US limits Huawei AI chip production to 200K units despite $25B investment

U.S. Commerce officials revealed that China’s Huawei Technologies can produce no more than 200,000 advanced AI chips in 2025, despite the company’s higher demand and ambitious expansion plans. This production cap reflects the ongoing impact of U.S. export controls, even as officials warn that China is rapidly closing the technological gap with American AI chip capabilities.

The big picture: U.S. export restrictions since 2019 have successfully limited Huawei’s AI chip production capacity, but China’s massive investments in semiconductor technology are accelerating its ability to compete with American companies like Nvidia.

What you should know: Huawei’s Ascend 910C chips represent China’s attempt to create a domestic alternative to Nvidia’s dominant AI processors.

• “Our assessment is that Huawei Ascend chip production capacity for 2025 will be at or below 200,000 and we project that most or all of that will be delivered to companies within China,” Jeffrey Kessler, Under Secretary of Commerce for Industry and Security, told lawmakers.
• The production figure falls short of Huawei’s internal demand, highlighting the effectiveness of current export controls while underscoring China’s determination to build indigenous capabilities.

Why officials are concerned: Despite the production limitations, U.S. officials emphasize that China’s technological progress poses a significant long-term challenge to American semiconductor leadership.

• “China is investing huge amounts to increase its AI chip production, as well as the capabilities of the chips that it produces. So, it’s critical for us not to have a false sense of security, to understand that China is catching up quickly,” Kessler warned during the congressional hearing.
• White House officials initially suggested China was only 3-6 months behind the U.S. in AI, though they later clarified this referred to AI models rather than chip hardware, with Chinese AI chips remaining one to two years behind American counterparts.

What they’re saying: Industry leaders acknowledge the technological gap while emphasizing their commitment to closing it through substantial investments.

• Huawei CEO Ren Zhengfei told Chinese state media that the company’s chips were “a generation behind those of U.S. competitors,” but noted that Huawei “invests more than $25 billion annually to improve performance.”
• Kessler assured lawmakers that “export controls have been strong and I’m confident that they will remain strong,” despite recent trade negotiations between the U.S. and China.

Trade implications: The chip restrictions remain separate from broader U.S.-China trade discussions, even as both countries reached a tentative trade truce in London this week.

• The Trump administration has applied additional export controls on semiconductor design software, jet engines for Chinese-made planes, and other goods following China’s continued restrictions on minerals exports.
• Kessler indicated no immediate plans for new semiconductor restrictions but emphasized that “it’s a constantly evolving landscape, and we need to make sure that our controls remain effective.”

The bottom line: Nvidia’s superior chip performance has maintained its market leadership, though export controls have cost the company market share in China as customers seek alternative solutions like Huawei’s domestic offerings.