SHANGHAI — Chinese tech giant Huawei on Monday touted a new approach to developing advanced semiconductors despite U.S. sanctions, as Nvidia struggles to sell its high-end chips in China.

Huawei said it developed a new engineering approach called “LogicFolding” to manufacture its Kirin smartphone chips this fall.

That breakthrough comes as Nvidia faces U.S. export restrictions in China and Apple contends with renewed competition from Huawei in the world’s second-largest consumer economy.

Huawei’s Mate 60 smartphone, launched in 2023, included 5G connectivity powered by an advanced chip that helped the company regain market share from Apple.

While U.S. restrictions have kept Nvidia from selling its most advanced chips to China in recent years, Beijing has pushed to support homegrown technology instead. Last week, Nvidia CEO Jensen Huang told CNBC the U.S. chipmaker had “conceded” the Chinese market to Huawei.

“For Nvidia, this means the window to sell advanced chips such as the H200 into China is narrowing,” said George Chen, partner and co-chair of digital practice at The Asia Group.

“This trajectory will likely heighten concerns in Washington, where Huawei remains emblematic of U.S. export restrictions,” he said.

Huawei said that by 2031, its new chip technology could deliver capabilities equivalent to 1.4-nanometer process technology — while global chip leader TSMC has begun volume production of 2-nanometer chips.

Nanometer processes refer to chip manufacturing technology, with smaller nodes typically enabling faster and more efficient semiconductors.

​​​​Paul Triolo, head of technology, Asia and Americas, at DGA Group, was skeptical of Huawei’s 1.4-nanometer claim.

“A stacked/folded design can produce effective density gains, but it does not mean Huawei has solved the full process, yield, power, thermal, and device-performance problems associated with true 1.4 nm-class manufacturing,” he said.

Blocked from assessing advanced extreme ultraviolet, or EUV, lithography machines from Dutch chip equipment maker ASML, Huawei has been forced to pursue alternatives to chip development as it seeks to remain competitive in AI, said Neil Shah, vice president of research at Counterpoint Research.

“However, this parallel semiconductor path is still unproven at scale. This approach can introduce tough thermal constraints and packaging complexities that can hit the manufacturing yields,” Shah said.

Huawei’s efforts to deploy the technology in its flagship Mate 90 smartphone series this fall would mark an engineering feat, but scaling it to AI datacenters would serve as the “ultimate litmus test for China’s creative workaround to Western sanctions,” he added.

Semiconductor development has, for decades, relied on “Moore’s Law,” an observation that the number of transistors would double roughly every two years — delivering more computing power while lowering costs. However, even Nvidia’s Huang has said Moore’s Law is no longer applicable to future chip development.

“Huawei is turning an engineering strategy into a quasi-‘law,'” Triolo said.

The new principle “is more a systems-level optimization doctrine: shorten wires, stack logic, improve memory semantics, and co-design chips, packages, software, and clusters,” he said.

Still, challenges remain around heat management and manufacturing at scale, Triolo said.

Huawei’s new chip architecture expands the layout from one layer to two, significantly increasing power efficiency, according to Tingbo He, president of Huawei’s semiconductor business.

This structure allows transistors to interact with each other at more points, He, who is also a director of the company’s scientist committee, said at the Institute of Electrical and Electronics Engineers’ International Symposium on Circuits and Systems.

However, she acknowledged that challenges remain, as Huawei is only just beginning a decade-long development path for the new technology.

Nvidia CEO Jensen Huang said the company has “largely conceded” China’s artificial intelligence chip market to Huawei, as U.S. export restrictions continue to reshape the global AI semiconductor landscape.

Huang’s comments came as Nvidia reported another blockbuster quarter, with revenue surging 85% to $81.62 billion from $44.06 billion a year earlier. The company also unveiled an $80 billion share buyback program and raised its dividend.

However, China remained a key flashpoint.

“The demand in China is quite large,” Huang told CNBC’s Sara Eisen. “Huawei is very, very strong. They had a record year, they’ll likely, very likely, have an extraordinary year coming up, and their local ecosystem of chip companies are doing quite well, because we’ve evacuated that market.” 

“We’ve really largely conceded that market to them,” he added. 

The remarks underscore how Washington’s tightening restrictions on advanced AI chip exports have accelerated Beijing’s push toward semiconductor self-sufficiency. 

The Chinese market once accounted for at least one-fifth of Nvidia’s data center revenue. However, the company has effectively been shut out of the market after the Trump administration told Nvidia in April that it would need a license to export chips to China and to a handful of other countries. 

