Marginalizing Europe

In this age of geoeconomic competition, technology is at the core of any country’s global power and agency. Amid growing demand, artificial intelligence and the computational hardware that powers it are arguably the most important of these technologies. China has recognized this and is charging ahead to diffuse its AI technology internationally.

As it exports, China is building AI spheres of influence where it can dislodge competing AI technologies from markets. One of its core AI exports is computational power, also known simply as chips. New data presented for the first time in this policy brief reveal that China is a prolific supplier of chips to international markets – countering a general conception that its chipmaking is focused on domestic needs.

Yet, until now, the public debate in Europe has largely neglected the subject of its own AI-related exports, such as chips and related hardware, focusing almost entirely on the threat of Chinese competition and the necessity of achieving AI sovereignty at home. China, on the other hand, has been shoring up its technological autonomy while pushing compute exports to go global. The imminent race for international AI markets means German and European policymakers must devote more resources to this competition – for both strategic and economic reasons.

China’s dominance in industries such as rare earths, a crucial input in advanced technologies, has given it leverage over countries with whom it competes. Likewise, Beijing can be expected to use any dominance in chip manufacturing for its own advantage. The data analyzed in this brief show that Germany and other European countries are not excessively dependent on Chinese chip imports. However, other countries, such as India – a key trading partner for Europe – are increasingly being drawn into China’s orbit and rapidly becoming part of its supply chain. Economically, this means Chinese chipmakers are competing directly with Germans. The growth in Chinese compute exports in recent years shows this competition is intensifying.

By tracing Chinese compute exports, we provide a more nuanced picture of Chinese compute diffusion than previously understood. Considering not only Chinese chip exports on their own, we differentiate between processing and memory chips and also include computers and computer parts that constitute compute more broadly. This  reveals, for example, that processing chip exports to Malaysia have stagnated, while those to Vietnam have grown. Memory chip exports, however, are more diversified – with both Vietnam and Malaysia growing in importance. This granular information leads us to conclude that Vietnam is an even more important transshipment hub for chips than Malaysia, especially when it comes to processing chips.

We also demonstrate which countries across regions are big buyers of Chinese computing infrastructure – and which are not. More fundamentally, we explore where China’s sphere of influence lies in terms of compute and what AI infrastructure trade flows between Germany and China reveal about their bilateral compute relationship. Who makes more money: China exporting to Germany or vice versa?    

While compute encompasses more than AI chips and related hardware (since not all exported chips are destined for AI applications), tracking China’s compute exports (graphics cards used in AI computing) gives us an indication of the demand for China’s chip exports in the age of AI.

Beyond demand, compute exports are also being driven by Chinese state subsidies that create industrial overcapacity in the domestic market. This overcapacity is then exported abroad to achieve dominance in European markets, undermining European industrial strength.

State Support Is Driving China’s Compute Trade Surplus

China’s 15th Five Year Plan explicitly outlines its ambition in the semiconductor field: “We will refine and perfect mature process nodes, improve advanced process manufacturing capabilities, accelerate the development of key equipment, materials, and components, and develop high-performance processors and high-density memory.”

Like other key sectors such as batteries and electric vehicles, the semiconductor industry has been the beneficiary of significant central and local government support in China. This support dates back to at least the year 2000 when the State Council published a comprehensive set of policies aimed at elevating a Chinese industry very much in its infancy – policies that continued over the next two decades. In 2020, the State Council introduced a new set of measures codifying significant benefits for microchip companies in China. These include corporate tax exemptions and reductions, investment inducements, and a commitment to helping Chinese integrated circuit companies to start exporting abroad rather than merely capturing domestic market share.

According to an OECD study published in June 2026, global industrial policies range from direct grants to tax reductions and cheaper financing. Among these, tax exemptions have been the largest factor. The study shows that, for Chinese companies, such support has played an outsized role.  In 2024, subsidies made up eight percent of Chinese corporate revenues, while comprising only four percent of revenues for companies based in European OECD countries. These subsidies helped foster competitive Chinese players in advanced memory chips – in particular, Yangtze Memory Technologies Corp. (YMTC) and ChangXin Memory Technologies (CXMT), which are today China’s largest memory makers and are also driving China’s efforts toward semiconductor autonomy. With the AI boom, global demand for all types of computing hardware components has skyrocketed and, with it, Chinese compute component exports – although the number of units exported has risen by less than their overall value, demonstrating the surge in prices.

