China's AI hardware suppliers can't keep up with surging demand because critical components are scarce and production capacity is lacking, Bloomberg reports. "I believe these capacity bottlenecks are unlikely to be resolved anytime soon, certainly not within 2026," says Xiang Xiaotian, director at Shanghai Chengzhou Investment Management.
Optics makers like Zhongji Innolight have aggressively stockpiled chips, circuit boards and components. First-quarter prepayments climbed more than 10-fold to 1.5 billion yuan. Foxconn Industrial Internet also stocked up on raw materials to ensure "smooth mass production and delivery." Suzhou TFC Optical Communication confirmed that "there are still some shortages of certain materials, which has had a certain impact on related products."
New factories in Thailand and Vietnam are meant to ease the pressure but don't yet match Chinese production standards. Despite some companies missing analyst estimates, share prices remained largely stable. According to Xiang, "the market is largely overlooking these concerns." The launch of new models like DeepSeek-V4 could further fuel demand.
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