Chinese AI Firm DeepSeek Develops Own AI Chips Amid US Export Ban

Chinese artificial intelligence company DeepSeek is developing its own AI chips to reduce reliance on Western suppliers like Nvidia, whose most advanced chips are banned from import into China under US sanctions, Reuters reported. DeepSeek's chips are designed for the inference phase of AI models, when they respond to user queries, unlike Nvidia's GPUs which are mainly used for training AI models. In the inference stage, CPUs are more commonly used, where Nvidia faces stronger competition from companies like Intel.

If successful, DeepSeek's efforts could reshape China's AI chip industry, which currently depends heavily on the black market to import high-performance chips. However, significant challenges remain, especially in establishing manufacturing capacity to produce these chips at scale. The US export ban also restricts the sale of chipmaking equipment to China, complicating local production of advanced semiconductors.

Currently, most AI chips in China come from Huawei, which produces them with a local partner. Although Huawei's chips are considered less advanced than Nvidia's, the company holds about half of China's $50 billion local chip market. Huawei's dominance is being challenged by competitors like Alibaba and Baidu, who are also developing chips.

DeepSeek's chip development began about a year ago and is still in early stages. The company is actively seeking external partners and has increased hiring of chip engineers recently. Earlier, in January 2025, DeepSeek attracted global attention by unveiling an AI model with capabilities comparable to those of US firms like Google and OpenAI but trained at a fraction of the cost. This initially caused a temporary panic in AI and chip stocks due to fears it would reduce global demand for AI training chips. However, the panic subsided when it emerged that DeepSeek had leveraged existing US models in its training process. Currently, companies such as Nvidia and OpenAI maintain significantly higher valuations than at the time of DeepSeek's announcement.

The development of indigenous AI chips by DeepSeek reflects China's strategic push to overcome US-imposed technological restrictions and build self-reliance in critical AI hardware.