Escobar: China Steps up Its Game in the Global AI Race

(Zero Hedge)—Late next month, Huawei will be testing its new powerful AI processor, the Ascend 910 D, even as by early May the previous 910C will start to be mass-delivered to scores of Chinese tech companies.

These serious breakthroughs are the next chapter of Huawei’s drive to counter Nvidia’s global monopoly in GPUs. The Ascend 910D is supposed to be more powerful than Nvidia’s extremely popular H100.

Huawei is pulling no punches in its race to manufacture a new generation of processors. Huawei has collaborated with SMIC – China’s largest semiconductor foundry – to apply Deep Ultraviolet Lithography (DUV) on what was previously only possible on EUV (Extreme Ultra-Violet technology). Once again, Huawei and SMIC defied the proverbial American “experts” with creative engineering solutions.

Huawei arrived at fabricating 5nm chips with DUV even as the process is more expensive than with EUV. If Huawei had access to EUV they would be already manufacturing 2-3nm chips. That will come, in short time, as both China and Russia, under permanent US high-tech blockade, must by all means develop their own EUV technology.

Shanghai geeks are convinced that Huawei will switch on 6G networksbefore the end of the decade. Their current breathless drive is not just aimed at the smartphone front – where Huawei is peerless; the new Huawei Mate 70 Pro + is by far the absolute top smartphone in the world, running on Harmony OS. Huawei is looking at cloud computing, AI and enterprise servers – and to become no less than the core player in the AI infrastructure race.

Ditching Any Reliance on American Technology

Earlier this month, Huawei introduced the CloudMatrix 384, a system connecting 384 Ascend 910C chips. The tech word in Shanghai is that this configuration, under certain conditions, and of course consuming much more power, already outperforms Nvidia’s flagship rack system – which is powered by 72 Blackwell chips.

Meanwhile, Huawei’s Kirin X chip is targeting the PC market, offering stiff competition to Apple, AMD, Intel and Qualcom while Harmony OS plus removes the necessity of using US software such as Microsoft and Android.

Shanghai geeks swear that China essentially doesn’t need to beat Nvidia or other US chips developers. After all, China already has the largest consumer market in the world – by volume and by value. If a parallel tech universe is the likely result of the Trump Tariff Tizzy (TTT), so be it. China already controls over 60% of the global gadget consumer market.

Kirin X may not – yet – match the power of Nvidia’s H100 GPUs. But Huawei chips are already the real deal for every Chinese company which is following the new Beijing-defined direction to reduce any reliance on American technology.

All of the above naturally brings us to the enormous AI elephant in the (digital) room: Nvidia.

A recent book, The Thinking Machine: Jensen Huang, Nvidia, and The World’s Most Coveted Microchip, is quite helpful to track not only the personal story of CEO superstar Huang, a Taiwanese who played the American Dream to the hilt and became a tech multi-billionaire, but Nvidia’s enviable tech accomplishments.

Huang does not interpret AI as emergent machine superintelligence, and firmly dismisses any direct analogy to biology. For this all-round pragmatist, AI is merely software – running on hardware that his company sells for a fortune.

Still, Nvidia has ventured into virgin territory way beyond the American biz-tech Valhalla, complete with holding the most valuable stock on the planet: arguably, when it comes to AI, Nvidia unveiled a new phase of evolution.

It’s crucial to understand how Huang sees China. It is indeed a key market for his AI chips – and he wants to keep selling them in droves. Trump’s tariffs though make sure that won’t happen.

And that’s what moved Huang to ditch his proverbial leather jackets and don a crisp business suit for a strategic visit to Beijing, where he affirmed the sacred importance of the Chinese market, whatever the new Trump-dictated gimmicks.

By 2022, the China market represented 26% of Nvidia’s business; this year, it has fallen to 13%, because of euphemistic “technology export controls”.

The problem is the US government, already by 2022, under the previous automatic pen administration, had blocked sales to China of advanced A100 and H100 chips. Nvidia started selling modified versions – and even after the ban chips continued to arrive in China. By June 2023, it was easy to find A100s for double their price in the black market in Shenzhen.