As our trade data show, these policies are working, and they are pushing significant growth in Chinese exports. The bilateral data between China and Germany also reveal that China has a compute trade surplus. In the automotive semiconductor sector, in particular, Germany is feeling increasing pressure. While Chinese car makers still strongly rely on Germany’s Infineon for AI chips, they are increasingly producing their own semiconductors. Electric vehicle powerhouse BYD recently announced that it “is now capable of supplying all the key chips required for intelligent vehicles.” These developments show an ambition to replace foreign chipmakers with domestic ones and to increasingly export products that rely on these domestic capacities. To ensure Europe can compete with China in the future, European policymakers must now develop ways to cultivate export relationships in specific regions.

Customs Records Illuminate Compute Exports Despite Dearth of Data

Direct data on Chinese compute exports are hard to come by. We therefore examined customs data published on the website of the General Administration of Customs of the People’s Republic of China.  Using the website’s interactive tool, we searched for products related to compute infrastructure. Products on the website are classified via Harmonized System (HS) codes – the goods classifications for imports and exports established by the Brussels-based World Customs Organization. Customs authorities use these unique number codes to understand what is being imported and exported. We identified several HS codes related to compute infrastructure that provide insights into Chinese hardware exports. (We do not analyze software exports here).

Although there are many other components in the hardware compute export ecosystem, we have limited our analysis to four product categories we regard as the most relevant for compute exports. These are:

847150 - computers

Desktop Computers, Workstation Computers, Server Systems, Thin Client Computers, Blade Servers, Mainframe Computers, Network Attached Storage, Storage Area Network, Rack Mount Computers, Integrated Computer Systems

847330 - computer parts and accessories

Motherboards, RAM Modules, Graphics Cards, Hard Disk Drives, Solid State Drives, Power Supply Units, Computer Fans and Cooling Units, Interface Cards, Keyboards for Automatic […]

854231 - chips that process data and adjacent hardware

Microprocessor, Controller Vendor-Specific, Central Processing Units, Field-Programmable Gate Arrays, Application-Specific Integrated Circuits, Signal Processors, System-On-Chips, Digital Signal Processors

854232 - memory chips

NAND Flash Memory Chips, DDR SDRAM, EEPROM, SRAM, DRAM, MultiMediaCard, NOR Flash Memory ICs, QDR SRAM, EDO DRAM, GDDR SDRAM

We do not know the exact share of AI compute exports, as the data gathered using these HS codes likely also include some components destined for non-AI settings. This is because the share of AI-related Chinese compute exports likely rose significantly in the period examined – from 2021 to the end of 2025, driven by the surge in demand for AI hardware.

Due to capacity limitations, we did not examine Chinese compute exports to every country. Instead, we selected highly industrialized countries in given economic and regional groupings that are therefore likely to import Chinese compute. These are:

• Brazil, Russia, India, and South Africa (BRICS 2011 constellation)
• Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam (ASEAN’s six largest economies, also known as ASEAN 6)
• Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States (G7)

Chinese Compute Exports Have Strengthened

Although the media has reported on the rise in Chinese chip exports, there has been little concrete data on which chips are being exported and their primary destinations. Little is also known about broader compute exports, such as computers and computer parts. As one of the first detailed studies to illuminate such exports, we show that China is running a global trade deficit in compute, but that this deficit is narrowing. China’s position is strengthening.

China Has Reduced Its Global Compute Trade Deficit

In 2025, China exported compute valued at CNY1.603 trillion (EUR 206.5 billion) globally, while compute imports were a staggering CNY 2.642 trillion (EUR 340.3 billion. This amounts to a compute trade deficit of CNY1.039 trillion (EUR 133.8 billion), down from CNY1.108 trillion (EUR 142.8 billion) in 2021. Thus, compared to 2021, Beijing’s trade deficit has narrowed by around 6.3 percent to CNY 69 billion (EUR 9 billion) in 2025.

