China's chip offensive: how Beijing is trying to circumvent US sanctions

China has intensified its efforts to counter U.S. export restrictions on advanced AI chips, with Huawei unveiling new microprocessors aimed at reducing dependency on American technology. The country's state-driven industrial mobilization has led to notable progress, though significant gaps remain between Chinese and U.S. capabilities. Meanwhile, LG has scaled back external advertising on Windows PCs following user complaints, although internal app promotions continue. These developments highlight broader shifts in both tech and logistics sectors. In late July, Huawei presented new AI microchips during a high-level meeting attended by Vice Premier Minister Ding Xuexiang, one of President Xi Jinping’s closest advisors. This move was part of a larger strategy to achieve self-sufficiency in key areas of AI hardware within three years, challenging U.S. leader NVIDIA. The decision came after the United States imposed strict limits on exporting cutting-edge AI processors and related technologies, which had threatened China’s rise as a global tech superpower. According to reports from the Wall Street Journal, Beijing launched a massive mobilization of domestic industry, reminiscent of the secretive state projects of the 1960s, including the development of nuclear weapons and satellites. Under Ding’s leadership, specialized teams were formed to analyze and master each segment of the complex semiconductor supply chain. The government applied pressure on major tech firms, warning that resistance to using indigenous chips would be viewed as treasonous. This approach has yielded results: according to investment bank Morgan Stanley, the share of foreign AI chips in China’s market dropped from 90% in 2021 to under 60% by 2025. New chip generations aim to bring this figure down further, to around 25% over the next five years. A turning point was the release of the Ascend 950 processor, which demonstrated surprising performance. Companies such as Meituan have since trained their language models exclusively on Chinese hardware. On the software side, Chinese startups have also made rapid strides. The Beijing-based firm Moonshot AI recently unveiled the Kimi K3 model, which performed closely to international benchmarks set by companies like OpenAI. However, developers face challenges due to insufficient computing power. Just two days after launching premium services, Moonshot had to temporarily suspend registrations due to capacity constraints. Despite these advances, the gap in computational power between the U.S. and China remains substantial. Analysts at Bernstein estimate that NVIDIA’s top chips offer roughly four times the processing power of Huawei’s best models. As of 2025, China’s total AI computing capacity accounts for approximately 14% of the U.S. level. U.S. sanctions have blocked access to modern extreme-ultraviolet lithography systems (EUV), forcing manufacturers like SMIC to rely on older deep-ultraviolet equipment (DUV). There are indications, however, that an EUV system from Dutch manufacturer ASML might have reached China. Huawei employs sophisticated multi-exposure techniques and innovative chip design to produce silicon in the 7-nanometer range. Industry experts describe this process as “fine woodwork,” noting that it leads to lower yields, higher error rates, and increased costs. To compensate for individual chip performance deficits, Huawei is increasingly focusing on network integration, deploying hundreds of interconnected components to enhance overall efficiency. Meanwhile, LG has responded to user concerns over intrusive advertisements on its monitors running Windows. Following protests, the South Korean company has agreed to disable external ads for antivirus software from McAfee. However, internal app promotions, such as the “LG Calibration Studio” for display calibration, will likely continue. Microsoft did not comment on the continuation of these internal promotions. The changes appear limited to North America, with no similar cases reported in Europe. Microsoft stated that LG will cease external advertising in Windows in the European region moving forward. In Germany, the logistics sector is grappling with how to reduce strain on delivery workers. DHL’s head, Nikola Hagleitner, has called for stricter regulations requiring two workers to deliver packages exceeding 23 kilograms. She argues that heavy lifting poses serious health risks, citing that nearly one-third of workplace injuries in the postal and parcel business relate to musculoskeletal issues. DHL plans to implement this policy across the entire industry, despite opposition from some competitors. The debate reflects growing concerns over worker safety amid rising package volumes.