China Racing to Build Its AI Chip Supply Chain Amid US Export Curbs

What’s Fueling the Race?

China is aggressively ramping up efforts to outpace U.S. export controls on AI chips. These restrictions—targeting high-performance semiconductors—are generating urgency in Beijing to shore up its supply chain, from design to packaging.

Where China Excels

China continues to dominate chip assembly, testing, and packaging, a labour-intensive stage of the supply chain where it remains unmatched. Despite U.S.-led efforts to onshore these processes in North America and Mexico, Chinese factories maintain scale and cost efficiency.

U.S. Restrictions & Chinese Countermoves

U.S. export rules now bar shipments of cutting-edge AI chips (16 nm or below, high-memory modules) to China. In response, China is prioritizing domestic AI chip programs—linked to its broader Made in China 2025 initiative, which earmarked $1.7 trillion for high-tech development.

Partners in the U.S. and Beyond

American giants like Nvidia are expanding domestic chip manufacturing. Their multibillion-dollar deals—from Arizona fabs to NVLink Fusion infrastructure—aim to build resilience against global trade restrictions

The Broader Supply Chain Picture

• Nvidia commands ~80–90% of the AI accelerator market.
• TSMC in Taiwan and ASML in the Netherlands hold near-total control over chip fabrication and lithography.

Despite U.S. efforts, China still holds a dominant position in critical minerals like rare earths, essential for chipmaking, using that leverage in global trade negotiations

Market & Geopolitical Stakes

Recent tariffs of up to 55% on Chinese imports—including rare earths—underscore the escalating tech-driven geopolitical standoff. Semiconductor stocks, particularly Nvidia and AMD, have climbed on the prospect of eased restrictions and supply chain rebalancing 

Final Take

China’s strategy: double down on domestic production and key supply chain control, while U.S. tech giants like Nvidia shift production back home. But with critical minerals, workforce infrastructure, and global fab footprint, China isn’t ceding ground easily. This race will define the next decade of AI and semiconductor dominance.