China has been striving to develop its own high-end semiconductors for some time, and recent developments indicate that progress is being made. Satellite images show Huawei is constructing an advanced chip factory designed to produce mobile CPUs and AI processors. This initiative follows Huawei’s announcement of a powerful new AI chip last month, which directly competes with NVIDIA. The establishment of this factory underscores Huawei’s commitment to its semiconductor ambitions.

In the ongoing semiconductor arms race, only a handful of companies and countries possess the technology to produce the sophisticated chips essential for various devices. Taiwan stands out as a dominant player, supplying cutting-edge chips for major companies like Intel, AMD, and NVIDIA. South Korean companies like Samsung also contribute significantly to the global chip supply, particularly in smartphones and computing devices. Consequently, China, similar to the United States, relies on imports for this critical resource, making it vulnerable to the geopolitical dynamics of trade.

Recent U.S. restrictions on advanced chip exports to China have further complicated the situation, motivating China to enhance its own semiconductor manufacturing capabilities, albeit slowly due to the technology-intensive nature of chip fabrication. Huawei’s new chip factory represents yet another milestone for China in the tech arena. The country has been progressively refining its chip technology, focusing on smaller and more advanced wafers. Huawei has achieved a notable 7nm milestone with its Ascend 910C chip, which competes with NVIDIA’s H100.

While this is still a step away from the leading-edge 2nm fabrication process utilized in the latest PC chips, it is well-suited for AI processor manufacturing. Located in Shenzhen, Huawei is currently developing three sites in Guanlan to optimize production. One site is dedicated to producing chip-making tools for SiCarrier, another for manufacturing memory modules via SwaySure, while the last will serve as the main facility for chip production. This factory will employ Huawei’s existing 7nm SoC process, aiming to meet the growing demand for its Kirin and Ascend chip lines, which are positioned as strong competitors against Western companies like NVIDIA.