(Yicai) April 7 -- A tight supply of computing power is spreading rapidly across the upstream and downstream of the information technology industry chain, reshaping the business models of China’s IT distributors while creating both cash flow pressure and new opportunities to work with leading internet companies.

The surge in demand for artificial intelligence computing power has significantly extended delivery cycles for key equipment, with channel partners telling Yicai that high-end AI servers and core components often require advance reservations months ahead. “High-end AI servers and core components basically all need to wait in line, and some projects need several months in advance to secure resources,” they said.

In the traditional IT market, distributors’ core competitiveness lies in circulation efficiency. They secured pricing advantages through bulk procurement and quickly resold products through distribution networks. High product standardization and stable supply allowed distributors to generate steady profits through this model.

However, the AI era has disrupted this dynamic. Since last year, key components such as graphics processing units and high bandwidth memory have faced periodic shortages, according to an executive at an IT channel distributor. “For some models, it’s not a matter of high prices but out of stock,” the person said.

To secure supply, many distributors have been forced to build inventory in advance, tying up significant capital. Due to the heavy capital required to stock key products such as chips and memory, Digital China Group’s operating cash flow recorded a temporary net outflow last year, company executives said at the firm’s 2025 earnings briefing earlier this month.

Shortages Open Doors to New Enterprise Clients

Despite the operational pressure, shortages of upstream components have also created new market opportunities and opened doors to cooperation with major clients that were previously difficult to access.

“Our memory products were previously mainly targeted at the to-consumer market. It took a long validation period to win major clients in the to-business market. However, amid widespread shortages, our company has begun supplying leading internet companies in recent months,” a manager at VSTECS Holdings told Yicai.

Rising supply chain uncertainty has also increased corporate acceptance of domestic computing power solutions. VSTECS said revenue from domestic computing power-related businesses rose 27 percent last year from the year before, mainly due to deeper cooperation with local computing power providers.

Digital China also disclosed that its contracted value from the internet sector exceeded CNY60 billion (USD8.7 billion) last year, rising more than ninefold from the previous year and becoming an important new revenue source.

“Last year, the electronic component distribution business achieved 40 percent growth, with a significant portion coming from breakthroughs with top internet clients,” said Li Jing, chief financial officer of Digital China, adding that the segment will remain an important revenue contributor.

According to Li Ying, chief executive of Digital China, enterprise demand for AI has shifted from early-stage “technology exploration” to “process reconstruction.” In this transition, computing power, models, and data are no longer procured separately but must be designed holistically around specific application scenarios. This shift also gives distributors opportunities to participate in full project development rather than acting solely as hardware vendors.

Digital China has therefore begun providing integrated services to leading internet companies, covering supply chains, equipment delivery, computing power leasing, and operation and maintenance services, and is now exploring entry into computing power infrastructure construction, Li Ying said.

Digital China currently holds nearly CNY5 billion (USD690 million) in orders and remains confident about the future of domestic computing power, Li added.

Editors: Tang Shihua, Emmi Laine