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US Warns Huawei Can Produce No More Than 200,000 AI Chips in 2025, But China Is Catching Up

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Huawei Technologies will likely produce no more than 200,000 advanced artificial intelligence chips in 2025, according to Jeffrey Kessler, Under Secretary of Commerce for Industry and Security at the U.S. Commerce Department. While this figure falls short of meeting China’s growing demand, Kessler cautioned that China is rapidly narrowing the technological gap with the United States.

Speaking before the House of Representatives Foreign Affairs South and Central Asia subcommittee on Thursday, Kessler emphasized that the production limitations do not mean the U.S. can become complacent. “China is investing huge amounts to increase its AI chip production, as well as the capabilities of the chips that it produces. So, it’s critical for us not to have a false sense of security,” he warned.

Since 2019, Washington has implemented a series of export controls restricting Huawei and other Chinese firms’ access to high-end U.S. chips and manufacturing equipment. These curbs aim to slow China’s progress in critical technologies and prevent potential military applications. Despite these hurdles, Huawei plans to supply its domestically produced Ascend 910C AI chips to Chinese customers as an alternative to Nvidia’s more advanced products.

White House AI Czar David Sacks recently stated that China is only 3-6 months behind the U.S. in AI model capabilities. However, he clarified that Chinese AI chip hardware remains about one to two years behind leading U.S. competitors such as Nvidia. Huawei’s CEO Ren Zhengfei also acknowledged the gap, noting that the company’s chips trail behind U.S. products by a generation, though Huawei continues to invest more than $25 billion annually to advance performance.

While Huawei is expanding its AI chip output, U.S. export controls have hampered Nvidia’s ability to maintain its market dominance in China. Recent trade negotiations between the U.S. and China in London resulted in a tentative truce, yet tensions persist, especially after the Trump administration imposed new export controls on semiconductor design software, jet engines for Chinese aircraft, and other critical technologies.

During the congressional hearing, Democratic Representative Greg Meeks raised concerns about the Trump administration’s approach, suggesting it has blurred the lines between export control policy and broader trade issues. Kessler reassured lawmakers that export controls remain robust and effective, while also stressing that the Commerce Department will continue to actively monitor and adjust regulations as the technology landscape evolves.

At present, there are no immediate plans for further restrictions on U.S. semiconductor sales to China, though officials remain vigilant about developments in China’s domestic semiconductor sector.

China Slams U.S. for ‘Abusing’ Export Controls Over Huawei AI Chip Guidance

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China has sharply criticized the United States for what it called the “abuse of export control measures”, following new U.S. guidance warning companies against using Huawei’s Ascend AI chips. The Chinese Ministry of Commerce said the move threatens the stability of global semiconductor supply chains and vowed to take action to protect the rights of its domestic companies.

At a press conference on Thursday, Commerce Ministry spokesperson He Yongqian urged Washington to “correct its practices” and accused the U.S. of targeting Chinese tech firms unfairly.

Background:

  • On Tuesday, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) issued new guidance stating that companies using Huawei’s Ascend chips—the firm’s most advanced AI semiconductors—risk violating U.S. export controls.

  • These chips are produced by Huawei, a Shenzhen-based tech giant already subject to sweeping U.S. restrictions, and are seen as direct competitors to products from American chipmakers like Nvidia in the Chinese AI market.

China’s Reaction:

The Chinese government views the BIS warning as a deliberate attempt to suppress China’s tech advancement and influence in artificial intelligence. The Ministry emphasized that it will take “necessary measures” to safeguard the legitimate interests of Chinese enterprises.

The dispute underscores growing U.S.–China tensions over semiconductor technology and AI dominance, with Washington seeking to restrict China’s access to critical hardware and Beijing accusing the U.S. of weaponizing trade rules to stifle competition.

This development also comes as the global tech industry becomes increasingly fragmented, with countries pursuing “chip sovereignty” strategies to reduce reliance on foreign suppliers.

Trump Administration to Scrap Biden-Era AI Chip Export Limits, Citing Innovation Concerns

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The Trump administration plans to rescind and revise a key Biden-era rule that restricted exports of advanced AI chips, aiming to replace it with a streamlined system that it says will better support U.S. innovation and AI leadership, the Commerce Department confirmed on Wednesday.

The Biden administration’s rule, part of a broader effort to curb China’s access to military-grade semiconductor technology, was set to go into effect May 15. Known as the Framework for Artificial Intelligence Diffusion, the rule divided global countries into three tiers based on their level of trust and posed export caps accordingly.

Why It’s Being Scrapped:

The Commerce Department spokeswoman called the rule:

“Overly complex, overly bureaucratic, and would stymie American innovation.”

She said the Trump administration is preparing a simpler replacement that removes the tier-based structure and introduces a global licensing regime governed through bilateral government agreements instead.

Tier System Under Biden Rule:

  • Tier 1: 17 allied countries + Taiwan (no restrictions)

  • Tier 2: ~120 countries (chip quantity caps)

  • Tier 3: China, Russia, Iran, North Korea (outright ban)

What Comes Next:

  • A new rule will rescind the tiered structure.

  • A government-to-government licensing regime is being discussed.

  • There’s no official timeline yet, as internal debate continues.

  • The Trump administration aims to focus on AI leadership and economic competitiveness, rather than control through blanket restrictions.

Market Reaction:

  • Nvidia (NVDA.O), a leading AI chipmaker whose sales have been constrained by export limits, rose 3% on the news, but slipped 0.7% after hours as markets absorbed the uncertainty surrounding implementation.

Strategic Context:

The Biden rule was part of a multi-year initiative to block Chinese access to cutting-edge chips used in AI and defense, while bolstering U.S. global dominance in emerging technologies. But the Trump team argues that these controls could inadvertently hurt American firms by stalling chip sales to non-hostile countries and overcomplicating enforcement.

A shift to bilateral licensing could give the U.S. more flexibility and diplomatic leverage, but critics warn it may also open loopholes and weaken safeguards designed to prevent authoritarian regimes from exploiting AI.