China plans to develop its chips without foreign tech

China’s tech giants have been trying to create their chips (semiconductors). It is a move viewed as progress approaching China’s aim to become self-reliant in technology.

However, in reality, the country is still away from its plan, even if it’s getting closer to self-sufficiency. According to one expert, China is still massively reliant on foreign technology and the chip market.

Semiconductors (chips) are vital components in everything, such as modern refrigerators, smartphones, cars, and many other electronics. Chips have also become an essential focus of the broader tech battle between China and the U.S.

China, the world’s second-largest economy, started to invest heavily into expanding its domestic chip industry. Still, it struggled to catch up with its rivals. Increasingly, semiconductors represent a sign of technological expertise and essential elements to national security for many nations.

This year, there were many announcements and reports from major technology companies from China regarding chips made in China.

This summer, Baidu launched its second-generation artificial intelligence chip called Kunlun 2. This week, Alibaba delivered a chip designed for cloud computing and servers. The Nikkei reported on Wednesday that Oppo (Smartphone maker) is also promoting its high-end processors for its handsets.

While these companies are creating their chips, they still need to rely on foreign tools. China’s internet giants are still massively reliant on foreign companies regarding the broader supply chain and manufacturing.

A partner at Bain & Company, Peter Hanbury, told CNBC that this is a small step in becoming more self-sufficient in chips. 

These companies are designing their chips to create semiconductors for specific applications to separate them from their competitors.

Foreign-dominated supply chain

Alibaba’s new Yitian 710 chip is based on a design from British semiconductor company Arm. They build it upon the 5-nanometer process, which is considered the most advanced chip technology today.

Baidu’s chip is based on the 7-nanometer process, while Oppo reportedly works on a 3-nanometer chip. That is why China started to build its own chips, as it does not have a company able to manufacture these leading-edge chips (semiconductors). Then, they will need to depend on just three companies outside of China: TSMC from Taiwan, Intel from the U.S., and Samsung in South Korea.

According to Hanbury, the semiconductor (chip) ecosystem is vast and complex. Therefore, raising self-sufficiency is very challenging across a broad range of capabilities and technologies.