Four years after Washington imposed curbs on high-end chips used in artificial intelligence, data centres and defence systems, China has channelled massive state investment into building its domestic semiconductor industry under its long-running “Made in China 2025” strategy.

The US policy aimed to slow China’s military and economic technological advancement, but it has also prompted Beijing to pour hundreds of billions of dollars into its own chip ecosystem.

China has offered subsidies, tax incentives and state-backed support to companies seeking to rival global leaders such as US firm NVIDIA and Taiwan’s TSMC, which dominates advanced chip manufacturing.

Domestic firms, including SMIC and HuaHong, have reported strong growth, with SMIC generating $9.3bn in revenue last year and HuaHong operating above full capacity due to demand.

However, experts say the progress has limits. Ryu Yongwook of the National University of Singapore said China’s overall chip capabilities remain well behind the US, Taiwan and South Korea, particularly in research, design and advanced manufacturing.

China has made gains in so-called legacy chips, where it now holds around 30% of the global market, producing components widely used in vehicles, industrial systems and consumer electronics.

Analysts say this expansion could put downward pressure on global prices.

Beijing has also achieved limited progress in advanced chip production, including 7-nanometre processors used in some Huawei smartphones, though these still lag behind the most advanced chips made by global leaders.

Experts say US sanctions and technological barriers continue to restrict China’s access to cutting-edge semiconductor tools, with some warning it could take a decade or more for it to close the gap.

While China has scaled back earlier ambitions of outright chip dominance in its latest five-year plan, it is increasingly focusing on AI systems designed for industrial use that require less computing power and are more cost-effective.

This approach has helped Chinese AI platforms gain traction in developing markets, with some estimates placing their global market share at around 15% by late 2025.

At the same time, US technology firms continue to dominate high-end AI development, with massive investment flowing into infrastructure, including data centres and advanced computing systems.

However, analysts warn that energy constraints in the US could become a limiting factor, while China’s expanding power capacity may give it an advantage in scaling AI infrastructure.

Forecasts suggest the chip and AI race could evolve into either continued US leadership, parallel ecosystems, or a deeper technological split between competing global systems.