China's AI Chip Deficit: Why Huawei Can't Catch Nvidia

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## By experts and staff

PublishedDecember 15, 2025 9:19 a.m.

### Experts

- [By Chris McGuire](https://www.cfr.org/experts/chris-mcguire)



Senior Fellow for China and Emerging Technologies


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## Executive Summary

On December 8, the Trump administration announced plans to loosen U.S. export controls on artificial intelligence (AI) chips to China by approving the sale of Nvidia H200 chips—the most powerful AI chip ever approved for export to China. That decision was [driven in part](https://www.bloomberg.com/news/articles/2025-12-09/trump-s-reprieve-for-nvidia-s-h200-spurred-by-huawei-s-ai-gains "driven in part") by concerns that Huawei is becoming a viable competitor to Nvidia in AI chips, making U.S. export controls less effective. However, a comparison of publicly available data on AI chip performance from both companies, coupled with estimates on AI chip production capacity finds something different: Huawei is not a rising competitor. Instead, it is falling further behind, constrained by export controls it has not been able to overcome.

Nvidia and Huawei’s AI chip roadmaps from this year show that the performance gap between U.S. and Chinese AI chips is large and growing. The best U.S. AI chips are currently about five times more powerful than Huawei’s best offerings. By 2027, that gap will widen to seventeen times. Perhaps most striking: according to Huawei’s own public roadmap, the company’s next-generation chip in 2026 will actually be less powerful than its best chip today. This apparent regression could indicate that SMIC and other Chinese fabs are struggling to produce high-performing AI chips for Huawei at scale. With SMIC stuck at 7nm process technology due to U.S. and allied equipment export controls, Huawei has hit a ceiling it is struggling to break through.

Huawei’s strategy of compensating for inferior quality with higher quantity is also failing. Even under very aggressive assumptions about Huawei’s AI chip production capacity—that it will produce 800,000 AI chips in 2025 (double the highest public estimates), two million AI chips in 2026, and four million in 2027—it will not be enough. Huawei would still produce only about 5 percent of Nvidia’s aggregate AI computing power in 2025, falling to 4 percent in 2026 and 2 percent in 2027. It is virtually impossible for Huawei to close this gap: even a hundredfold increase in AI chip production by 2027 would not even bring Huawei to half of Nvidia’s output. Meanwhile, China’s demand for AI compute is growing exponentially as models become more advanced, meaning the country’s AI chip shortage will become

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