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China pushes to design its own chips, but still relies on foreign tech


Technologist examines the computer chip.

Sefa Ozel | E+ | Getty Images

GUANGZHOU, China — China’s technology giants have been pushing to develop their own semiconductors or chips, a move seen as progress toward China’s goal to become self-reliant in the critical technology.

China may be one step closer to becoming self-sufficient, but it still has a lot of work ahead. One expert says China remains dependent heavily on foreign technology. China also lags in the leading edge segment of the chip market.

Semiconductors play a key role in all things, from phones to refrigerators and cars to smartphones. Semiconductors are also a central focus in the wider technology war between China and the U.S.

It is second in the world. has for years invested heavilyTo boosting its domestic chip industryHowever, it is still behind its rivals from the U.S. or other regions of Asia. Many countries are increasingly recognizing semiconductors as a key element of national security and an indicator of their technological prowess.

This year, major Chinese technology firms have announced a series of developments in chip manufacturing.

This August Baidu launched Kunlun 2, its second-generation artificial intelligence chip This week AlibabaPublished a chip designed for servers and cloud computing. Oppo, a smartphone maker, is developing high-end processors to power its handsets. NikkeiReported Wednesday.

It is only a first step to becoming more self-sufficient in semiconductors.

Peter Hanbury

partner, Bain & Company

Although these companies might be creating their own chips they may still have to depend on other tools. However, China’s Internet giants still heavily depend on foreign firms for manufacturing and other supply chains.

“This is a step in becoming more self-sufficient in semiconductors but a small one,” Peter Hanbury, a partner at Bain & Company, told CNBC by email. These chips are locally made, however, a large portion of the IP is used. [intellectual property]Manufacturing, material, and equipment are still available internationally.

The reason these companies are designing their own chipsThis is possible because they create semiconductors specifically for their applications, allowing them to distinguish themselves from the rest.

Supply chain dominating foreign countries

China is dependent on foreign companies when it comes to the details of silicon design.

Alibaba’s Yitian 710 chips. This is an Arm-based architecture. The so-called 5-nanometer technology, which is the latest chip technology available at the moment, will be used to build it.

Baidu’s Kunlun 2 Chip is built on the 7-nanometer process. Oppo is working on a 3 nanometer chip, according to reports.

This is where the challenge lies for China

This country doesn’t have the ability to produce these high-quality semiconductors in such large quantities. They will have to rely on just three companies — IntelThe U.S. TSMCTaiwan, SamsungSouth Korea

China’s top chip producer SMICIt is currently years behind its companiesIn terms of manufacturing technology.

It’s more than just manufacturing. Even large companies, such as Intel or TSMC, rely on tools and equipment from other companies for their manufacturing processes.

There is power concentrated in the hands a handful of people: ASMLThe only world-leading company capable of doing so is, which is a Dutch company. making a machine that chip manufacturers needTo make the best chips.

Hanbury explained that “the semiconductor ecosystem” is vast and complicated, and it is therefore difficult to achieve self-sufficiency using a wide range of technologies and abilities.

The leading edge is generally the hardest area for self-sufficiency. This is where you will need investment money, as well as the enormous requirements of technical knowledge and experience.

Geopolitical vulnerabilities

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TSMC was responsible for manufacturing Huawei’s chips. TSMC couldn’t make chips for Huawei when the U.S. rules were introduced. It was that simple. crippled its smartphone business globally

SMIC also has its place on the U.S. blacklistIt is therefore restricted in its ability to access American technology.

For Chinese firms currently creating their own chips, these sanctions may be an issue.

Hanbury explained that Oppo could have domestically-designed chips if they tried to prevent the shipment smart phone processors. But, these chips are made using global technology. If the chip manufacturing partner were stopped from making them, they might still have access to their chips.

Problems in the Supply Chain

All governments around the globe now consider semiconductors to be a very strategic and vital technology.

Joe Biden, the U.S. president has asked for an $50 billion investmentin research and semiconductor production and has sought out chipmakers willing to invest in the nation. Intel announced March that it had a new product: announced plans to spend $20 billion to build two new chip factoriesIn the U.S. they call them fabs.

CNBC’s Gina Raimondo, Commerce Secretary, stated that “This is all about out-competing China.”

Washington is trying to return semiconductor manufacturing to the United States. seeing it as key for national securityGiven the supply chain, very concentrated in Asia

However, like-minded countries are working together to secure their supply chains of semiconductors.

The leaders of Australia, India, Japan, and Japan, also known as the Quad. announced plans in SeptemberEstablishing a new semiconductor supply chain initiative to help identify and protect vulnerabilities and ensure access to vital semiconductor components and semiconductors.

Many of the discussions about supply chain issues in semiconductors were started. by a global chip shortageThat has caused disruption in industries ranging from automotive to consumer electronics and worries leaders about the ability of their nations to obtain semiconductors as required.

Where is China right now?

To make things more clear, TSMC already works on 3-nanometer technology. SMIC will have to learn the same manufacturing techniques as TSMC before it can catch up.

Hanbury explained that “even moving fast forward through these technologies wouldn’t be enough to catch-up and reduce dependence at the leading Edge because the leading Edge is continually moving forward.”

“It’s almost as if you are running for a fast runner and the other runner is rapidly running away.”