China’s AI chip firms are going public fast. But its crown jewel is staying private

Published Wed, Jan 14 20269:43 PM ESTUpdated Wed, Jan 14 202611:17 PM EST

Key Points

China’s AI chip IPO boom has boosted smaller firms, but analysts say Huawei still dominates.
Manufacturing constraints at SMIC limit growth for smaller Chinese chip designers.
Huawei’s full-stack strategy sets it apart, even as it stays private.

China's artificial intelligence chip sector has drawn heavy investor interest following a string of successful initial public offerings. But while those newly listed firms have led market gains, analysts say they are not leading China's effort to reduce reliance on Nvidia. Instead, most analysts point to tech giant Huawei and its secretive chip unit, HiSilicon, as standing out among domestic competition, not only in technological advancement, but also in scale and its broader supply chain. Huawei , however, is not expected to go public. The U.S.-sanctioned company, best known for its smartphones and telecommunications business, has long maintained its intention to remain privately held, unlike smaller chipmakers that have recently listed shares. Huawei, in response to CNBC inquiries, declined to comment on its intention to list or stay private. That stance has limited options for mainland investors seeking exposure to China's push to build a domestic alternative to Nvidia, currently the world's most valuable company by market capitalization. Instead, investors have turned to smaller firms such as Biren Technology , MetaX , Moore Threads and Shanghai Iluvatar CoreX Semiconductor , all of which were listed recently. Moore Threads, a graphics processing unit developer founded in 2020, raised over $1.1 billion in its public listing on Dec. 5 . MetaX, which also develops GPUs, followed on Dec. 17, raising nearly $600 million . Chinese tech giant Baidu recently also announced plans to spin off its AI chip subsidiary, Kunlunxin , and list it in Hong Kong. Huawei is still likely to remain ahead of other Nvidia alternatives in China's AI processor and GPU market... The reason is not just any single chip, but the stack. Principal analyst at Counterpoint Wei Sun Analysts say that despite those firms' strong market performance, Huawei continues to dominate China's AI processor market in terms of market share and breadth of offerings. In a report last month, analysts at Bernstein estimated that Huawei and Nvidia were neck and neck in China, with each accounting for about 40% of processor sales by dollar value. Bernstein projected Nvidia's share would shrink to 8% under export restrictions, while Huawei's share could rise to a dominant position at 50%, subject to policy changes. Cambricon, China's largest AI chipmaker by market capitalization, was expected to hold about 9% of the market, with smaller firms such as Hygon and MetaX trailing further behind. While analysts expect Chinese players to continue capturing a greater share of the domestic market, they say the sector is also due for consolidation. "Semiconductor companies tend to consolidate with bigger players in order to invest in higher research and development," said Qingyuan Lin, a senior analyst covering China semiconductors at Bernstein. Full stack Huawei has expanded its Ascend series of AI chips in recent years and plans to launch its next-generation Ascend 950 in 2026. Though these chips remain less powerful than their cutting-edge counterparts from Nvidia on a one-to-one performance basis, analysts said other innovations have set the Shenzhen-based firm apart in China. "Huawei is still likely to remain ahead of other Nvidia alternatives in China's AI processor and GPU market," said Wei Sun, a principal analyst at Counterpoint. "The reason is not just any single chip, but the stack... That matters more than headline specs." The "stack" refers to multiple layers of the AI computing supply chain, spanning chip design, data center construction and software development. Last year, Huawei released its "AI CloudMatrix 384" system, which links large numbers of its cutting-edge Ascend chips to maximize performance . Analysts found that the cluster outperformed Nvidia's leading system at the time on some metrics. Besides AI infrastructure, Huawei is also developing its CANN software layer to compete with Nvidia's CUDA, putting them in direct competition across multiple layers of the AI ecosystem. Sun said that these factors have helped give Huawei a clear lead, though it does not mean the firm is unchallenged. Other technology giants in China, including Baidu , have been pursuing similar full-stack strategies. Production constraints Many newly listed Chinese AI chip firms, such as Moore Threads, are designers rather than manufacturers, meaning they rely on external foundries to produce chips. Nvidia, for example, depends on Taiwan Semiconductor Manufacturing Co to fabricate its designs. For Chinese chip designers, the closest thing to TSMC at their disposal is Semiconductor Manufacturing International Corp., or SMIC. However, according to analysts, SMIC's limited production capacity has constrained output, with Huawei so far receiving priority access. "The situation at SMIC, where Huawei is being prioritized, probably under some direction from industrial planning authorities, leaves little capacity for the other leading GPU makers such as Biren, MetaX, Enflame, Illuvatar, Sophgo, and others," said Paul Triolo, Partner and Senior VP for China at DGA Group. "Once some of the new companies burn through IPO revenue, there could be a reckoning if they can't get sufficient production at SMIC and the market uptake for their product is slow." Staying private Despite Huawei's dominance in China's AI chip sector, analysts do not expect the company or its chip arm, to go public any time soon. But that's not due to a lack of interest. "Huawei, as a listed company, would be getting a ton of investor interest, given its broad product line, significant lead in AI hardware and software development," said DGA Group's Triolo. However, Huawei founder Ren Zhengfei has preferred to retain internal control over all aspects of the business rather than answer to shareholders, according to analysts. The firm is also less likely to see a need to raise capital as compared to smaller competitors, given the profitability of its other businesses, and funding from Beijing's backing of the domestic semiconductor industry. "In a post-Ren era, it is not inconceivable that the company considers listing," Triolo said. "But so far there has been no problem with revenue and funding for R & D, given the success of Huawei's telecommunications and smartphone business." Still, Ren reportedly wrote in a 2021 letter to employees that Huawei could "gradually enter the market in the future."