An employee works at a chip testing workshop in Wuhan, Hubei province, in January 2024. （XUE TING/FOR CHINA DAILY）
Washington's restrictions on high-tech exports, including advanced chips and tariffs, are causing significant losses for US companies, while simultaneously accelerating breakthrough innovations in China's technology sector, industry leaders and experts said.
Executives across US and Chinese tech firms pointed to the unintended consequences of the policies, while they called for a more rational approach to ease trade tensions and pursue win-win cooperation for both sides.
Jensen Huang, CEO of US semiconductor firm Nvidia, said the US government's export controls on artificial intelligence chips to China were "a failure", at a tech forum in late May.
"All in all, the export control was a failure. The fundamental assumptions that led to the AI diffusion rule in the beginning, have been proven to be fundamentally flawed," Huang said.
Nvidia's market share in China, Huang said, has plunged to 50 percent now from 95 percent at the start of former US president Joe Biden's administration.
Meanwhile, in April, Nvidia noted a $5.5 billion write-down to its inventory, after the US government issued new regulations that asked companies to get a license to sell their AI chips to China.
Over the past year, Washington's ban on the sale of advanced AI chips to China has compelled tech companies to pivot sharply toward domestic semiconductor designers like Huawei Technologies Co Ltd, while also spurring Beijing to invest heavily to develop a supply chain that doesn't rely on manufacturers outside the country.
"The local companies are very, very talented and very determined, and the export control gave them the spirit, the energy, and the government support to accelerate their development," Huang said.
Huang told Bloomberg in a separate interview recently that Huawei's AI chip technology, including the CloudMatrix cluster and Ascend 910C chip, now competes with Nvidia's high-end offerings such as Grace Blackwell and H200.
Jack Gold, principal analyst at consultancy J.Gold Associates, said: "What's actually happening is that the US government right now is handing China a big win as it tries to get their own chip business going."
Once Chinese companies are competitive, they'll start selling around the world and people will buy their chips, Gold added.
Against the backdrop of Washington's wider tech restrictions, Chinese companies are making steady progress in core technologies such as chips and operating systems.
In the shadow of US export restrictions on Nvidia chips, Chinese tech companies are expanding their cooperation with Huawei to use the latter's AI chips for training large language models.
iFlytek, for instance, said that its proprietary deep reasoning model Spark X1 is the industry's only large language model trained entirely on China's domestic computational infrastructure.
iFlytek said it is partnering with Huawei's AI chip research team to create better domestic computing solutions for AI training, and that Spark X1 demonstrates significant improvements across general AI tasks, including mathematics, coding, logical reasoning, text generation, language understanding and knowledge-based Q&A.
Consumers check out Huawei's foldable PC at a Huawei smart life store in Chongqing on May 23. （SUN KAIFANG/FOR CHINA DAILY）
Semiconductor research company ICwise said in a report that Washington's tariffs could accelerate China's shift toward non-US chips, squeezing US players.
"China's mature-node semiconductors, meaning chip-processing technology using 28 nanometers and above, are already competing with US rivals in automotive micro control units, power devices, memory chips and mid-to-low-end chips. While these products primarily target cost-sensitive markets, tariffs could amplify their price advantages, hastening the displacement of US components," ICwise added.
Meanwhile, China's semiconductor exports to the US are minimal, insulating the sector from immediate tariff shocks. This structural resilience allows Chinese firms to focus on import substitution rather than scrambling to mitigate export losses, ICwise said.
Xiang Ligang, director-general of the Zhongguancun Modern Information Consumer Application Industry Technology Alliance, a telecom industry association, said: "China's semiconductor industry, tempered by years of US sanctions, now boasts a near-complete supply chain.
"Previous restrictions ironically catalyzed China's progress in chips. The latest tariffs may similarly drive upgrades, particularly in high-value upstream segments like lithography machines and specialty chemicals. While short-term disruptions are inevitable, the sector's strategic focus could transform external pressure into a catalyst for innovation," Xiang added.
Ren Zhengfei, founder of Huawei, said there is no need for the company to worry about chip challenges, as using innovative methods can produce computational results that are comparable to the most advanced levels in the world, despite the US government restrictions.
Ren made the comments in an interview with People's Daily.
In the face of external blockades and suppression: "There is no need to think too much about difficulties. Just take action and move forward step by step," Ren said.
He said the software-related challenges that China faces are manageable. "Software is built on mathematical symbols, codes and layers of cutting-edge algorithms. There are no shackles here," he said.
"The real challenge lies in our education system and talent development. In the future, China will have hundreds, or even thousands, of operating systems supporting its progress across industry, agriculture, healthcare and beyond," he added.
Ren underscored the importance of theoretical research. "Without fundamental research, we lack roots. Even if the leaves appear lush and thriving, a single gust of wind can make them fall," he said.
In May, Huawei officially unveiled personal computers powered by its self-developed operating system, challenging Microsoft's Windows and Apple's macOS in the desk operating system sector.
For decades, the global PC operating system market has been dominated by Microsoft's Windows and Apple's macOS, while domestic alternatives have largely relied on Linux-based modifications. Huawei wants to break this paradigm by developing its own PC operating system — HarmonyOS.
Huawei Executive Director Yu Chengdong said the company remains committed to forging the "difficult yet right path" by advancing its self-developed HarmonyOS.
"Every line of code you write is rewriting the history of China's software industry," Yu said, adding that HarmonyOS integrates hardware, software, chips and cloud capabilities to deliver breakthroughs in AI-powered features and cross-device collaboration.
Meanwhile, other Chinese companies such as Xiaomi Corp are also ramping up research and development spending to bolster their semiconductor prowess. Xiaomi, for example, unveiled its 3-nanometer XRing O1 chip for smartphones in May.
The new chip, a result of over four years of intensive R&D efforts, will position Xiaomi to compete directly with leading foreign chip designers, though it remains to be seen how the actual products will perform on handsets, experts said.
Lei Jun, chairman and CEO of Xiaomi, said the company will invest 200 billion yuan ($27.8 billion) in R&D from 2026 to 2030.
Lei said Xiaomi now has a 2,500-strong semiconductor R&D team driving innovation, enforcing its position among China's top three chip design firms in both R&D spending and team scale.
XRing O1 is Xiaomi's dramatic comeback in the high-stakes arena of advanced chip design after an 11-year journey marred by setbacks and reinvention. In 2014, Xiaomi launched its inaugural semiconductor project — code-named Surge — targeting mid- to-high-end mobile chips, Lei said.
In 2017, Xiaomi debuted its Surge S1 System-on-Chip for smartphones, but commercial challenges forced a strategic retreat from large-scale chip development. After the setback, Xiaomi shifted focus to "small chips", releasing over a dozen specialized semiconductors for fast charging, imaging, battery management and 5G connectivity, while quietly honing R&D expertise.
Concurrent with its electric vehicle venture, Xiaomi secretly greenlit the XRing project in 2021 to reboot flagship SoC development, vowing to conquer cutting-edge process nodes.
"If Xiaomi aims to become a world-class hardcore technology company, mastering chip tech is a summit we must conquer. This is a battle we cannot avoid," Lei added.
