Key Takeaways
- Chinese domestic chip shipments are expected to reach 5 million units by 2026.
- Local manufacturers like SMIC and Shanghai Huahong are leading the growth in China's semiconductor industry.
- US sanctions on advanced AI chips have spurred local production, despite challenges.
Chinese domestic chip shipments could reach 5 million units by 2026, according to an expert hosted by Deutsche Bank. This projection comes as the country pushes for increased local semiconductor production due to US restrictions on advanced AI chips.
The pressure on Chinese manufacturers has intensified with the country being cut off from Nvidia’s most powerful AI GPUs. As a result, companies are relying more heavily on domestic alternatives. Beijing has reportedly discouraged local firms from purchasing Nvidia hardware to support domestic chipmakers.
Local chip demand is primarily supported by companies such as Semiconductor Manufacturing International Corporation (SMIC) and Shanghai Huahong Grace Semiconductor Manufacturing Corporation. According to details from the Deutsche Bank expert call, Chinese domestic chip shipments reached around 4 million units in 2025 and are expected to rise to 5 million units in 2026.
The sector is projected to grow at a compound annual growth rate of approximately 30 percent over the next two to three years. The domestic share, led by SMIC and Shanghai Huahong, is also anticipated to increase from around 40 percent to more than 50 percent.
China’s domestic AI hardware industry gained attention after Moonshot AI claimed that its Kimi K3 model was trained entirely on domestic chips. This claim has added to the debate over whether Chinese chipmakers can support large-scale AI development despite US export controls.
However, China's leading chipmakers still face significant obstacles due to restrictions on advanced chipmaking equipment needed to manufacture cutting-edge GPUs. JPMorgan also expects growth in China’s domestic AI chip market, projecting shipments to rise from around 1 million units in 2025 to 5 million by 2028.
Cambricon Technologies has been a key player in this sector, drawing attention last year when Goldman Sachs estimated that the company could ship 2.3 million AI chips by 2030. Cambricon has benefited from US sanctions, pushing Chinese AI developers toward locally designed chips and generating around 80 percent of its revenue from ByteDance.
Despite these efforts, China’s domestic AI chip industry still faces major barriers. Advanced manufacturing remains difficult without access to the latest chipmaking machines. This means that while local shipments are expected to increase, matching the performance and scale of Nvidia's leading AI chips will remain a significant challenge.
