China’s Semiconductor Crisis Worsens: U.S. Sanctions Cripple Huawei and SMIC

The tech cold war escalates as China's chip famine reaches critical levels. American export controls are now visibly starving Huawei and SMIC of crucial semiconductor supplies—just as global demand peaks.

How bad is it? Production lines are slowing, inventory buffers are vanishing, and Beijing's 'self-sufficiency' rhetoric rings hollow. Meanwhile, TSMC and Samsung quietly raise champagne glasses.

For investors: Another reminder that geopolitics moves markets faster than earnings reports. The semiconductor supply chain just became the world's most expensive game of musical chairs.

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The lack of high-end chips is already hurting China’s tech sector. Companies such as DeepSeek have delayed new AI models because of limited supply. In response, the Chinese government has asked state data centers to use domestic chips instead of foreign ones. Huawei’s own Ascend chips are getting a major boost from this policy shift, helping the company expand its reach in cloud and AI computing.

Industry Strain and Local Adjustments

At the same time, Chinese engineers are rewriting code and reshaping their software to run on lower-power chips made at home. Factories are also trying workarounds to keep up. Some are combining several smaller chips to match the output of stronger ones, but this method raises power use and costs. Local governments have started to subsidize energy bills for these heavy systems.

Analysts say SMIC’s production remains limited by older tools, which create a high number of defective chips. Even with rising output, China still relies on U.S. and allied suppliers for the most advanced chipmaking equipment. As a result, production of efficient chips for AI and cloud services continues to lag behind the U.S.

Global and Market Impact

The restrictions have wide market effects. Major U.S. chip companies such as Advanced Micro Devices (AMD), Intel (INTC), Marvell Technology (MRVL), Microchip Technology (MCHP), Micron Technology (MU), Nvidia (NVDA), Qualcomm (QCOM), and Texas Instruments (TXN) all face reduced access to the Chinese market. While these firms benefit from U.S. policy support at home, they also lose one of their biggest customer bases abroad.

Meanwhile, Huawei is expanding its AI chip output. Analysts expect it to ship more than one million chips this year and up to 1.6 million in 2026.

Looking Ahead

For now, U.S. companies keep their edge in chipmaking and design. Yet China’s focus on self-reliance is pushing rapid local development. The global chip race remains intense, with both countries aiming to secure their positions in the growing AI economy.

Using TipRanks’ Comparison Tool, we lined up all the tickers from this piece side by side to gain a broader look at the semiconductor industry.