In a move signalling one of its strongest efforts yet to reduce dependence on foreign technology, China has reportedly directed that all state-funded data centre projects use only domestically-produced artificial intelligence chips.
The order, according to a report citing sources familiar with the matter, is seen as part of Beijing’s broader push for AI chip self-sufficiency amid a temporary pause in trade tensions with the United States.
Chinese regulatory authorities have instructed that new data centre projects receiving any form of state funding must deploy only local AI chips. Those projects less than 30 per cent complete have been told to remove installed foreign chips or scrap purchase plans, while those at a more advanced stage will be reviewed on a case-by-case basis.
The guidance, sources said, represents one of China’s most assertive steps to eliminate foreign hardware from its critical infrastructure. It also underscores Beijing’s determination to strengthen its domestic chip sector as Washington maintains curbs on technology exports.
Access to advanced AI chips, particularly those produced by Nvidia, has long been a flashpoint in US-China relations as both nations vie for dominance in artificial intelligence and high-performance computing.
President Trump, following talks with Chinese President Xi Jinping last week, said in a televised interview that Washington would “let them deal with Nvidia but not in terms of the most advanced” chips.
However, Beijing’s new directive could severely impact Nvidia’s already diminished market share in China, while creating new opportunities for domestic firms such as Huawei.
It remains unclear whether the guidance applies nationwide or is limited to select provinces. The Cyberspace Administration of China and the National Development and Reform Commission have not commented on the report.
Also Read : Iran to rebuild nuclear sites with China, Russia
AI data centre projects in China have attracted over $100 billion in state funding since 2021, according to a review of government tenders. Several projects have reportedly been halted following the new directive, including one in a northwestern province that had planned to deploy Nvidia chips.
China’s government has long sought to counter US export restrictions, which Washington justifies because advanced chips could enhance Chinese military capabilities.
Over the past year, Beijing has intensified efforts to phase out American technology, discouraging domestic tech firms from buying Nvidia products and unveiling data centres powered entirely by local AI chips.
In 2023, China banned Micron’s products from use in its critical infrastructure, leading the US memory chipmaker to withdraw from the server market in the country. Nvidia’s current share of China’s AI chip market has fallen from 95 per cent in 2022 to virtually zero, the company has said.
The new directive reportedly covers Nvidia’s H20 chips, the most advanced AI processors the company is still permitted to sell in China as well as more powerful models such as the B200 and H200, which are officially barred under US export controls but remain accessible through grey-market channels.
While the order is expected to benefit local chipmakers like Huawei Technologies, Cambricon, MetaX, Moore Threads, and Enflame, analysts warn it could further widen the technological gap between the US and China in AI computing.
American firms such as Microsoft, Meta, and OpenAI have invested hundreds of billions of dollars in data centres equipped with Nvidia’s latest processors, while Chinese manufacturers face production bottlenecks due to ongoing US restrictions on semiconductor-making equipment.
Beijing’s latest move, though intended to accelerate self-reliance, underscores the difficult balancing act China faces in maintaining technological competitiveness while disentangling from Western supply chains.
Follow us
