BEIJING, China: Reuters reported that due to demand for its artificial intelligence (AI) chips and manufacturing constraints, Chinese tech giant Huawei is prioritizing AI chip production and slowing production of its rival to Apple’s iPhone.

Amid a low yield rate, a proxy for production quality, Huawei has only one facility that produces both its Ascend AI chips and Kirin chips, which power its top-range Mate 60 smartphones.

However, just as the firm leads Chinese smartphone sales for the first time in more than three years, a global AI arms race and a technological standoff between the U.S. and China have forced it to focus on chips instead of phones.

U.S. sanctions against China implemented in 2019 on national security grounds has removed access to advanced chipmaking tools and hit Huawei’s smartphone unit.

Washington has also restricted sales of AI processing chips to China, a market that was 90 percent controlled by U.S. giant Nvidia before the latest restrictions in October forced Chinese customers to rely instead on domestic alternatives.

Huawei denies it is a security risk.

In response to U.S. restrictions, Beijing launched an initiative to improve China’s computing capacities, which led to local authorities announcing data center projects while boosting public and private demand for local products, especially Huawei’s Ascend series.

The Ascend 910B is China’s most competitive non-Nvidia AI chip. Huawei has prioritized production of Ascend chips over Kirin chips and, therefore, slowed the production of its Mate 60 smartphones.

The production bottleneck has affected Other Huawei products, including its Ascend-equipped computing unit MDC 810, which powers advanced driver assistance systems.

Last week, Reuters reported that due to production issues with the MDC 810, Chinese automakers had to delay deliveries of their flagship models.