Huawei is grappling with significant production challenges for its advanced AI chips, particularly the Ascend 910C, which currently has a commercially viable yield of only about 20%.

The U.S. export controls are a major hurdle, preventing China from acquiring critical technologies such as extreme ultraviolet (EUV) lithography equipment, essential for producing sophisticated processors.

Despite these efforts, Huawei's production issues are compounded by limitations in its software ecosystem, particularly within its Cann software, which affects overall efficiency.

Future U.S. export controls on the semiconductor industry are anticipated, especially if Donald Trump returns to the presidency in January 2025, which could reinforce tough trade policies towards China.

In response to these restrictions, Huawei is prioritizing strategic government and corporate orders, recognizing the long-term challenges posed by the lack of EUV technology.

The Chinese government is backing its semiconductor ambitions with a nearly $48 billion fund, which includes over $1 billion in grants to Huawei in 2023.

The Ascend 910C is designed to compete with Nvidia's AI chips and has already been distributed to tech firms for sampling and orders, although supply issues persist.

Chinese companies, including ByteDance, have expressed frustration over slow delivery rates of Huawei's chips, receiving significantly fewer units than ordered.

Reports indicate that SMIC, Huawei's primary chip manufacturer, charges a premium for chips produced on its advanced nodes, which are less sophisticated than those made by TSMC, contributing to higher costs.

Nvidia, which previously held a 90% share of the Chinese AI chip market, has seen its revenue from China impacted by ongoing restrictions since 2022.

As Huawei seeks to expand its customer base for AI processors domestically in China, it faces significant challenges due to the ongoing U.S. trade restrictions that affect its operations.

Overall, while Huawei's 910C chip is reported to outperform Nvidia's upcoming B20 chip, the company must navigate a complex landscape of supply chain and regulatory challenges.