Huang is convinced that “no AI should be able to learn without a human in the loop” – even as he admitted, two years ago, that “reasoning capability is two or three years out”. Translation: according to Huang AI will start thinking for itself within the next few months.

Even as Nvidia prepares to invest billions of dollars to build AI supercomputers in Texas, the Chinese essentially are not losing any sleep on “thinking AI”: their focus is extremely practical, to conquer not only the Chinese market but also the supply chains of most of Eurasia.

The US National Security Council has concluded that it’s too dangerous for China to buy Nvidia’s high-end chips, even the H20 – designed for the Chinese market. Huawei, anyway, already produces chips somewhat comparable to the H20.

Huang is losing his sleep because, essentially, Nvidia is losing the immense Chinese market to Huawei – with Trump’s direct input. Nvidia has tens of thousands of H20s specially designed for China which they simply cannot sell. Each chip cost between $12,000 to $20,000.

How China Is Opening a Digital “Pandora’s Box”

Huawei’s new drive is yet another example of Chinese will capable of staring down any challenge – based on indigenous talent, tech expertise and national pride. The record, even before Trump 1.0 sanctions, shows that Huawei does eat massive uphill battles for breakfast. In fact Ascend in many aspects was ahead of Nvidia as early as in 2019 – and that’s why two different US administrations banned it.

China is already light years ahead of the US on chip research. Chinese universities amass most places in the global Top Ten for published papers on semiconductors and on citations – a distinction shared, among others, by the Chinese Academy of Sciences (number one), Tsinghua University (one of China’s top two universities), the University of Electronic Science and Technology of China (number four), and Nanjing, Zhejiang and Pekin Universities.

Two weeks ago in Shanghai I first heard that Huawei would catch up with US semiconductor giants in maximum two years. Now, after the announcement of the Ascend 910D, the buzz shifted to only one year for China to overtake Nvidia and develop better lithography machines than the ones currently produced by ASML.

And the debate is fast switching to how far Huawei will be able to go within the next 2 to 3 years.

In several aspects we are already in the early stages of a US-China tech decoupling. For years Nvidia has dominated the AI hardware space. Their GPUS are the brains behind most contemporary advanced AI. The H100 chip is the gold/platinum standard for AI infrastructure worldwide. Nvidia’s chips had huge demand from Chinese tech giants – Alibaba, Tencent, Baidu, Bytedance.

Soon that may not be the case – and that goes way beyond Nvidia’s certified loss of market share in China. China is now all out focused on building a successful, self-sufficient AI hardware ecosystem. The coup de grace will be to restrict the export of all rare earth minerals to the US. Huaweii then will pull up in no time.

Everyone remembers how DeepSeek R1 wiped out over $1 trillion from Wall Street only three months ago. DeepSeek R2 will be released soon; training was a whopping 97% cheaper than OpenAI. And training happened on Huawei’s Ascend. No Nvidia.

Quantum Bird, a world-class physicist formerly with the CERN in Geneva, puts everything in much needed context. He stresses how indigenous chip development by China – and in a near future, Russia and probably India – is “multi-faceted; what we are observing are the initial stages of a redefinition of the notion of recognizing patterns and machine learning, technologies that are popularly referred to as ‘AI’ by the media.”

Nvidia chips, Qantum Bird remarks, are indeed “computational beasts”, but they work better around “processing models and workloads typical of ‘AI’ models developed by Western scientists.” DeepSeek’s development, on the other hand, showed a transgression of established models: “The possibilities opened for performance leaps are huge, even using relatively modest hardware, with alternative approaches based on advanced math and different calculus flows.”

In a nutshell: “This is the Pandora’s box that Nvidia now fears the Chinese may have opened”. And that totally ties in with Huang’s red alert, prompting his visit to Beijing.

We may be heading indeed towards a serious tech decoupling. Or as Quantum Bird frames it: “A technological and scientific divergence medium and long-term. If the architectures that emerge from these developments are incompatible when it comes to their usage on specific ‘AI’ models, Nvidia will lose its global monopoly and will become just a company reduced to a corporate/scientific Western niche.”

Even as Huawei, from its privileged base in the Chinese market, will go on to win most markets across the Global Majority – from BRICS to BRI.