Huawei is expected to face a cap of 200,000 units in producing its Ascend AI chips in 2025, mainly for domestic use, according to a US Commerce official.

Commerce Under Secretary Jeffrey Kessler warned against underestimating China’s ambitions in semiconductor development, despite its current limited production.

In 2024, China’s AI accelerator market reached 1.5 million units, with additional demand for high-end chips in smartphones, including those from Huawei.

Kessler urged Congress to double the Bureau of Industry and Security’s (BIS) budget, aiming to expand enforcement and prevent illegal exports of US semiconductors.

He confirmed the US has halted all licensing for firms like Huawei and SMIC and may use the foreign direct product rule if allies don’t align with US security goals.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ The growing gap between China’s AI ambitions and chip production reality

Huawei’s projected production of only 200,000 Ascend AI chips in 2025 represents just a fraction of China’s domestic AI chip market, which stood at approximately 1.5 million units in 2024 according to the original article.

This shortfall highlights the effectiveness of U.S. export controls in limiting China’s high-end semiconductor production capabilities despite years of investment in domestic chip manufacturing.

The global semiconductor industry is expected to reach $697 billion in 2025, with AI chips alone contributing over $150 billion of that total 1, placing China at a disadvantage in the fastest-growing segment of the market.

For perspective, the Texas Stargate data center project is expected to eventually require 500,000 advanced chips, more than double Huawei’s entire projected 2025 production capacity.

This production gap explains why AI chip smuggling has become a concern, with estimates suggesting between 10,000 to several hundred thousand chips may have been smuggled into China in 2024 2.

2️⃣ Export controls create significant economic impacts on both sides

While restricting China’s access to advanced AI chips serves U.S. national security interests, it also comes with substantial costs for American technology companies.

NVIDIA reportedly lost $5.5 billion in Q1 2025 inventory and orders due to the U.S. ban on selling its H20 AI chips to China, with potential total losses reaching $15 billion 3.

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