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Global Compute Exports Have Surged

In 2021, Chinese compute exports amounted to CNY 1.17 trillion (EUR 151 billion). Over the following five years, the value of Chinese global compute exports increased across all four HS code categories (see ­Figure 1 on page 5). The greatest gains were for chips that process data, rising 50 percent to CNY 171 billion (EUR 22 billion), and those that store data, up 36 percent at CNY 177 billion (EUR 23 billion). Computer exports rose by only 11 percent to CNY 15 billion (EUR 2 billion) and computer parts and accessories by around 30 percent to CNY 68 billion (EUR 9 billion).

Vietnam and Malaysia Are Top Compute Export Destinations

Most likely due to their role as major transshipment hubs, the data show Malaysia and Vietnam were top export destinations for Chinese compute (goods with the HS codes 847150, 847330, 854231, and 854232) between 2021 and 2025. This is because China exports goods such as electronics to Malaysia and Vietnam for minor processing, and these are then shipped to the United States, where demand for them has risen significantly. In this way, China is able to circumvent US tariffs. Because it imports many finished compute products, such as desktop computers or hard drives, the United States also figures highly in the study as an export destination. Both of these findings confirm our expectations. However, the revelation of India as a top compute export destination comes as a surprise. The bilateral geopolitical situation between India and China has been tense in recent years. India’s technology restrictions targeting China have been harsh. In 2020, for instance, it imposed a domestic ban on the procurement of Chinese power hardware. In 2025, China’s largest compute export markets in terms of revenue among the 17 countries examined were:

• Vietnam at CNY 205 billion (EUR 26.4 billion)
• Malaysia at CNY 97 billion (EUR 12.5 billion)
• the United States at CNY 54 billion (EUR 6.95 billion)
• India at CNY 53 billion (EUR 6.8 billion)

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Computer Exports to Malaysia Up Significantly

The data shows the top three destinations for Chinese computer exports (HS code goods 847150) to be Japan, Malaysia, and the United States. While demand for Chinese products was mostly stable across the countries examined, Malaysia’s imports took off substantially in 2024 and 2025 – likely due to its role as a processing location and transshipment hub.

The US Is a Major Consumer of  Computer Parts and Accessories

When it comes to computer parts and accessories (goods with the HS code 847330), the largest export destinations are the United States, Vietnam, and Malaysia. The US figures as a large consumer of electronics products, while Vietnam and Malaysia are part of China’s export supply chain.

Growing Demand for Chips That Process Data and Adjacent Hardware

Chinese processor chips (included in HS code 854321) are mostly shipped to Vietnam, Malaysia, and increasingly also to India, potentially showing growing demand in India. But unlike Vietnam and Malaysia, India is unlikely to become yet another transshipment hub for Chinese chips, as India is pursuing its own dedicated effort to achieve greater self-sufficiency in chip manufacturing.

Vietnam’s Memory Chip Demand Shows Deepening Trade Relationship

As with data processing chips, Vietnam, Malaysia and India are the largest export markets for memory chips (goods with the HS code 854232) by far. While Indian and Malaysian imports grew gradually in the period, Vietnamese demand jumped significantly in 2025, showing a recent substantial deepening of its trade compute relationship with China.

Over the period, Chinese compute exports to the most developed countries (G7), such as to the United States, the UK, France, and Japan, have remained largely stable. However, the data show that other industrialized countries, such as India, Vietnam, and Malaysia have deepened their compute trade relationship with China considerably. As Europe is currently forging closer ties with India, including its 2023 Memorandum of Understanding on deepening semiconductor ties, policymakers should take note of this development.

China’s Compute Trade Surplus with Germany Has Narrowed

Germany’s total global share of processing chip exports was 5.7 percent in 2025 compared to China’s global share of one third. For this reason, China’s compute trade surplus with Germany is not surprising, even though Germany plays a central role as Europe’s top processing chip exporter and is home to Europe’s largest semiconductor cluster in Lower Saxony.  

Nevertheless, China’s trade surplus with Germany has narrowed in recent years. In 2025, China exported CNY 16.1 billion (EUR 2.077 billion) of compute to Germany, while importing around CNY 13.4 billion (EUR 1.7 billion). While this means China exported CNY 2.7 billion (EUR 350 million) more compute than it imported from Germany, its trade compute trade surplus has shrunk since 2021, when it was roughly CNY 8.7 billion (EUR 1.1 billion).

