This start-up has Huawei on its guard.

Cambricon is gradually rising to become China's leading AI chip manufacturer. Photo: Bloomberg .

Cambricon, a Chinese chip design company, is emerging as a direct competitor to Huawei in the artificial intelligence (AI) chip race. With its software advantages and government backing, Cambricon is being bet on by investors to become one of the pillars of Beijing's technological self-reliance strategy.

In 2019, Cambricon lost almost all of its revenue when Huawei stopped using its chips in smartphones. Six years later, the situation has completely changed. The semiconductor manufacturer's share price doubled in just one month, reaching 1,495 yuan ( $209 ), giving it a market capitalization of 580 billion yuan ( $81 billion ). This surge was driven by expectations that the company would supply chips to DeepSeek, the Chinese AI company that recently made groundbreaking technological advancements that have shaken Silicon Valley.

Amidst market euphoria, Cambricon issued a warning that its share price may have become "decoupled from fundamentals." However, policymakers still place considerable faith in the company, aiming to counterbalance Huawei as Beijing pushes for domestic chip production.

Founded in 2016 by the Chinese Academy of Sciences (CAS), Cambricon quickly launched its first AI chip. CAS still holds 15.7% of the shares, making it the second largest shareholder after founder Chen Tianshi. Huawei was a customer accounting for 98% of Cambricon's revenue in 2018.

However, the company faced difficulties until 2022, when the US blacklisted Cambricon and forced it to sever its partnership with TSMC. Despite this, from 2020 to 2024, the company still invested 5.6 billion yuan ( US$81 million ) in R&D, focusing on developing software to make the chip compatible with models trained on Nvidia GPUs.

According to a ByteDance engineer, software compatibility makes Cambricon chips easier to deploy than Huawei's Ascend. Currently, the company's customers include major players such as China Telecom, Alibaba, Tencent, and Baidu, which compete directly with Huawei in cloud computing, networking equipment, and self-driving cars.

However, production capacity remains a major bottleneck for this fledgling chip manufacturer. Cambricon relies on SMIC for its 7nm chip production. Last year, the Chinese government directed SMIC to allocate significant capacity to Cambricon instead of Huawei. The Financial Times reports that SMIC plans to double its 7nm chip production capacity by 2026, opening up further growth potential for the company.

"There has never been a capacity problem that China couldn't solve. Construction is what we will do if it's profitable," commented a semiconductor investor.

Currently, Cambricon's priority is securing a stable supply from SMIC to meet rapidly growing market demand.