China is facing a severe shortage of advanced computer chips after tighter U.S. export limits. The shortfall is so deep that Beijing is now stepping in to control how production from Semiconductor Manufacturing International Corporation (SMIC) is shared. Reports say Chinese officials are giving priority to Huawei Technologies, which uses SMIC’s chips to power its AI products.
Meet Your ETF AI Analyst
- Discover how TipRanks' ETF AI Analyst can help you make smarter investment decisions
- Explore ETFs TipRanks' users love and see what insights the ETF AI Analyst reveals about the ones you follow.
The lack of high-end chips is already hurting China’s tech sector. Companies such as DeepSeek have delayed new AI models because of limited supply. In response, the Chinese government has asked state data centers to use domestic chips instead of foreign ones. Huawei’s own Ascend chips are getting a major boost from this policy shift, helping the company expand its reach in cloud and AI computing.
Industry Strain and Local Adjustments
At the same time, Chinese engineers are rewriting code and reshaping their software to run on lower-power chips made at home. Factories are also trying workarounds to keep up. Some are combining several smaller chips to match the output of stronger ones, but this method raises power use and costs. Local governments have started to subsidize energy bills for these heavy systems.
Analysts say SMIC’s production remains limited by older tools, which create a high number of defective chips. Even with rising output, China still relies on U.S. and allied suppliers for the most advanced chipmaking equipment. As a result, production of efficient chips for AI and cloud services continues to lag behind the U.S.
Global and Market Impact
The restrictions have wide market effects. Major U.S. chip companies such as Advanced Micro Devices (AMD), Intel (INTC), Marvell Technology (MRVL), Microchip Technology (MCHP), Micron Technology (MU), Nvidia (NVDA), Qualcomm (QCOM), and Texas Instruments (TXN) all face reduced access to the Chinese market. While these firms benefit from U.S. policy support at home, they also lose one of their biggest customer bases abroad.
Meanwhile, Huawei is expanding its AI chip output. Analysts expect it to ship more than one million chips this year and up to 1.6 million in 2026.
Looking Ahead
For now, U.S. companies keep their edge in chipmaking and design. Yet China’s focus on self-reliance is pushing rapid local development. The global chip race remains intense, with both countries aiming to secure their positions in the growing AI economy.
Using TipRanks’ Comparison Tool, we lined up all the tickers from this piece side by side to gain a broader look at the semiconductor industry.
