China’s drive for AI chip and memory self-reliance, including domestic players (SMIC, YMTC, Montage, Huawei) and global supply-chain shifts

China AI Chips & Semiconductor Push

China’s semiconductor industry continues to navigate a critical juncture in 2026, marked by robust technological progress, strategic capital inflows, and a complex geopolitical environment that shapes both opportunities and constraints. Building on earlier momentum, recent developments reveal an accelerated push toward AI chip and memory self-reliance—anchored by leading domestic players such as Huawei, Zhipu AI, Montage Technology, YMTC, SMIC, Nexchip, and CXMT—while global supply chains and capital markets adapt to a shifting landscape of export controls and market sentiment.

Accelerating Technological and Market Progress in H2 2026

Chinese semiconductor firms have sustained and expanded their innovation trajectories, demonstrating growing maturity in AI chip design and memory technologies:

Huawei and Zhipu AI continue to validate domestic AI chip capabilities, with their pioneering large language model (LLM) training on Huawei’s in-house AI chips remaining a benchmark achievement. This collaboration has not only boosted investor confidence but also showcased China’s progress in deploying AI hardware at scale.
The Kirin 8030 chipset from Huawei, revealed in more detail this year, shows marked improvements in AI inference speed and energy efficiency despite ongoing U.S. export restrictions, confirming Huawei’s resilience and R&D depth in advanced chip design.
Montage Technology’s Hong Kong IPO debut in early 2026, which saw a striking 57% share price jump, signaled strong investor interest in fabless AI chip developers specializing in high-performance data processing and interconnect solutions. This IPO has become a bellwether for China’s growing AI semiconductor capital market.
In the memory sector, YMTC’s delivery of “cross-boundary” LPDDR5 memory engineering samples, crucial for next-generation mobile and PC devices, indicates meaningful strides toward closing the technology gap with established global DRAM and NAND suppliers.
The dramatic surge of 80–90% in global memory prices in Q1 2026 has materially benefited Chinese memory producers, fueling capacity expansions and prompting some Western PC OEMs to increase adoption of Chinese memory chips as a pragmatic diversification.
China’s R&D efforts in high-bandwidth memory (HBM) and next-generation DRAM also continue to advance, with industry observers noting China is approaching key breakthroughs critical for AI accelerators and data center workloads.

Capital Markets and Policy Environment: Supportive Yet Cautious

China’s semiconductor ambitions enjoy strong state backing, yet investor sentiment is showing signs of maturation:

The Shanghai Semiconductor Fund’s expansion to RMB 82 billion (~$12 billion) in early 2026 underscores Beijing’s long-term strategic commitment to semiconductor R&D, fabrication capacity, and ecosystem development.
Nexchip Semiconductor’s planned H-share IPO, targeting up to US$550 million, aims to bolster domestic wafer fabrication capacity, addressing persistent bottlenecks in leading-edge chip manufacturing.
CXMT Corporation, an emerging Chinese DRAM maker, has begun IPO preparations with major state-owned investment banks China International Capital Corporation and CSC Financial, signaling ongoing investor appetite for memory sector expansion.
However, after the initial enthusiasm following Montage Technology’s IPO, some investors are exhibiting caution toward new AI chip IPOs, reassessing valuations in light of evolving geopolitical risks, uncertain technology timelines, and market volatility. This signals a maturing capital market grappling with the complex risk–reward balance.
A notable new development is that the Hong Kong Exchanges and Clearing (HKEX) is reportedly considering broadening the scope for confidential IPO filings. This regulatory shift could ease the listing pathways for Chinese semiconductor and AI hardware firms, accelerating capital-raising efforts and influencing future IPO timelines.

Geopolitical Landscape and Supply Chain Realignment: Intensifying Complexities

The semiconductor sector remains deeply entangled with geopolitical dynamics that both constrain and catalyze China’s ambitions:

The U.S. has expanded export controls further, tightening restrictions on advanced chip manufacturing equipment and components. The ban on NVIDIA’s high-end H200 AI accelerator chips remains under review, reflecting a nuanced approach balancing strategic containment with commercial enforcement challenges.
Taiwan continues to enforce stricter export restrictions on chip shipments to Huawei and SMIC, especially after uncovering attempts to circumvent controls involving TSMC-fabricated AI processors.
Meanwhile, the Dutch government’s intensified investigation into Nexperia, a semiconductor company with Chinese investors, highlights growing international scrutiny over supply chain security and foreign investment.
Despite tensions, pragmatic cross-border collaborations persist, such as ongoing negotiations between ByteDance and Samsung for AI chip co-development, illustrating the complex interplay of competition and cooperation in the semiconductor ecosystem.
A particularly striking development is the Reuters exclusive revealing that Chinese AI startup DeepSeek successfully trained an AI model on Nvidia’s top-tier GPUs despite U.S. export bans. This underscores enforcement challenges and the porous nature of export controls, complicating the global effort to contain technology diffusion.

