U.S. restrictions on high-bandwidth memory and semiconductor manufacturing equipment are limiting China’s ability to produce advanced AI chips, but experts warn the measures could also accelerate Beijing’s efforts to replace American technology.
HBM Shortage Creates Bottleneck For China’s AI Chips
In an exclusive statement to Benzinga, Shay Boloor, chief market strategist at Futurum Equities, said the restrictions are having a dual effect, constraining Chinese chipmakers in the near term while encouraging domestic suppliers to develop alternatives.
"Every restriction also gives Chinese suppliers a larger captive market and stronger incentive to replace foreign technology," Boloor said.
Christopher Tang, a professor at the UCLA Anderson School of Management who studies global supply chains, told Benzinga that HBM is the most immediate constraint on China’s AI chip production.
China accumulated an estimated 13 million HBM stacks before U.S. controls took effect in December 2024, but those reserves are being depleted.
Domestic memory maker ChangXin Memory Technologies (CXMT) is projected to produce about 2 million stacks in 2026, enough to support an estimated 250,000 to 300,000 Huawei Technologies Ascend-class chips, Tang said.
Without access to ASML Holding NV’s (NASDAQ:ASML) advanced extreme ultraviolet lithography equipment, Chinese manufacturers rely on older deep ultraviolet technology and multiple patterning techniques, which raise costs and reduce yields.
Tang said China could develop chips capable of meeting much of its domestic AI demand within a few years, though matching global leaders at scale could take until late this decade or beyond.
Could US Chip Restrictions Backfire
The longer-term consequences could extend beyond China’s AI ambitions to American semiconductor companies.
Nvidia Corp’s (NASDAQ:NVDA) share of China’s AI accelerator market has effectively fallen to zero, Tang said.
He also noted that Applied Materials Inc. (NASDAQ:AMAT) China revenue contribution declined to 28% from 35% a year earlier.
Beijing is further encouraging domestic substitution by requiring chipmakers to use at least 50% Chinese-made equipment when expanding capacity, Tang said.
While the global AI boom is currently helping offset some lost business, he warned that Chinese equipment suppliers could eventually become stronger international competitors.
"The long-term risk for the U.S. is that Chinese suppliers mature in a protected home market and then compete abroad," Tang said.
Boloor cautioned against assuming export restrictions will permanently strengthen U.S. chipmakers, arguing that limiting supply could ultimately push Chinese customers toward domestic alternatives.
Nvidia and Advanced Micro Devices, Inc. (NASDAQ:AMD) did not immediately respond to Benzinga’s request for comment. Intel Corp (NASDAQ:INTC) and Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) declined to comment.
Nvidia Gets $35 Billion China Chip Orders
Earlier this week, it was reported that Nvidia has received chip orders worth more than $35 billion from Chinese tech giants ByteDance, Alibaba Group Holding Ltd. (NYSE:BABA) and Tencent Holdings Ltd. (OTC:TCEHY).
The companies reportedly ordered more than 3 million RTX PRO 5500 graphics cards at approximately $11,400 each.
According to MarketsandMarkets, China’s AI chip market was valued at $25.37 billion in 2025 and is projected to reach $95.56 billion by 2030, representing a compound annual growth rate of 20.9%.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo Courtesy: Shay Baloor
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