Chinese chip expert: Self-chip efforts will go to dead ends without access to US technology - Photo 1.

"The self-production effort will go to a dead end without access to American technology."

Over the years, Chinese chip designers and designers have worked hard to meet Beijing's sovereign desire for autonomy in the semiconductor industry. Beijing targets 70% of the chips used by the Chinese industry in 2025 by domestic companies.

But in the face of recent developments, many industry executives and experts have warned that the national goal of autonomy and independence in China's processor chip is unlikely to be achieved without it. access to US technology.

Beijing targets 70% of the chip used by Chinese industry in 2025 by domestic companies.

"There are alternatives in China but the technology gap is too big.", CEO of one of China's leading artificial intelligence chip (AI) manufacturers. To design the chip, his company itself also relies heavily on American technology. "If we are banned from trading and prohibiting US chip design software updates, our chip development process will go dead-end."

Another director from NextVPU, an AI chip maker founded by former AMD engineers, agrees. "Don't update the US-provided chip design software, China's self-development chip effort will hit the wall," he said.

All the directors who agreed to share with Nikkei in this article asked to remain anonymous to avoid problems.

Experts and suppliers in chip development industry also support the views of the two directors.

"We will use any chip manufacturing components and materials we can earn from local firms if their performance is good enough.", a manager of Semiconductor Manufacturing International Co. – China's largest contract manufacturing company, shares. "But we still need US components, materials, intellectual property and chip design software. No other chip manufacturer in the world can eliminate US partners."

Chinese chip expert: Self-chip efforts will go to dead ends without access to US technology - Photo 2.

Global chip design market share, after 8 years, the US still dominates

Cici Zhang, an analyst with TrendForce, has similar thoughts. "The overall rate of self-sufficiency in China's chip design sector is only 15% in 2018"., Zhang said. "We do not think China can quickly replace a wide range of global semiconductor component suppliers because the supply chain in the world is closely linked."

The Beijing government wants China's industry to use 40% of its domestic production chips by 2020 and reach 70% by 2025. However, many industry managers and experts think this goal is outside. reach while many Chinese companies are reluctant to switch to using Chinese chips.

"To be honest, Chinese chips are still less efficient than Intel chips.", a senior sales manager for Inspur – the world's third-largest server maker, No. 1 China, admitted. Companies that handle sensitive processes like financial transactions do not want to believe in China's very young chip industry.

"Our customers are banks and a stable system is their top priority.", an executive of Siecom, a software development company in Shenzhen, specializes in manufacturing end-to-end telecommunications equipment for Chinese banks. "Even if Huawei's chips work as well as Qualcomm chips, we still feel Qualcomm's chips are safer because they have decades of chip manufacturing experience."

According to IC Insights, chip manufacturing in China – including operations of foreign companies – accounted for only 15% of the total 155 billion dollars worth of Chinese chip market last year. This market research group predicts China's domestic chip production will only reach 20.5% by 2023.

China's ambition of 2025 has been hampered by the persecution that the US government has just conducted

Complying with the US ban, AMD has limited knowledge sharing with its Chinese joint venture partner, Tianjin Haiguang. AMD said it is considering specific details to determine the next steps related to their joint venture in China.

Earlier this year, Intel, AMD's rival, also terminated its partnership with Unisoc Communications, a mobile chip maker backed by Beijing. Previously, these two companies had plans to develop 5G.

"China's self-reliance efforts do not grow as quickly and are really affected by the US crackdown.", Arisa Liu, a senior analyst at Taiwan Economic Research Institute, shared.

Analysts say that a poor partnership in the technology industry between Chinese companies and the US has also adversely affected the development dynamics of Chinese chip designers. Expected revenue from this sector will increase by 17.9% this year, to about 296.5 billion yuan. Since 2014, when China announced a multi-billion dollar support package to strengthen its semiconductor business, this is the first time the growth rate has dropped to below 20%.

Moreover, with high-end chips used in data centers and other sophisticated applications, Chinese companies still favor imported chips compared to home-made goods. Chinese chips produced not only poorly in performance, but also sometimes up to 50% higher in cost due to limited production scale, the top AI chip maker shared. The market's hesitation in using domestic chips has made it difficult for Chinese developers to improve their technology.

Chinese chip expert: Self-chip efforts will go to dead ends without access to US technology - Photo 3.

Number of Chinese chip development companies in the last 4 years

"Small companies can't cover the cost difference.", the director said. "But the deployment is very important to the technology improvement process. We can only know how our chip works if someone uses it."

At an industry conference earlier this year in Shenzhen, Jiang Yijie, executive director of Montage LZ chip maker, said: "What Chinese chip makers lack is not the market's potential but market confidence."

The Chinese government has tried to set an example for businesses. Last June, the Chinese Central Government Shopping Center for the first time brought Chinese-made chips to the shopping list. Inspur began using chips manufactured by fellow companies for government and military projects. "The government's efforts to use chips produced by China are the clearest evidence that China is looking for ways to support domestic companies.", Inspur's sales director said.

Michael Guo, sales manager at Zhejiang Shijing Sensor Technology, a company that makes chips for automakers, also relies on Beijing's help. "If the government encourages the use of chips made in China in public procurement projects, private companies will trust and use more.", Mr. Guo said.

Even if he had the right support, Guo was cautious about whether Beijing could achieve its ambitious 2025 goal. "China's chip industry is on the rise but still far behind Western companies in the same industry.", Mr. Guo said. "It may take another decade for us to catch up with them."

According to Nikkei

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