China's AI hardware suppliers struggle to meet demand as component shortages and capacity gaps persist

China’s AI hardware supply chain is straining under surging demand as shortages of key components and limited manufacturing capacity slow production, industry participants say. Xiang Xiaotian warned that “these capacity bottlenecks are unlikely to be resolved anytime soon, certainly not within 2026,” underlining that the mismatch between orders and output is likely to persist through at least next year. This shortfall matters because it is already delaying deliveries and forcing customers and suppliers to take costly short‑term measures to secure parts and inventory.

Optical component makers have been among the most active in reacting to the squeeze. Companies such as Zhongji Innolight have been stockpiling chips, circuit boards and other components to keep production lines running during intermittent supply interruptions. That precautionary buying has been accompanied by a sharp rise in upfront payments: some firms reported first‑quarter prepayments climbing more than tenfold to about 1.5 billion yuan as customers and vendors attempt to lock in capacity and materials.

The reporting names several other firms active in the AI hardware ecosystem, including Foxconn Industrial Internet, Suzhou TFC Optical Communication and DeepSeek V4. These companies are identified as part of the broader supplier landscape that is grappling with tight component availability and constrained throughput at fabs and assembly plants. The cumulative effect is a tighter near‑term market for AI‑grade hardware components, especially for optics and specialized chips that are difficult to source quickly.