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Investing.com -- China has made impressive progress in high-end chip design but still faces structural barriers that prevent it from matching the U.S. in semiconductor manufacturing anytime soon, according to Alpine Macro.
Strategist Noah Ramos says that “attempting to predict breakthroughs at the cutting edge of high-tech manufacturing is a fool’s errand,” though the gap between the two countries is narrowing across parts of the AI technology stack.
While Huawei has “nearly leveled the playing field with Nvidia in terms of chip design,” Ramos noted, China remains constrained by its inability to produce advanced silicon at scale due to a lithography bottleneck, the investment research firm said in a recent note.
Even if Huawei were to design a 3-nanometer chip, “they would lack the fabrication capability to manufacture it.” Though this has slowed China’s progress, Ramos warns that it has also created a degree of U.S. “complacency” in supporting broader AI infrastructure such as electricity generation, grid stability, and robotic components.
At the system level, Alpine argues that China is catching up faster than many expect. Despite Nvidia’s GB300 outperforming Huawei’s Ascend 910C in compute and efficiency, China’s cheaper electricity, larger power grid, and state-driven deployment model are helping it compensate for individual chip shortcomings.
Huawei, for instance, has achieved system-level parity by deploying about five times as many Ascend chips to match Nvidia’s compute output — though at a roughly 50% higher energy cost per unit.
Export controls remain a key headwind, but Ramos points out that “reverse engineering capabilities, combined with national security prioritization of building a self-sufficient AI stack, are accelerating convergence timelines.”
China’s greatest weakness lies in lithography, where it has only recently begun producing domestic deep ultraviolet (DUV) tools and remains “far from producing EUV systems.”
The strategist also flags emerging policy shifts under the Trump administration that could alter the pace of convergence.
The potential approval of H20 chip exports to China and a reported “rare earths for silicon” agreement between Trump and Xi “could represent a significant policy inflection point,” he wrote.
Overall, Ramos concludes that while he would be “surprised if the U.S. lead is entirely eroded by the end of the decade,” China’s quantity-driven strategy could narrow the performance gap meaningfully. “
The U.S. ‘edge’ is shrinking,” he said, urging investors to monitor the “quantity over quality equalizer” as Beijing continues to scale its AI ecosystem.