In the interview with CNBC, Huang struck a cautious tone on prospects for any near-term reopening of the Chinese market, saying Nvidia had told investors to “expect nothing” regarding approvals to sell advanced chips into the country.

BEIJING — Chinese telecommunications giant Huawei announced Thursday new computing systems for powering artificial intelligence with its in-house Ascend chips, as it steps up pressure on U.S. rival Nvidia.

The company said it plans to launch its new “Atlas 950 SuperCluster” as soon as next year.

The U.S. has sought to cut China off from the most advanced semiconductors for training AI models. To cope, Chinese companies have turned more to grouping large numbers of less efficient, often homegrown, chips together to achieve similar computing capabilities.

Huawei announced it would roll out three new versions of its Ascend chips through the end of 2028, with the aim to “double compute” capabilities with each year’s release.

The chips form the basis of Huawei’s AI computing infrastructure, in which a supercluster is connected to multiple superpods, which, in turn, are built from multiple supernodes. Supernodes, which form the base, are built on Ascend chips, using system design to overcome technical limitations imposed by U.S. sanctions.

Huawei said its new Atlas 950 supernode would support 8,192 Ascend chips, and that the Atlas 950 SuperCluster would use more than 500,000 chips.

A more advanced Atlas 960 version, slated for launch in 2027, would support 15,488 Ascend chips per node. The full supercluster would have more than 1 million Ascend chips, according to Huawei.

It was not immediately clear how the systems compared with those powered by Nvidia chips. Huawei claimed in a press release that the new supernodes would be the world’s most powerful by computing power for several years.

In a speech Thursday, Eric Xu, vice chairman and rotating chairman of Huawei, claimed that its forthcoming Atlas 950 supernode would deliver 6.7 times more computing power than Nvidia’s NVL144 system, also planned for launch next year.

Xu even predicted that Huawei’s product would “be ahead on all fronts” compared with another Nvidia system planned for launch in 2027 — and claimed the Atlas 950 supercluster would have 1.3 times the computing power of Elon Musk’s xAI Colossus supercomputer.

“Huawei’s announcement on its computing breakthrough is well timed with recent increasing emphasis by the Chinese government on self-reliance on China’s own chip technologies,” said George Chen, partner and co-chair, digital practice, The Asia Group.

While he cautioned that Huawei might exaggerate its technical capabilities, Chen pointed out that the Chinese company’s ambition to be a world AI leader “cannot be underestimated.”

Research firm SemiAnalysis found in April that Huawei’s self-developed CloudMatrix system was able to perform better than Nvidia’s — despite each Ascend chip delivering only about one-third the performance of an Nvidia processor. Huawei built its advantage by having five times as many chips.

“Computing power has and will continue to be the key for AI,” Rotating Chairman Xu said Thursday in a statement, translated by CNBC. He was speaking at the opening of the company’s annual Huawei Connect event in Shanghai. The event runs through Saturday.

Two years ago at the same event, Huawei announced its Atlas 900 SuperCluster. The company currently sells a “Atlas 900 AI Cluster” with “thousands” of Ascend chips.

Huawei said Thursday it had deployed more than 300 of its Atlas 900 A3 supernodes to more than 20 customers in telecoms, manufacturing and other industries.

Pressure has only risen since on the U.S. chipmaker. Its shares fell more than 2% Wednesday after the Financial Times, citing sources, said China has ordered local tech giants to stop tests and orders of the Nvidia RTX Pro 6000D chip.

Nvidia CEO Jensen Huang told reporters he was “disappointed” to hear the news of the reported ban. He’s previously described Huawei as a “formidable” competitor.

Huawei reclaimed the top spot in China’s smartphone market in the second quarter of the year, while Apple returned to growth in the country — one of its most critical markets — data released by technology market analyst firm Canalys showed on Monday.

Huawei shipped 12.2 million smartphones in China in the three months ended June, a rise of 15% year on year — equating to 18% market share. It’s the first time Huawei has been the biggest player by market share in China since the first quarter of 2024, according to Canalys.

Apple, meanwhile, shipped 10.1 million smartphones in the quarter in China, up 4% year on year and ranking fifth. It is the first time Apple has recorded growth in China since the fourth quarter of 2023, Canalys said.

Shipments represent the number of devices sent to retailers. They do no equate directly to sales but are a gauge of demand.

The numbers come ahead of Apple’s quarterly earnings release this week, with investors watching the company’s performance in China, a market where the Cupertino giant has faced significant challenges, including intense competition from Huawei and other local players such as Xiaomi.