Processor Chip Exports to Germany Are Striking

Significantly, China made more money from processor chip sales to Germany in 2021-2025 than it did from computers, computer parts or memory chips, with the value of processor chip exports rising by CNY 2.4 billion (EUR 309 million) in the period. The value of computers sold to Germany decreased by CNY 1.5 billion (EUR 190 million) during the period examined. Computer parts remained steady, down by CNY 80 million (EUR 10 million), along with memory chips, which were up by CNY 450 million (EUR 57 million).

Increase in Imports from Germany Driven by ­Processing Chips

Over the five years, China’s compute imports from Germany rose from CNY 6.1 billion (EUR 790 million) to CNY 13.4 billion (EUR 1.7 billion). Imports of computers, computer parts, and memory chips remained stable. The increase in imports was driven almost entirely by processing chips, whose import value rose by CNY 7.6 billion (EUR 980 million).

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Conclusion and Recommendations for the EU and the German Government

The current public debate in Europe and Germany regarding China and trade in computing hardware frequently revolves around the use of policy measures such as export controls to manage threats from China to Europe’s economic competitiveness or national security. Such policies prevent Chinese companies from buying the latest lithography machines from Dutch manufacturer ASML, which are required for making advanced semiconductor chips, or they stop China from importing the latest, most powerful semiconductors made by the leading US chipmaker NVIDIA.

Our study instead examines which countries have deepened their compute relationships with China. The data suggest that this includes countries important to Europe’s efforts to become more competitive and diversify technologically beyond China toward trading partners such as India, Malaysia, and Vietnam – countries that China is also currently tapping as key export markets. The issue is that when Europe’s semiconductor industry becomes more intertwined with countries in China’s technology export ecosystem, and thereby in its technological sphere of influence, such as India, it may undermine Europe’s efforts to de-risk from China.

India is not the only country China aims to draw into its technological sphere of influence. ASEAN countries are also the prime focus of China’s state-led strategy that aims to tie these neighboring countries into Chinese-built AI compute infrastructure. Although China’s dominance in compute hardware is far from complete, our findings show that some countries are likely already in China’s sphere of influence – in particular, Malaysia and Vietnam. This means Europe must examine how it can compete with China in bringing Malaysia and Vietnam closer to Europe’s technological supply chain.

Southeast Asia is the region that most urgently requires European policymakers’ attention. As China deepens its compute footprint in the region, Europe is bound to be pushed out of these markets. Other regions and markets may follow. As China increases semiconductor exports to Malaysia, for example, Malaysia will be drawn further into China’s compute sphere of influence. In August 2025, the Malaysian semiconductor assembly and test provider Inari Amertron Berhad and Chinese chipmaker Sanan Optoelectronics announced their plan to jointly buy 100 percent of Lumileds, a Dutch automotive semiconductor company that holds sizable technology assets in the US and makes technologies the United States considers to be dual-use (military and civilian). The deal would have gone through if the United States had not denied regulatory approval on the basis of national security concerns. In short, because Malaysia’s role as a transshipment hub means closer relations to China in the broader semiconductor ecosystem, this also comes with national security concerns for Europe. Europe, on the flipside, is currently present in Malaysia, with semiconductor plants belonging to  Austria’s AMS-Osram and Germany’s Infineon as well as test facilities owned by German engineering and tech company Bosch, among others.

Recommendations

• German and European chip policy has largely focused on increasing capacity to meet domestic consumption needs. However, as our evidence shows, European chip policy needs a stronger export component and must include competition with China abroad, particularly in regions that are most fought over, such as Southeast Asia.
• In this region, the main emphasis should not be to merely increase European exports, but more importantly, to tie the region into a European compute export network that can compete with one that is China-centered. This network would provide a much-needed competitive counterbalance to China’s aim for a system  built around a single country’s dominance with concomitant potential for coercion.
• European policymakers should consider establishing priority regions for exporting European compute and AI exports more broadly, e.g., the Balkans, Eastern Europe, North Africa and potentially the Middle East. It is in Europe’s core interest to ensure that these regions are closely intertwined with a European technological ecosystem, rather than a Chinese sphere of influence due to the potential economic, political, and national security consequences.
• When tackling these challenges, Germany and Europe should avoid losing time by pursuing extensive, complex and time-consuming strategies. Instead, they should channel funds and projects to strengthen computing and AI ties between Europe and these regions. Such an early effort could potentially mitigate future Chinese computational and AI influence-seeking.