China’s tech giants switch to domestic chips amid US trade pressure

Chinese technological companies have been forced to shift their development of artificial intelligence (AI) to homegrown chips amid worsening US-China trade tensions.

Donald Trump’s administration moved to restrict sales of a popular chip, Nvidia’s H20, forcing companies like Alibaba, Tencent, and Baidu to test alternative options to meet growing AI demand at home.

The existing stockpile of Nvidia’s H20 will only last Chinese companies until roughly early next year, according to the Financial Times. In turn, new chip orders can take up to six months to be shipped - and that’s only if Nvidia can present a processor that’s compliant with Trump’s strict export rules.

Nvidia is expected to start producing compliant chips for Chinese export in early July, although they will likely not have high-bandwidth memory (HBM), which is critical for processing large volumes of data. Details about the potential processors also remain unclear.

Nvidia chief Jensen Huang commented on the situation during an analyst earnings call on Wednesday, saying: “We don’t have anything at the moment.”

And yet, it seems like Chinese tech magnates are feeling confident in their ability to deal with the issue on their own.

“We believe that over time, domestically developed self-sufficient chips, along with increasingly efficient homegrown software stacks, will jointly form a strong foundation for long-term innovation in China’s AI ecosystem,” Shen Dou, head of Baidu’s AI cloud group, said, adding that the company has a variety of chip options to consider.

Alibaba chief Eddie Wu also said that the company is exploring “diversified solutions to meet rising customer demand.”

Although strict, it seems like Trump’s export controls might have led to a surge in independent innovation in domestic high-end AI chips, such as Huawei’s Ascend chip series, according to the China Institutes of Contemporary International Relations.

“Domestic entities in China have already begun large-scale procurement and use of Ascend chips.”

Although many more Chinese companies must be considering the use of Huawei chips, they remained largely under the radar after Washington warned that using them anywhere in the world could lead to criminal penalties.

On top of that, companies could be dealing with significant costs when migrating their systems to the new chips. The process is very time-consuming and will possibly require extensive support from Huawei engineers.

Other Chinese chipmakers are also being considered by leading tech giants, with some companies, like Baidu and Alibaba, working on their own processors.

China’s ambitions, however, are not just about developing models – they’re about owning the computer stack, both on Earth and increasingly in orbit, with its goal to push AI infrastructure into space.