Huawei, which made a comeback at the end of 2023 after its smartphone business was crippled by U.S. sanctions, has eaten away at Apple’s share.

Apple’s return to growth in China will be a welcome sign for investors. The U.S. tech giant “strategically adjusted its pricing” for the iPhone 16 series in China, which helped it grow, Canalys said. Chinese e-commerce firms discounted Apple’s iPhone 16 models during the quarter. And Apple itself also increased trade-in prices for some iPhone models.

Canalys’ numbers back up figures released by Counterpoint Research earlier this month showing Apple’s return to growth in China.

Shares of Apple have fallen around 14.5% this year, partly on concerns over China and geopolitical headwinds.

U.S. President Donald Trump has threatened Apple with tariffs and urged CEO Tim Cook to manufacture iPhones in America, a move experts have said would be near impossible.

Meanwhile, competition in China has intensified. Huawei has aggressively launched various smartphones in the past year and has started to roll out HarmonyOS 5, its self-developed operating system, across various devices. It is a rival to Google’s Android and Apple’s iOS.

“This move is expected to accelerate the expansion of its independent ecosystem’s user base, while also placing greater demands on system compatibility and user experience,” Lucas Zhong, analyst at Canalys, said in a press release.

Despite being beaten down by years of U.S. trade restrictions, China’s telecom giant Huawei has quietly emerged as one of the country’s fiercest competitors across the entire AI landscape.  

Not only does the Shenzhen-based firm appear to represent Beijing’s answer to American AI chip darling Nvidia, but it has also been an early adopter of monetizing artificial intelligence models in industrial applications. 

“Huawei has been forced to shift and expand its core business focus over the past decade… due to a variety of external pressures on the company,” said Paul Triolo, partner and senior vice president for China at advisory firm DGA-Albright Stonebridge Group.

This expansion has seen the company get involved in everything from smart cars and operating systems to the technologies needed for the AI boom, such as advanced semiconductors, data centers, chips and large language models. 

“No other technology company has been able to be competent in so many different sectors with high levels of complexity and barriers to entry,” Triolo said. 

This year, Nvidia CEO Jensen Huang has become increasingly vocal in calling Huawei “one of the most formidable technology companies in the world.” He has also warned that Huawei will replace Nvidia in China if Washington continues to restrict U.S. chip firms’ exports to the Asian country.

Nvidia surpassed $4 trillion in market capitalization last week to become the world’s most valuable company. Its cutting-edge processors and a related “CUDA” computing system remain the industry standard for training generative AI models and applications. 

But that moat may be narrowing, as Huawei proves that it not only does it all, it does it well. While challenging American AI stalwarts like Nvidia is a tall order, the company’s history shows why it can’t be counted out.

Huawei, which now employs more than 208,000 people across over 170 markets, came from humble beginnings. Founded by ambitious entrepreneur Ren Zhengfei in 1987 out of an apartment in Shenzhen, the firm started as a small telephone switch distributor.

As it grew into a telecoms player, it gained traction by targeting less developed markets such as Africa, the Middle East, Russia and South America, before eventually expanding to places like Europe.

By 2019, Huawei would be well-positioned to capitalize on the global 5G rollout, becoming a leader in the market. Around this time, it had also blossomed into one of the world’s largest smartphone manufacturers and was even designing smartphone chips through its chip design subsidiary, HiSilicon. 

But Huawei’s success also attracted increasing scrutiny from governments outside China, particularly the U.S., which has frequently accused Huawei’s technology of posing a national security threat. The Chinese company has refuted such risks. 

Huawei’s business suffered a major setback in 2019 when it was placed on a U.S. trade blacklist, preventing American companies from doing business with it. 

As the impact of the sanctions kicked in, Huawei’s consumer business – once the company’s largest by revenue – halved to about $34 billion in 2021 from the year before.

The company still managed a breakthrough on AI chips, and pressed ahead despite additional U.S. restrictions in 2020 that cut the company off from chipmaker Taiwan Semiconductor Manufacturing Co. A year earlier, Huawei officially launched its Ascend 910 AI processing chip as part of a strategy to build a “full-stack, all-scenario AI portfolio” and to become a provider of AI computing power.

But the U.S. targeting of Huawei also had the effect of turning the company into a martyr-like figure in China, building upon attention it received in 2018 when Meng Wanzhou, Huawei’s CFO and daughter of Ren, was arrested in Canada for alleged violations of Iran sanctions.

As the U.S.-China tech war continued to expand and broad advanced chip restrictions were placed on China, Huawei was an obvious choice to become a national champion in the race, with more impetus and state backing for its AI plans. 

