Not Chips Alone: China Profits from the AI Hardware Shortage in the US

Sanctions and restrictions on chip deliveries have not prevented Chinese companies from successfully entering the AI infrastructure market in the United States. Data centers specializing in AI workloads require powerful power supply systems and advanced cooling solutions, and China has a large number of manufacturers producing such equipment. Products such as power transformers, batteries, and cooling systems still make their way into the US (they are not subject to sanctions) and, moreover, are in high demand.

Speed Versus Shortage

US data centers are in urgent need of upgrades to their power systems. Despite this, the United States imports up to 80% of the equipment required for this purpose. While the US is still unable to close this gap on its own, Chinese suppliers such as Sieyuan Electric are capitalizing on weaknesses in the local market.

Chinese companies can complete deliveries within one year, whereas suppliers from other countries often delay shipments by two to three years. As a result, orders for Chinese manufacturers are growing several times faster than demand in the domestic market.

Monopoly on Cooling and Energy Storage

China also maintains leadership in several critically important adjacent sectors, including:

• Batteries: Exports of Chinese batteries have grown by 61%, and this segment currently has no direct competitors.
• Cooling: Chinese components have become indispensable for maintaining the required temperatures in data centers.

According to forecasts, spending on AI infrastructure will reach $1 trillion by 2030. While the US focuses on restricting processors, China is effectively supplying core infrastructure equipment faster and at lower cost than anyone else.