Wafer Fabrication Equipment (WFE): The Persistent Achilles’ Heel

China’s strides in chip design and memory innovation are tempered by ongoing constraints in wafer fabrication equipment:

Domestic capabilities in extreme ultraviolet (EUV) lithography and advanced etching tools remain nascent, with commercial-scale production of cutting-edge WFE still years away.
Government mandates increasingly require localized procurement of WFE and raw materials, backed by substantial funding, but bridging the equipment gap remains a formidable technological and commercial challenge.
The capital raised through Nexchip’s upcoming IPO will be partly allocated to expand wafer fabrication capacity and invest in overcoming WFE limitations, reflecting market confidence tempered by recognition of this critical bottleneck.

Market and Supply Chain Implications: Gradual but Meaningful Realignment

China’s semiconductor progress is reshaping global markets and supply chains in nuanced ways:

The spike in memory prices has improved profitability for Chinese suppliers, accelerating capacity expansions and strengthening their negotiating position in global markets.
Western PC OEMs are increasingly incorporating Chinese memory chips into their supply chains, reflecting pragmatic risk diversification amid supply shortages and cost pressures, though geopolitical risks keep reliance calibrated.
Montage Technology’s successful IPO and growing interest from international investors highlight expanding capital flows into China’s AI chip sector, despite emerging investor caution.
China’s focused R&D on high-bandwidth memory and advanced DRAM technologies is critical to challenging the dominance of South Korean, Japanese, and U.S. suppliers in high-value AI hardware segments.
Analysts and leading media, including the South China Morning Post, are increasingly recognizing China’s potential to challenge U.S. dominance in AI semiconductor technology, suggesting a broader geopolitical and industrial realignment underway.

Conclusion: Forward Momentum Amid Persistent Challenges

As 2026 progresses, China’s semiconductor industry embodies a dual narrative of significant technological and market progress coupled with enduring uncertainties. Breakthroughs by Huawei, Zhipu AI, YMTC, Montage Technology, and wafer fab pioneers like Nexchip, supported by unprecedented government funding and evolving capital markets, have established a solid foundation for AI chip and memory self-reliance.

Nevertheless, critical bottlenecks remain, particularly in wafer fabrication equipment, compounded by intensified export controls, enforcement challenges highlighted by DeepSeek’s circumvention, and a more cautious investor climate. The pause in some AI chip IPOs reflects growing market realism about the timelines, risks, and geopolitical headwinds ahead.

At the same time, regulatory innovations such as the potential expansion of confidential IPO filings by HKEX may ease capital-raising hurdles for semiconductor firms, providing a timely boost amid cautious investor sentiment.

Ultimately, China’s semiconductor trajectory illustrates an adaptive, strategically supported push to reshape global supply chains and challenge incumbent players. While near-term challenges temper expectations, the structural shifts underway point toward a more multipolar, complex semiconductor ecosystem with China as a rising and increasingly influential actor.

Key Data and Recent Highlights (Updated)

Shanghai Semiconductor Fund expanded to RMB 82 billion (~$12 billion) (Feb 2026)
Montage Technology IPO debuted with a 57% share price surge (Feb 2026)
Global memory prices surged 80–90% in Q1 2026 (Counterpoint Research)
Huawei/Zhipu AI collaboration: LLM trained entirely on domestic chips
Reuters/Nikkei report: SMIC and Hua Hong Semiconductor plan advanced chip output expansion (Feb 2026)
CXMT Corporation begins IPO preparations, signaling memory capacity expansion
Investor caution emerges with a pause on some AI chip IPOs amid geopolitical and market risk reassessment
HKEX reportedly considering wider scope for confidential IPO filings, potentially easing semiconductor firm listings
ByteDance–Samsung AI chip co-development negotiations continue amid geopolitical tensions
U.S. export controls expanded; NVIDIA H200 export ban under review
Taiwan tightens export bans on Huawei and SMIC chip shipments
Dutch investigation into Nexperia intensifies supply chain security concerns
Nexchip Semiconductor H-share IPO targets up to US$550 million for wafer fab expansion
WFE localization efforts ongoing but advanced equipment gaps persist
Reuters exclusive reveals DeepSeek’s use of Nvidia GPUs despite export bans, highlighting enforcement challenges
South China Morning Post and analysts highlight China’s rising challenge to U.S. AI semiconductor dominance

This dynamic and evolving narrative captures the complex interplay of innovation, investment, geopolitical friction, and market realism defining China’s determined semiconductor journey in 2026.

Sources (11)