“The export controls have ironically pushed Huawei into the arms of the Chinese government in a way that CEO Ren Zhengfei always resisted,” Triolo said. In this way, the restrictions also became “the steroids” for Huawei’s AI hardware and software stack.

After another year of declining sales in the consumer segment, the unit started to turn around in 2023 with the release of a smartphone that analysts said contained an advanced chip made in China. 

The 5G chip came as a shock to many in the U.S., who didn’t expect Huawei to reach that level of advancement so quickly without TSMC. Instead, Huawei was reportedly working with Chinese chipmaker SMIC, a company that has also been blacklisted by the U.S.

While semiconductor analysts said the scale that Huawei and SMIC could produce these chips was severely limited, Huawei nonetheless had proved it was back in the advanced chip game. 

It was also around this time that reports began surfacing about Huawei’s new AI processor chip, the Ascend 910B, with the company looking to seize upon gaps left by export controls on Nvidia’s most advanced chips. Mass production of the next-generation 910C is reportedly already on the way. 

To fill the void left by Nvidia, Huawei “has been making big strides in replicating the performance of high-end GPUs using combinations of lower chips,” said Jeffrey Towson, managing partner at TechMoat Consulting.

In April, Huawei unveiled its “AI CloudMatrix 384”, a system that links 384 Ascend 910C chips in a cluster within data centers. Analysts have said CloudMatrix is able to outperform Nvidia’s system, the GB200 NVL72, on some metrics.

Huawei isn’t just catching up, “it’s redefining how AI infrastructure works,” Forrester analysts said in a report last month about CloudMatrix.

Meanwhile, Huawei has also developed its own “CANN” software system that acts as an alternative to Nvidia’s CUDA. 

“Winning the AI race isn’t just about faster chips. It also includes delivering the tools developers need to build and deploy large-scale models,” Forrester’s report said, though authors noted that Huawei’s products are still not integrated enough with other commonly used tools for developers to switch over quickly from Nvidia.

The company has been deploying its Ascend AI chips and AI CloudMatrix 384 at its growing portfolio of AI data centers, which are operated by its cloud computing unit, Huawei Cloud, established in 2017 to compete with the likes of Amazon Web Services and Oracle. 

These data centers, in turn, have provided the training capabilities and computing power used by Huawei’s suite of AI models under its Pangu series. 

Unlike other general-purpose AI models like OpenAI’s GPT-4 or Google’s Gemini Ultra 1.0, Huawei’s Pangu model is designed to support more industry-specific applications across the medical, finance, government, industrial and automotive sectors. Pangu has already been applied in more than 20 industries over the last year, the company said last month. 

Rolling out such AI applications often involves having Huawei tech staff working for months at the project site, even if it’s in a remote coal mine, Jack Chen, vice president of the marketing department for Huawei’s oil, gas and mining business unit, which provides digital and intelligent solutions to transform these industries, told CNBC.

That research enabled the company in May to deploy more 100 electric-powered trucks that can autonomously transport dirt or coal using the telecom company’s 5G network, AI and cloud computing services.

And it’s not limited to China. The technology can “be replicated on a large scale in Central Asia, Latin America, Africa, and the Asia-Pacific,” Chen said.

Huawei has also open-sourced the Pangu models, in a move it said would help it expand overseas and further its “Ascend ecosystem strategy,” which refers to its AI products built around its Ascend chips.

Speaking to CNBC’s “Squawk Box Asia” on Thursday, Patrick Moorhead of Moor Insights & Strategy said he expected Huawei to push Ascend in countries part of China’s Belt and Road Initiative — an investment and development project aimed at emerging markets. 

Over a period of five to 10 years, the company could begin to build serious market share in these countries, in the same way it once did with its telecommunications business, he added.

Taiwan has added China’s Huawei and SMIC to its trade blacklist in a move that further aligns it with U.S. trade policy and comes amid growing tensions with Beijing. 

The two leading Chinese chip firms have been put on Taiwan’s “Strategic High-Tech Commodities Entity List,” along with many of their international subsidiaries.

Taiwan’s current regulations require licenses from regulators before domestic firms can ship products to parties named on the entity list. 

In a statement on its website, Taiwan’s International Trade Administration said that Huawei and SMIC were among the 601 new foreign entities, blacklisted due to their involvement in arms proliferation activities and other national security concerns.

Huawei and SMIC are also on a U.S. trade blacklist and have been impacted by Washington’s sweeping controls on advanced chips. Companies such as contract chipmaker Taiwan Semiconductor Manufacturing Co already follow U.S. export restrictions. 

