Go deeper with TH Premium: Taiwan, trade, and tariffs

“If the United States hadn’t forced our country, our companies, and our industry, we wouldn’t have done something like this. But we are also grateful to the US for enabling our country’s semiconductor industry chain to truly grow,” the Huawei Rotating Chairman said. “Now the momentum is very good, and everyone recognizes and supports it.”

Huawei was one of the first major Chinese tech companies to get a blanket ban from the U.S., after it, along with several other Chinese tech companies, was excluded from the North American market in 2019 by the first Trump administration. In 2022, President Joe Biden enacted export controls on AI GPUs, essentially banning China-based firms from acquiring powerful hardware like the Nvidia A100 and H100, as well as AMD Instinct MI250 and MI250X chips.

Both companies eventually created less potent versions of their top hardware to comply with White House regulations. But even then, President Donald Trump enacted a complete export ban during his second term, forcing Nvidia to write-off $5.5 billion in GPUs and costing AMD $800 million in sales. Trump eventually made a 180-degree turn, allowing Chinese companies to acquire H200 chips as long as they can get an export license from the U.S. and that AMD and Nvidia pay a 25% fee to the federal government, but the semiconductor landscape has already changed by then.

While some firms resorted to smuggling and the black market to get their needed chips, the export controls forced the majority of them to look toward domestic alternatives instead. Even though these chips aren’t as powerful or efficient as what Nvidia or AMD offer, it's still better than having no chips at all. This means that local Chinese chip companies are getting more revenue, allowing them to reinvest their earnings into their R&D efforts. Because of this, they have started releasing chips that could somehow compete against what U.S. chipmakers can offer in terms of performance (although they still consume a lot more power).

This development is compounded by Beijing’s push for gaining semiconductor independence. So, even though many Chinese tech companies still want to buy Nvidia chips, likely because of its CUDA platform, the central government ordered these firms to purchase homegrown chips instead. It even went as far as instructing customs officers to block H200 AI chips at the border, and even recently extended the ban to the RTX 5090D V2 gaming GPU.

Nvidia CEO Jensen Huang has always been against AI chip export bans, arguing that keeping American technology readily available across the world is key to extending its influence. Furthermore, he said that cutting Chinese firms from U.S. hardware would only force domestic chipmakers to innovate and build solutions that would compete against what Nvidia has. True enough, Nvidia’s AI chip market share in China has fallen to “zero percent,” compared to the 95% it previously held before the AI chip bans. And even if that’s the case, Chinese firms still continue making frontier AI models and remain competitive against American AI tech companies.

The chip ban did have a negative effect on Chinese AI development, in that it delayed its progress for a few years. But in that short span, many homegrown firms stepped up and took on the challenge of developing alternatives to American tech. Today, we’re starting to see the fruits of their labor and investment, which wouldn’t have accelerated if Chinese tech companies could readily buy American chips.