China’s ongoing industrial policies, including de-Americanization and large-scale state investment, are ensuring the dominance of the traditional chip market while gradually reducing dependence on American technology.
Chinese companies still rely on American AI chips, but they are rapidly developing competitive alternatives that pose a challenge to the U.S. and NVIDIA.
The long-term goal of China’s industrial policy is to help the semiconductor and chip industry break free from dependence on American technology and avoid risks associated with export controls.
In 2022, China initiated the de-Americanization policy, requiring the replacement of foreign software in IT systems by 2027. Some Chinese chip companies are reducing their reliance on foreign technology supply chains and accelerating localization.
To support the development of the domestic semiconductor and chip industry, the National Integrated Circuit Industry Investment Fund, established in 2014, has completed three rounds of financing by May 2024, accumulating approximately $95 billion to support the construction of China’s chip supply chain.
China is gradually dominating the global traditional chip market, with an expected market share of 39% by 2027, and the new production capacity in 2024 has already exceeded that of all other regions combined.
Following the U.S. export controls implemented in April, NVIDIA announced in mid-July that the U.S. government allowed the sale of H20 to China.
U.S. Secretary of Commerce Gina Raimondo pointed out that this move aims to keep Chinese developers dependent on the American technology system.
NVIDIA executives stated that rather than letting customers seek Chinese alternatives, it is better to continue charging high fees.
Chinese local chips are rapidly capturing the market.
However, China’s industrial policy has achieved results in the traditional chip field, and the Chinese government is promoting de-Americanization in several key technology areas.
China requires major telecommunications operators to gradually eliminate foreign chips used in networks by 2027, directly impacting Intel and AMD.
China’s policies have led to a significant decline in revenue for both companies in the Chinese market, with Intel’s revenue dropping from $20.03 billion in 2019 to $14.85 billion in 2023, and AMD’s from $5.21 billion to $3.42 billion.
China is Intel’s largest market, accounting for 27% of its revenue in 2023, while AMD’s high-end AI chip sales are also restricted, with its revenue share in China dropping from 22% in 2022 to 15% in 2023.
Companies like Huawei are gradually increasing their market share in the telecommunications sector with the Kunpeng 920, which utilizes 7nm technology. In October 2023, nearly half of the AI servers purchased by China Telecom used Huawei chips.
Huawei’s revenue doubled from 42.2 billion yuan in 2022 to 104.4 billion yuan in 2023, but is expected to slightly decline to 62.6 billion yuan in 2024.
However, some government-funded investment projects have failed to produce chips, reflecting ongoing risks in China’s industry.
Between 2019 and 2022, six large manufacturing projects, including Wuhan Hongxin and Jinan Quanchip, ended in failure.
China’s advanced chips still rely on imports.
While China dominates the traditional chip field, most of the demand for advanced chips still relies on imports.
As of early 2024, about 80% of high-end AI chips for Chinese cloud computing companies come from NVIDIA, which is expected to drop to 50-60% in the next five years.
For many years, China has contributed about 20% of NVIDIA’s sales revenue, with sales to China in 2023 amounting to approximately $1 billion.
However, NVIDIA’s revenue from China and Hong Kong has decreased from 21% in October 2023 to 12% in October 2024.
In August 2024, Huawei tested the Ascend 910C, claiming it is comparable to NVIDIA’s 4nm AI chip H100. In mid-April 2025, Huawei announced the production of Ascend 920 to replace NVIDIA’s H20.
In July 2025, the U.S. resumed exports of H20 to China, preventing NVIDIA from incurring losses of up to $5.5 billion, and AMD was also allowed to sell MI308.
These developments are a victory for China and are part of the U.S.-China rare earth magnet trade agreement, but Raimondo stated that the U.S. still does not sell “our best products” to China.
However, the Cyberspace Administration of China subsequently interviewed regarding the tracking and positioning function of H20, pointing out security issues.
After achieving success in the traditional chip market, China is further advancing its de-Americanization policy while utilizing American components to enhance advanced chip technology.
If domestic companies successfully mass-produce advanced AI chips, American companies may be excluded from key global markets. China’s industrial policy may become the core key to the success of the semiconductor and chip industry.