Morgan Stanley has released a research report indicating that China has made substantial progress over the past 12 months in alleviating bottlenecks in equipment and semiconductor foundry capacity. With policy support, the nation's foundry capacity and chip supply are expected to meet core sovereign demand around 2028. The report notes that while policy backing can accelerate early-stage development, long-term value will depend on commercial competitiveness. Chinese AI GPU suppliers must demonstrate compelling economic benefits to sustain growth beyond 2028. Analysis reveals that China's AI data centers possess competitive total cost of ownership due to lower prices, cheaper electricity costs, and increasingly robust infrastructure. In inference workloads, cost per token is more critical than peak performance, further strengthening the competitive edge of Chinese solutions. The firm believes China's localization strategy—compensating for process technology gaps by scaling up chips, fabs, and equipment—continues to yield results. An optimistic scenario assumes domestic GPUs will expand into training workloads and potentially gain international adoption; a pessimistic outlook envisions diminishing differentiation leading to commoditization and industry consolidation. Morgan Stanley also projects China's AI chip market will reach $67 billion by 2030, implying a 23% compound annual growth rate from 2024 to 2030. It estimates 76% self-sufficiency in AI chips by 2030. The firm maintains a positive view on China's AI semiconductor supply chain, including SMIC, Naura Technology Group Co., Ltd., and ASMPT, as well as Chinese internet platforms whose AI chip investments reinforce strategic positioning.
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