China Reviews Broadcom's Dominance in State-Owned Data Centers, FT Reports

Chinese authorities are examining the use of Broadcom Inc.'s (NASDAQ:AVGO) networking switches within state-backed data centers, signaling a potential move to reduce reliance on foreign technology, the Financial Times reported on Wednesday.

Details of the Review

According to the report, which cited people familiar with the matter, China's State-owned Assets Supervision and Administration Commission (SASAC) has recently surveyed the number of Broadcom switches deployed in data centers controlled by state-owned enterprises.

The survey uncovered a significant dependence on the U.S. chipmaker's hardware. In some state-controlled companies, Broadcom's switches were found to account for as much as 90% of the equipment, one person told the FT. These findings could lead to informal government guidance for these enterprises to decrease their use of Broadcom products.

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Market Context and Implications

This review is a component of Beijing's broader strategic push for “domestic chips for domestic use,” aimed at strengthening local technology suppliers and enhancing national security. The move could directly benefit Chinese competitors such as Huawei, H3C Technologies, and Ruijie Networks (SZ:301165).

In the high-end data-center switch market in China, Broadcom competes with Nvidia (NASDAQ:NVDA) and Huawei. However, state-backed facilities have already been restricted from using certain Nvidia products due to U.S. export controls, a situation that has created opportunities for domestic firms. A similar reduction in Broadcom's footprint would further accelerate this trend toward supply chain localization in China's critical digital infrastructure.