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Amid the backdrop of surging global demand for AI computing power, Chinese AI chip industry has exhibited a differentiated development trajectory. On one hand, a growing number of small and medium-sized enterprises (SMEs) are actively going public, leveraging raised capital to accelerate breakthroughs in core technologies.
On the other hand, industry leader Huawei maintains a privately held structure, relying on its proprietary ecosystem to establish a sustainable competitive advantage. However, manufacturing capacity constraints—particularly at firms such as Semiconductor Manufacturing International Corporation (SMIC)—have emerged as a critical bottleneck impeding industrial upgrading, underscoring the dual realities of opportunity and challenge within China’s domestic AI chip sector.
The IPO surge among AI chip firms reflects a deep alignment between capital market dynamics and industrial imperatives. Companies including Moore Threads and MetaX have recently finished the IPO. Moore Threads experienced a 468% surge in share price on its debut, with the RMB 8 billion raised entirely allocated to next-generation chip research and development, highlighting strong investor confidence in China's indigenous computing power capabilities. For SMEs, an IPO not only broadens access to financing but strengthens their strategic positioning within the supply chain, enabling sustained high investment in R&D and supporting rapid technological iteration.
In contrast to the capital-driven expansion of SMEs, Huawei’s decision to remain private underscores its long-term strategic orientation as a core technology innovator. Through its Shengteng series of AI chips and full-stack AI solutions, Huawei maintains a leading position in government and enterprise markets. The private ownership model enables Huawei to operate independently of short-term financial pressures associated with public listing, thereby safeguarding the continuation and autonomy of its core R&D initiatives. Its strategy of cultivating a vertically integrated ecosystem offers a distinct developmental paradigm for the broader industry.
Regardless of organizational structure, all players face common challenges related to manufacturing capacity restraints. SMIC reported a capacity utilization rate of 95.8% in the third quarter of 2025, with its 14nm production lines operating at full capacity over an extended period. Leading firms dominate available capacity, leaving limited room for SMEs to secure fabrication resources. Moreover, due to external technological restrictions, SMIC’s 7nm process relies on multiple patterning techniques, resulting in higher costs and lower yields—factors that further constrain the profitability and scalability of smaller enterprises.
Addressing these structural imbalances requires coordinated efforts across the entire supply chain. SMEs should prioritize core technological innovation while strengthening strategic collaboration with foundries to secure production capacity. Foundry operators like SMIC must expedite capacity expansion to alleviate supply-demand mismatches. At the policy front, there is a need to enhance mechanisms for end-to-end innovation and support breakthroughs in key enabling technologies. Greater ecosystem openness from leading firms—combined with the innovative agility of SMEs—can foster a more collaborative and resilient industrial environment.
The advancement of China’s domestic AI chip industry hinges on the synergistic integration of capital, technological expertise, as well as manufacturing capability. Only by overcoming capacity constraints, consolidating innovation efforts, and transforming market enthusiasm into tangible technological progress can the sector transition from quantitative growth to high-quality, sustainable development.
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