• Huawei’s advanced AI processor presents challenge to Nvidia in China
• Western tech companies may reassess supply chain and strategy as China pushes for self-sufficiency

The development of an advanced AI processor by Huawei presents a mounting challenge to Nvidia’s global dominance in the AI chip market, particularly in China. According to recent reports from the Wall Street Journal, the Chinese technology giant is preparing to test its new Ascend 910D chip, which company sources claim could outperform Nvidia’s flagship H100 processor. 

The move comes amid escalating tensions between Washington and Beijing over technology transfer and semiconductor manufacturing capabilities. Industry analysts are monitoring developments as Huawei expects to receive the first batch of its advanced AI processor samples by late May, with testing already underway at select Chinese tech companies. 

The advance follows a trajectory of improvement in Huawei’s chip manufacturing capabilities that has surprised many Western observers. 

The Financial Times reported earlier this year that Huawei has made significant strides in production efficiency, saying the company has “significantly improved the amount of advanced artificial intelligence chips it can produce” and increased the manufacturing yield of its latest AI chips to approximately 40% from just 20% a year ago. 

While this remains below the industry standard of about 60% for similar processors, it represents a critical threshold that has made Huawei’s production line profitable for the first time. The progress is notable given the extensive US export controls designed to limit China’s access to advanced semiconductor technology. 

Nvidia’s China revenue at risk as domestic alternatives emerge

In 2022, the US banned the sale of Nvidia’s H100 chip to Chinese customers before it was even launched, creating a substantial market opportunity for domestic alternatives. The implications for Nvidia are significant. 

According to Grace Shao’s December 2024 analysis, “Deep Dive: Is Huawei like China’s Nvidia plus Google?“, China has historically accounted for “approximately 20-25% of Nvidia’s annual sales.” As Chinese companies adopt domestic alternatives, Nvidia could see a substantial reduction in revenue from what has been one of its most important markets.

Shao says that “As the chip ban took effect, Chinese AI companies began buying and hoarding inventory. However, Huawei’s launch of the Ascend 910B and then 910C completely disrupted the ecosystem in China and emerged as the most viable alternative to Nvidia’s sought-after A100 chip.” The upcoming 910D model could accelerate any transition.

For Western observers, Huawei’s resilience in the face of trade restrictions has been remarkable. The company’s surprise launch of the Mate 60 smartphone in 2023, featuring a domestically-produced processor, demonstrated its ability to innovate despite export controls. 

The timing of the launch during then-Commerce Secretary Gina Raimondo’s visit to Beijing was interpreted as a deliberate show of technological independence. Beyond corporate competition, the developments reflect China’s broader ambition to achieve semiconductor self-sufficiency. 

As reported by the Financial Times, Beijing has been providing “state support, with Beijing urging local tech companies to buy more of Huawei’s AI chips and shift away from $3.3tn US chipmaker Nvidia.”

Technical hurdles and geopolitical implications

However, technical challenges remain. According to the Financial Times, “AI companies and Huawei researchers have also said that the Ascend 910B did not work well for large-scale model training, because of problems with inter-chip connectivity and memory issues.” 

Huawei has been working to address these limitations in its newer models. The software ecosystem presents another significant hurdle: Nvidia’s CUDA platform has established itself as the industry standard, with one person close to Huawei’s business telling the Financial Times that Nvidia’s software is “known for being easier to use and capable of faster data processing than Huawei’s offerings.”

Production capacity also remains constrained. Despite plans to produce 100,000 910C processors and 300,000 910B chips this year, according to the Financial Times, Huawei reportedly prioritises large state-run cloud providers like China Mobile, leaving other potential customers struggling to secure supplies.

Nevertheless, Huawei’s integrated approach to technology development gives it unique advantages. As Shao says, “Huawei has created a comprehensive ecosystem and long invested in the cloud, hardware, and various touch points with enterprises and consumers (far before AI became hot).”

The geopolitical significance of these developments extends beyond corporate competition. Huawei founder Ren Zhengfei recently told Chinese President Xi Jinping that worries about a “lack of core and soul” had eased, adding “I firmly believe a greater China will rise faster,” according to the People’s Daily as reported by the Financial Times. 

The reference to semiconductors (the “core”) and operating systems (the “soul”) underscores the national importance China attaches to technological self-sufficiency. Huawei’s AI processor development signals an acceleration of technological decoupling between China and Western markets. 

While Nvidia will likely maintain its leadership position globally (particularly in North America and Europe), the emergence of viable alternatives in China suggests a fragmentation of the AI hardware landscape along geopolitical lines.

The commercial success of the Ascend 910D, as it moves from testing to production, will be an indicator of China’s progress toward technological independence. If Huawei can deliver on its performance claims and address previous hardware limitations, Western companies may need to reassess their competitive strategies and supply chain dependencies in what increasingly appears to be a bifurcated global technology ecosystem.