Huawei is encountering obstacles in production due to soaring demand for its AI chips, resulting in delays in manufacturing its high-end Mate 60 smartphones, according to a report from Reuters. The production facility responsible for both Ascend AI chips and Kirin chips is facing constraints, with a low yield rate affecting the quality of output. This predicament highlights the intricate challenges Huawei faces as it contends with global competition in AI technology amidst the ongoing Sino-US technological rivalry and seeks to revive its smartphone division following US sanctions in 2019.

Sources familiar with the situation informed Reuters that Huawei has prioritized the production of Ascend chips over Kirin chips, leading to the slowdown in manufacturing Mate 60 smartphones. This strategic shift underscores Huawei's efforts to stay competitive amid surging demand for AI chips. The intensifying global race for AI functionality, combined with US restrictions on the sale of AI processing chips to China, has compounded Huawei's challenges, prompting the company to explore domestic alternatives.

Analysts speculate on Huawei's chip manufacturing capabilities, noting advancements in chip technology evidenced by the unexpected August launch of the Mate 60 series featuring Chinese-made chips capable of fifth-generation (5G) telecommunication speeds. The production bottleneck, particularly the consistent unavailability of Mate 60 handsets, sheds light on the complexities of Huawei's chip manufacturing process. The company is reportedly working to enhance the yield rate, aiming for the current production arrangement to be a temporary measure.

Huawei's struggles in AI chip production extend to other products, including the Ascend-equipped computing unit MDC 810, which powers advanced driver assistance systems. Reuters recently reported that Chinese automakers had to postpone the delivery of flagship models due to production issues with the MDC 810.