Huawei is reportedly advancing its plans to mass-produce the Ascend 910C AI chip in the first quarter of 2025, even as the company grapples with extremely low wafer yields. Simultaneously, China's AI chip development faces mounting barriers under intense scrutiny from the US Department of Commerce.
Market confidence wavers
While Huawei and other Chinese firms position their AI computing chips as globally competitive, these claims face widespread skepticism. Notably, even domestic cloud service providers (CSPs) display limited interest in adopting locally produced AI chips.
Sanctions tighten grip
China's high-performance computing (HPC) chip development encounters escalating challenges, as US Department of Commerce sanctions block access to advanced process technologies. Moreover, even unsanctioned companies face significant operational difficulties, including technical bottlenecks and financial constraints, hampering their ability to sustain operations.
Supply chain disruptions deepen
Advanced process supply chains, spearheaded by TSMC, have started rejecting sensitive orders from Chinese clients, citing difficulties in providing support. These actions underscore the growing constraints on China's AI chip development, further widening the gap with global industry leaders.
Domestic adoption lags
Market reports indicate aggressive promotional efforts for Huawei's Ascend 910C chip. However, domestic Chinese CSPs remain hesitant to adopt it, citing concerns about inconsistent supply levels and uncertain performance reliability.
Government policies encouraging domestic alternatives have achieved minimal success, as manufacturers often make only token purchases. Most continue to depend on downgraded Nvidia processors or imported chips obtained through informal channels, reflecting weak local adoption and dimming growth prospects for the sector.
Technical hurdles persist
Experts highlight that while some Chinese teams remain unsanctioned, developing AI chips poses considerable technical hurdles. Success demands substantial investments in talent and capital, alongside robust platforms to integrate hardware and software for optimal performance.
Huawei continues operations despite restricted access to cutting-edge manufacturing technologies, leveraging support from military resources and a broad civilian base. Its chip development efforts also receive backing from key Chinese semiconductor players, including SMIC and rely on less advanced manufacturing processes.
Startups struggle to survive
Meanwhile, emerging startups face steep challenges, requiring heavy investment in top-tier talent and navigating complex risks to deliver market-ready products before depleting financial resources.
Industry outlook remains uncertain
Sources indicate that supply chains occasionally receive trial production orders for AI chips from Chinese clients. While some teams show promising technical capabilities, few achieve full-scale production, with many constrained by financial challenges that hinder even trial production efforts.
Despite reports of wafer yields as low as 20%, Huawei remains central to China's AI chip ambitions. The company's efforts underscore its pivotal role in sustaining the sector, despite widespread skepticism about its recent AI chip launch.