However, the addition of Huawei and SMIC to the Taiwan blacklist is likely aimed at the reinforcement of this policy and a tightening of existing loopholes, Ray Wang, an independent semiconductor and tech analyst, told CNBC. 

He added that the new domestic export controls could also raise the punishment for any potential breaches in the future. 

TSMC had been embroiled in controversy in October last year when semiconductor research firm TechInsights found a TSMC-made chip in a Huawei AI training card. 

Following the discovery, the U.S. Commerce Department ordered TSMC to halt Chinese clients’ access to chips used for AI services, according to a report from Reuters. TSMC could also reportedly face a $1 billion as penalty to settle a U.S. investigation into the matter.

Huawei has been working to create viable alternatives to Nvidia’s general processing units used for AI. But, experts say the company’s advancement has been limited by export controls and a lack of scale and capabilities in the domestic chip ecosystem. 

Still, Huawei is believed to have acquired several million GPU dies from TSMC for its AI chips by using previous loopholes before they were discovered, according to Paul Triolo, partner and senior vice president for China at advisory firm DGA-Albright Stonebridge Group. 

A die refers to a small piece of silicon material that serves as the foundation for building processors and contains the intricate circuitry and components necessary to perform computations. 

According to Brady Wang, associated director at Counterpoint Research, while the latest export restrictions on SMIC and Huawei are expected to have minimal direct impact on TSMC’s business, the move from the Taiwanese government carries “significant symbolic weight.”

“It underscores the Taiwanese government’s intention to align more closely with international efforts — particularly those led by the U.S. — to curb the transfer of advanced technologies,” he told CNBC.

“Other Taiwanese firms, especially smaller IC design houses or component suppliers that may have maintained indirect ties to Chinese companies such as Huawei or SMIC, could face tighter scrutiny and increased compliance obligations going forward,” he added.

The Taiwanese government’s crackdown on exports to SMIC and Huawei also comes amid tense geopolitical tensions with Mainland China, which regards the democratically governed island as its own territory to be reunited by force, if necessary.

In April, the U.S. reaffirmed its commitment to support the existing status quo as China conducted large-scale military exercises off the coast of the island.

In statements reported by state media on Sunday, China’s top political adviser Wang Huning echoed Beijing’s position, calling for the promotion of national reunification with Taiwan and for resolute opposition to Taiwan independence. 

Apple on Friday raised the amount of money people can get off their next iPhone in China by trading in their old device, rolling out further incentives to spur demand in a crucial market.

The iPhone 15 Pro Max now has a trade-in value of up to 5,700 Chinese yuan ($791), an increase from 5,625 yuan previously. For reference, a brand new iPhone 15 Pro Max starts at 7,999 yuan in China. The iPhone 15 Pro model can now be traded in for up to 4,750 yuan, up from 4,725 prior.

There are also trade-in value increases across other models too.

Apple has looked to offer discounts over the last year, especially around holiday periods in China. While the latest hikes are not huge, they signal Apple’s ongoing desire to galvanize sales in the world’s second largest economy, where it has faced falling market share and declining sales amid tougher competition from local rivals.

In the first quarter of the year, Apple’s China shipments fell 8% year-on-year, while the company’s share of the smartphone market in the country declined from 15% to 13%, according to data from Canalys. Apple also reported this month that sales in its Greater China region, which includes Hong Kong and Taiwan, fell slightly on an annual basis.

But Apple’s China headache goes beyond sales to questions over its supply chain and products. While U.S. President Donald Trump has paused most tariffs on China for now, there is still an ongoing discussion about whether chips and other electronics may receive a special duty.

Apple, which makes around 90% of its iPhones in China via its manufacturing partner Foxconn, has been looking to move more production to India — though Trump has also voiced displeasure with that. The White House leader said this month that he told Apple CEO Tim Cook he doesn’t want the company building products in India and would rather them make devices in the U.S.

Apple’s biggest challengers number Xiaomi and Huawei, with the latter seeing a stunning revival in its home market over the last 17 months thanks to breakthroughs in chips and aggressive launches of new devices.

Xiaomi, which was the biggest player by market share in China in the first quarter, has meanwhile been ramping up its presence in the high-end device space to directly compete with Apple. On Thursday, the company launched the Xiaomi 15S Pro smartphone that contains an in-house developed chip — something very few companies in the world have managed to do successfully.

Xiaomi has also committed nearly $7 billion to develop more chips over the next 10 years, signaling its ambition to compete with Apple and Huawei.