China is making strides in semiconductor production deemed crucial for artificial intelligence despite US export controls and diffusion rules, a new report suggests.

Recent semiconductor analysis focusing on China says since the start of the year, Beijing has taken inventory of and redistributed some of its semiconductor production tools acquired in recent years, and in turn put them under control of China-based companies best-placed to use them.

One of those is Semiconductor Manufacturing International Corporation (Smic), China’s largest chipmaker, says the report from Jefferies, an investment banking and capital market firm based in New York.

This move, according to the report, and other Beijing strategies, suggests US efforts to thwart China’s progress in the continuing AI race have been less than effective.

“Smic is adding capacity in Shanghai, Shenzhen and Beijing for advanced node capacity … they will have nearly 50,000 (microchip) wafers per month of capacity this year,” Jefferies says.

Such a forecast runs counter to others by Jeffrey Kessler, US undersecretary of commerce for industry and security.

“Our assessment is that Huawei Ascend chip production capacity for 2025 will be at or below 200,000 and we project that most or all of that will be delivered to companies within China,” Mr Kessler said. He warned that China was working to blunt the impact of any US measures to slow its chip output.