China Gains Ground as US Chip Controls Backfire, Says Rakesh Kumar

Rakesh Kumar, a professor of electrical and computer engineering at the University of Illinois Urbana-Champaign, has spent four years as a vocal academic critic of Washington’s strategy to curb China’s chip industry through export controls. His recent pronouncements, delivered with a touch of vindication, suggest his predictions are coming to fruition.

Shifting Market Dynamics

Data from the first half of 2026 indicates a significant shift in China’s AI accelerator market. Nvidia’s market share dropped to 34%, a 44% decrease year-over-year, translating to 678,000 units shipped. While still substantial, this represents a smaller portion of an expanding market.

Meanwhile, Huawei saw its share climb to 28% in the same period, shipping 572,000 AI accelerators. This trend highlights a growing preference for domestic hardware among Chinese companies, replacing foreign products in their systems. Overall, AI accelerator shipments in China surged to approximately 2 million units in the first half of 2026.

The composition of these shipments is also evolving, with a notable shift towards non-GPU chips, a segment that poses a challenge to Nvidia’s dominance in the GPU market.

The Impact of Export Controls

Despite these shifts, the export controls implemented by the Biden administration and allied nations, including the Netherlands, have demonstrably constrained China’s access to the most advanced chip manufacturing capabilities.

The critical bottleneck remains EUV lithography, a technology essential for etching the most intricate circuit patterns onto silicon and vital for leading-edge chip production. Without access to EUV machines, China’s ability to develop domestically produced advanced chips is severely limited, despite significant investments in its semiconductor supply chain over the past decade. China continues to rely on foreign equipment for its most advanced manufacturing nodes.

In 2026, export controls on advanced computing items have moved towards a case-by-case review process, deviating from outright rejections. This approach includes individualized licensing and tariff adjustments, reflecting a renewed focus on the issue under the Trump administration.

A Strategic Resource and a Warning

Kumar’s comprehensive analysis of the semiconductor landscape is detailed in his 2026 book, “Chip Age: How Semiconductors Became the World’s Most Powerful Resource.” The book frames semiconductors as a strategic resource comparable to those that defined earlier geopolitical eras, examining supply chain vulnerabilities, great-power competition, and the escalating demand driven by artificial intelligence.

In a recent interview, Kumar also presented China as both a model and a cautionary tale for nations like India. He noted that China’s substantial state investment demonstrates the potential of dedicated commitment, but emphasized that financial resources alone did not grant access to the most advanced manufacturing tools. This continued dependence on foreign equipment, he argued, represents a vulnerability that rivals can exploit.

Implications for Investors and Policymakers

For investors in U.S. chip companies, the first-half data serves as a stark reminder that market access in China cannot be considered a stable revenue stream, as policies can shift with each administration. The robust growth in total shipments, reaching approximately 2 million units, underscores the immense demand for AI hardware in China, with a growing portion being met by local suppliers and alternative chip designs.

Kumar’s central message for policymakers revolves around understanding the second-order effects of export controls. While these measures can safeguard a nation’s technological edge at the forefront of innovation, they may inadvertently foster the development of domestic alternatives in less advanced segments of the market.