions of its chips, such as the H20, for the Chinese market. However, sales of even these modified chips have been declining. The company has stated it has not sold its H200 chips in China and is uncertain about future import approvals.
Global Ambitions
Huawei, already a major player in telecommunications equipment, is also expanding its presence in the global chip market. While China's domestic production capacity for advanced chips is increasing, it has yet to fully meet demand. As manufacturing capacity grows and pricing becomes more competitive, Chinese chips could potentially gain market share in regions like Southeast Asia. According to Brady Wang, a semiconductor analyst at Counterpoint Research, "China’s strategy of pursuing technological self-sufficiency — and eventually exporting its technologies — is unlikely to change regardless of whether Nvidia can sell its chips in China."