US-China Tech Rivalry: The Chip Shortage Hurting AI Ambitions

The ongoing economic conflict between the U.S. and China has intensified confrontations in the AI accelerator market. Recent reports indicate that the chip shortage in the Chinese market has become so severe that the state has intervened. The Chinese government’s control over chip distribution is now prioritizing domestic solutions, notably Huawei Ascend chips. This move is part of a broader strategy to bolster the local technology sector amid increasing international pressures.

This issue is particularly critical in Chinese public cloud projects and state-funded data centers, which are now officially prohibited from using foreign chips. Chinese developers are required to quickly rewrite code and restructure workloads to function on domestic accelerators such as Huawei Ascend 910B and 910C. Despite these efforts, there are concerns about the energy efficiency of these systems. Huawei’s most advanced chips require three to four times more energy compared to Nvidia accelerators to achieve similar performance levels.

Leading companies, including Alibaba and Baidu, have initiated the shift of workloads to their proprietary accelerators. However, most enterprises lack such solutions. Alternative strategies include training models overseas through subsidiaries or relying on used or refurbished Nvidia accelerators manufactured before the latest U.S. regulations came into effect. The grey market has also become a source for acquiring necessary chips.

Additional measures from the Chinese government include increased investment in domestic semiconductor industries, seeking autonomy from U.S.-controlled supply chains. Meanwhile, U.S. companies are adapting by forming alliances that can circumvent export restrictions and maintain their market positions in China while complying with the evolving regulatory landscape.