America’s semiconductor restrictions are biting in China

Shortages of advanced AI chips are so acute that Beijing is intervening and tech companies are resorting to workarounds

- Lingling Wei, Amrith Ramkumar & Robbie Whelan

Beijing is taking an aggressive approach to help its technology giants squeezed by America’s chip restrictions.

Shortages of advanced semiconductors are so acute that the government has begun intervening in how the output of China’s largest contract chip maker, Semiconductor Manufacturing International, is distributed, according to people familiar with the matter. Chinese authorities are trying to give priority to the needs of tech conglomerate and national champion Huawei Technologies, which uses SMIC technology to make artificial-intelligence chips, the people said.

Chinese tech companies are fighting to secure limited domestic capacity and, in some cases, labs are smuggling coveted supplies of high-performance Nvidia chips.

Buzzy AI upstart DeepSeek had to delay the release of its latest model earlier this year because of a shortage of chips, people familiar with its operations said. And companies such as Huawei are cobbling together workarounds, including by bundling thousands of chips into huge, power-hungry systems that can help train AI models, people familiar with their moves said.

The lengths to which Chinese companies and Beijing are going in the face of recent U.S. export restrictions are a sign of the stakes in the race for AI supremacy.

Top U.S. officials are divided on whether to continue limiting China’s access to chips and semiconductor manufacturing equipment, or allow more sales. Their goal is to prevent chips made by Huawei from becoming more advanced and in demand around the world. The White House's decision has ramifications at home—for companies such as Nvidia— and abroad.

President Trump elected not to discuss the potential export of a new Nvidia chip to China in a recent meeting with Chinese leader Xi Jinping after top officials warned him about the security risks, which include boosting China’s military by providing better technology.