China warns AI users they are ‘traitors’ if they resist domestic chips

Huawei expects to ship 1.5 million AI chips this year, doubling 2025 volume

Chinese Vice Premier Ding Xuexiang set up a committee in early 2023 drawing on the country’s best companies and labs to form specialized teams to master different elements of the chip supply chain, The Wall Street Journal reported. He applied the same all-out approach China used to produce its first atomic bombs, hydrogen bombs and satellites in the 1960s, according to the Journal. Ding delivered a blunt warning to China’s largest AI users that anyone who resisted employing domestic chips was a traitor, according to people familiar with the message.

Huawei, the leading domestic chip developer, presented a plan to Ding last summer for rivaling Nvidia and said China could become self-sufficient in some critical areas of AI within three years. Dependence on foreign AI chips has dropped from 90% in 2021 to less than 60% in 2025, according to Morgan Stanley data cited by the Journal, and could fall to 25% over the next half-decade. Huawei’s deputy chairman Eric Xu said, “If the U.S. hadn’t forced our country, our company and our industry into a corner, we would never have done something like this.”

Still, the technology gap remains substantial. Nvidia’s top AI chip boasts around four times the computing power of Huawei’s best offering, the Journal reported. China’s AI computing power stood at about 14% of the U.S. in 2025, according to Bernstein estimates. Huawei expects to ship around 1.5 million AI chips this year, roughly doubling its 2025 volume, and aims to produce 750,000 of its latest Ascend 950 chips, according to people familiar with the matter. China’s broader chip-making ambitions include a target of producing more than 500,000 advanced wafers a month by 2030, up from roughly 30,000 last year, the people said.

The push has been fueled by state investment, including a roughly $48 billion fund raised in 2024 for the semiconductor industry, and policy changes such as scrapping state salary caps at equipment maker Naura Technology to attract talent. The government also pressured Chinese AI users to pivot away from Nvidia. After an initial period of allowing sales of a downgraded H20 chip, Beijing privately told companies to halt purchases and later required commitments to use more domestic chips, the Journal reported. That squeeze boosted demand for domestic chips but also caused a supply crunch and a boom in gray-market smuggling, where prices for illegal Nvidia chips have more than doubled over the past six months, according to Chinese distributors.

The capacity shortfall is already affecting Chinese AI developers. Moonshot AI, a Beijing startup, unveiled a new model Kimi K3 this month that closely trails top U.S. systems, but it had to suspend sign-ups for premium services after two days because it lacked sufficient computing capacity, the Journal reported. Meituan, a tech company, recently released an AI model that it said was comparable to Google’s flagship and was trained solely with Chinese chips.

Because U.S. export controls cut off China’s access to the most advanced chip-making equipment, Huawei has pursued a strategy it calls “diaohua,” or fine-carving, using older deep-ultraviolet lithography machines and alternative designs to squeeze performance from older technology. The Journal reviewed some 200 patents published over the past two years by Huawei and its partners that illustrate efforts to reduce errors and boost yield through production workarounds and software, sometimes using AI. Huawei also aims to bundle hundreds of thousands of chips into massive clusters that function as a single computer, leveraging its networking expertise to mimic cutting-edge silicon. The company has outlined a method for stacking circuits to pack more computing power into a single chip footprint, aiming to develop chips by 2031 that could outperform any semiconductor currently in production.

Several analysts expressed caution about China’s prospects of closing the gap. Brookings Institution fellow Kyle Chan said, “It’s trying to catch up with a bullet train.” Bernstein analyst Qingyuan Lin said the strategy is “more about finding a way to prevent the gap from widening quickly” than overtaking the U.S. Chris Miller, a historian of technology at Tufts University, said chip manufacturing is “orders and orders of magnitude more complex than almost every other type of manufacturing.” Ray Wang of SemiAnalysis estimated that China might eventually match the extreme-ultraviolet lithography technology it needs, but that could take at least a decade and as many as 50 years.

The Journal reported that the outcome of China’s chip campaign has global ramifications, noting that if the U.S. controls the top technology, the rest of the world will depend on Washington’s favor to make progress in fields such as medicine, robotics, autonomous driving and military strategy.