China's Homegrown Advantage

While the People’s Republic has traditionally relied on low labor costs and scale to enable competitive pricing, making it the go-to choice for mass-producing consumer goods, apparel, electronics, and more, this new plan is focused on high-end, domestically-produced technology products. Of particular interest in this strategy is all the hardware needed to develop AI. Huang says China’s $50 billion AI chip market is now “effectively closed” to American suppliers.

Data shows China’s tech leaders have narrowed the gap in several areas of AI hardware, particularly in inference, and according to some sources, they may be just a single quarter behind the U.S. in development, with the remaining lag being in software, not silicon. Alibaba, Tencent, and Baidu say that rewriting their Large Language Model training pipelines from Nvidia’s CUDA platform to Huawei’s CANN toolkit will delay new AI development by about three months, not years. Once that’s done, everyday AI workloads can run on domestically produced chips instead of imported Nvidia parts. In this new domestic production plan for cutting-edge technology, Huawei is laying the groundwork for the future by working with the Ascend AI processor while Chinese chipmaker AMEC is reportedly ramping up its local production. The picture that emerges is one of a rapidly accelerating transition. Meanwhile, Chinese companies will continue to build on their dwindling Nvidia stockpiles, where U.S. technology maintains a reliable lead, while shifting the rapidly growing inference workload to Ascend processors and other local chips. At this technological frontier, some challenges are growing and new ones are emerging. China’s growing technological autonomy in the AI ​​processor sector has profound geopolitical implications, turning technological competition into a central element of international relations.

This “chip war” is not just about semiconductors, but represents a struggle for global technological dominance, with far-reaching implications for the global economic balance, given the centrality of chips in modern technological infrastructure. The United States has responded to this challenge with increasingly restrictive measures, such as the expansion of the Entity List by the US Department of Commerce, which aims to limit China’s access to advanced technologies considered crucial to American national security. These restrictions have also had a significant impact on US companies: Huang estimated that the trade policies introduced by the Trump administration have caused Nvidia to lose $15 billion. In the near future, the development of Chinese AI processors is expected to accelerate further. Chinese innovation is also extending beyond traditional processors, with the development of autonomous AI systems such as Manus, designed by Chinese startup Monica, which redefines the concept of an autonomous agent by operating completely independently thanks to a sophisticated multi-agent architecture. This approach represents a significant divergence from the Western strategy: where Silicon Valley focuses on increasingly powerful AI models that require human supervision, China opts for radical autonomy.

From a global market perspective, China’s growing technological autonomy in the AI ​​processor sector could lead to greater market fragmentation, with the formation of distinct and potentially incompatible technological ecosystems. This tech fragmentation scenario could have profound implications for global supply chains and international cooperation in the technological field and have repercussions on economic growth and geopolitical balances. We must ask ourselves whether we are not running towards a new season of polarization that replaces the Iron Curtain with a new Bamboo Curtain. We must recognize that competition between the United States and China could also stimulate innovation at a global level, leading to faster progress in the field of artificial intelligence. The question for our country system, however, is how to take a position that can take maximum advantage of these scenarios by reducing the fragility of the system due to dependence on foreign countries.