China Overcomes US Sanctions With Local Chip Shipments to Hit 5 Million

Chinese domestic chip shipments could reach 5 million units in 2026, according to an expert hosted by Deutsche Bank.

The estimate comes as China pushes local semiconductor production due to US restrictions on advanced AI chips. The country has been cut off from Nvidia’s most powerful AI GPUs, forcing Chinese companies to rely more heavily on domestic alternatives.

China Pushes Local Chip Production

China’s domestic chip demand is mainly being supported by local manufacturers such as Semiconductor Manufacturing International Corporation (SMIC) and Shanghai Huahong Grace Semiconductor Manufacturing Corporation.

The pressure on these companies has increased as Chinese AI firms seek alternatives to Nvidia hardware. Although Nvidia has developed China-specific chips to comply with US sanctions, Beijing has reportedly discouraged local companies from buying them to support domestic chipmakers.

Domestic Shipments Expected to Grow

According to details from the Deutsche Bank expert call, Chinese domestic chip shipments reached around 4 million units in 2025 and could rise to 5 million units in 2026.

The sector is expected to grow at a compound annual growth rate of around 30 percent over the next two to three years.

The domestic share led by SMIC and Shanghai Huahong is also expected to rise from around 40 percent to more than 50 percent.

Kimi K3 Puts Local Chips in Focus

China’s domestic AI hardware industry gained more attention after Moonshot AI claimed that its Kimi K3 model was trained entirely on domestic chips.

The claim has added to the wider debate over whether Chinese chipmakers can support large-scale AI development despite US export controls.

However, China’s leading chipmakers still face major obstacles because they are restricted from buying the most advanced chipmaking equipment needed to manufacture cutting-edge GPUs.

JPMorgan Also Expects Growth

JPMorgan has made a similar projection for China’s domestic AI chip market.

The bank expects domestic AI chip shipments to rise from around 1 million units in 2025 to 5 million units by 2028.

JPMorgan expects Huawei and government-backed Cambricon Technologies to account for most of that growth.

Cambricon Remains a Key Player

Cambricon drew attention last year after Goldman Sachs estimated that the company could ship 2.3 million AI chips by 2030.

The company has benefited from US sanctions, which pushed Chinese AI developers toward locally designed chips. Cambricon was also reported to generate around 80 percent of its revenue from ByteDance.

China Still Faces Major Barriers

China’s domestic AI chip industry is growing, but it still faces serious limits.

Local demand is rising quickly, but advanced manufacturing remains difficult without access to the latest chipmaking machines. This means China may be able to increase shipments, but matching the performance and scale of Nvidia’s leading AI chips will remain a major challenge.

For now, the key takeaway is clear: US sanctions are accelerating China’s domestic AI chip push, and local shipments are expected to keep rising as Chinese firms look for alternatives to foreign hardware.