China is pushing hard to make its chip industry independent of foreign suppliers. Nikkei Asia reported in May 2026 an internal directive for more than 70% of the silicon wafers used by Chinese chipmakers to be sourced domestically by the end of 2026. That's a reported internal goal, not a published policy. China missed a similar 70% target under Made in China 2025, though analysts see the narrower wafer goal as more achievable.
What's happening
- Wafer self-sufficiency: silicon wafers are one area where China has made measurable progress, which makes the reported target more credible than past ones.
- AI chips: Huawei reportedly aims to ship about 1.6 million Ascend AI chip dies in 2026, but it's constrained at the 7-nanometre node and relies on stockpiled foreign high-bandwidth memory.
- Domestic output: one expert estimate puts Chinese domestic AI chip shipments at around 5 million units in 2026, up from about 4 million in 2025.
- Money: Bloomberg reported China is weighing incentives worth up to $70 billion for its chip industry.
- Nvidia: even with the US allowing some exports of Nvidia's H200 to China, Oxford Economics expects China's localisation push to continue, and Beijing has reportedly discouraged purchases of Nvidia's China-specific chips.
Why it matters outside China
- Two AI hardware ecosystems are forming, one around Nvidia and TSMC and one around Huawei and Chinese foundries. Models and tools increasingly get optimised for both.
- Supply chains are being split and duplicated, which is part of why India is attracting fabs and packaging plants.
- Open-weight Chinese models (DeepSeek, Qwen, Kimi) are often trained or served on domestic hardware, and they're competitive alternatives for developers everywhere.
The practical takeaway for builders
Don't tie your product to one AI provider or region. Keep model calls behind an interface, and choose providers by cost, quality and data rules, not by habit.
At NextGen Fusion, our AI and software development company in Lucknow, we build AI features that can switch providers as the market shifts.
