China reviews Broadcom switch use in state-backed data centres

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China reviews Broadcom switch use

Highlights

China's Sasac has surveyed state-owned data centres, finding Broadcom switch penetration could be as high as 90%, as part of a campaign to boost domestic chip use.
The review investigates whether Broadcom's bundling practices have restricted access for local vendors like H3C Technologies, Ruijie Networks, and Huawei to the state-backed data centre market.
Shifting procurement guidance favors H3C and Ruijie, with government agencies spending billions annually on IT, while private data centres like ByteDance and Alibaba remain unaffected by potential Broadcom restrictions.

State survey targets switch dependence

As reported by Financial Times, China’s State-owned Assets Supervision and Administration Commission, or Sasac, has been surveying state-controlled data centres in recent weeks to determine how many Broadcom switches they use. People familiar with the exercise say the review forms part of a broader “domestic chips for domestic use” campaign aimed at expanding the adoption of Chinese semiconductors and AI products across the public sector.

High-end switches are critical components in data centres because they move very large volumes of data at high speed. One person familiar with the survey says the initial findings show Broadcom’s penetration rate among state-owned companies could be as high as 90%, and that the review could lead Sasac to issue informal guidance to curb the use of Broadcom switches in domestic facilities.

The survey is also examining whether Broadcom has used its market position to bundle products or require large purchases of switch chips, in some cases up to tens of thousands of units. According to the people, that practice has limited the ability of Chinese companies including H3C Technologies and Ruijie Networks to source from other switch suppliers such as Huawei.

Domestic suppliers stand to gain

Demand for AI training from Chinese companies is making data centre switches an increasingly valuable market, potentially worth billions of dollars in sales for local vendors. Broadcom, Nvidia and Huawei all sell high-end switches in China, but people familiar with the market say state-backed data centres are no longer allowed to use Nvidia products while many still contain substantial numbers of Broadcom switches.

H3C and Ruijie are often listed as preferred vendors in procurement guidance used by government agencies, public institutions and state-owned enterprises, which spend billions of dollars each year on IT products. Beijing is also encouraging a shift toward domestic switches, while highlighting Huawei’s progress in improving connectivity, a key measure for training and running AI models.

Industry experts say Huawei’s switches are less energy efficient than Broadcom’s, increasing electricity costs for users. Huawei’s data centre business has usually been the largest buyer of its own switches, while H3C and Ruijie, which compete with Huawei in building data centre racks, have relied on Broadcom.

One sales representative at a data centre rack manufacturer says any potential restriction on Broadcom switches does not apply to privately operated data centres such as those run by ByteDance and Alibaba. The representative adds that existing equipment would not be removed and describes the move as part of a broader effort to “nationalise the supply chain.”

Sasac, Broadcom, H3C and Ruijie did not respond to requests for comment.

In our earlier article on Nvidia and Broadcom’s outlook in the AI infrastructure buildout, we examined how investor debate over AI spending is evolving while both companies retain strong multiyear growth visibility amid tight supply. We also noted that valuations for both stocks had compressed versus historical averages, potentially providing support even if sentiment cools, as attention rotates across different parts of the AI chip ecosystem.

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