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China is pursuing technological “independence”, which is fueling global unrest




BEIJING (AP) – To help make China a self-sufficient “technology superpower”, the ruling Communist Party is pushing the world’s largest e-commerce company to take on the difficult, expensive business of designing its own processor chips – a business unlike any other Alibaba Group has done before.

Its 3-year-old chip unit, T-Head, unveiled its third processor in October, the Yitian 710 for Alibaba’s cloud computing business. Alibaba says it currently has no plans to sell the chip to outsiders.

Other novice chip developers including Tencent, a gaming and social media giant, and smartphone brand Xiaomi promise billions of dollars in line with official plans to create computing, clean energy and other technologies that can build China̵[ads1]7;s wealth and global influence.

Processor chips are playing an increasingly critical role in products from smartphones and cars to medical equipment and household appliances. Deficiency due to the coronavirus pandemic disrupts global production and increases supply concerns.

Chips are a top priority in the ruling Communist Party’s marathon campaign to end China’s dependence on technology from the United States, Japan and other suppliers that Beijing sees as potential economic and strategic rivals. If successful, business and political leaders warn that this could slow innovation, disrupt global trade and make the world poorer.

“Self-reliance is the foundation of the Chinese nation,” President Xi Jinping said in a speech released in March. He called on China to become a “technology superpower” to ensure “national economic security.”

“We must strive to become the world’s most important center for science and the high foundation of innovation,” Xi said.

Beijing may be chasing a costly disappointment. Even with huge official investments, businessmen and analysts say that chipmakers and other companies will struggle to compete if they break away from global suppliers of advanced components and technology – a goal no other country is striving for.

“It’s hard to imagine a country rebuilding all of this and having the best technology,” said Peter Hanbury, who runs the industry for Bain & Co.

Beijing’s campaign is raising tensions with Washington and Europe, which see China as a strategic competitor and complain that it is stealing technology. They restrict access to tools needed to improve the industry.

Should the world disconnect, or split into markets with incompatible standards and products, parts made in the United States or Europe may not work in Chinese computers or automobiles. Smartphone manufacturers that have a single dominant global operating system and two network standards may need to create unique versions for different markets. It can slow down development.

Washington and Beijing must “avoid separating the world,” UN Secretary-General Antonio Guterres told the Associated Press in September.

China’s factories assemble the world’s smartphones and tablets, but need components from the United States, Europe, Japan, Taiwan and South Korea. Chips are China’s largest import, ahead of crude oil, at more than $ 300 billion last year.

Official urgency over this grew after Huawei Technologies Ltd., China’s first global technology brand, lost access to US chips and other technology in 2018 under sanctions imposed by the White House.

It paralyzed the telecom equipment manufacturer’s ambition to be a leader in the next generation of smartphones. US officials say Huawei is a security risk and could help Chinese espionage, an accusation the company denies.

Huawei and some Chinese rivals are close to matching Intel Corp., Qualcomm Inc., South Korea’s Samsung Electronics and Britain’s Arm Ltd. when it comes to being able to design “bleeding edge” logic chips for smartphones, according to industry analysts.

But when it comes to making them, foundries like state-owned SMIC in Shanghai are up to a decade behind industry leaders, including TSMC, or Taiwan Semiconductor Manufacturing Corp., which produces chips for Apple Inc. and other global brands.

Even companies like Alibaba that can design pieces will probably need Taiwanese or other foreign foundries to make them. Alibaba’s Yitian 710 requires precision that no Chinese foundry can achieve. The company refused to say which foreign manufacturer they would use.

“My country is still facing a huge gap in chip technology,” said industry analyst Liu Chuntian of the Zero Power Intelligence Group.

China accounts for 23% of global chip production capacity, but only 7.6% of sales.

Packing millions of transistors on a silicon nail size requires around 1,500 steps, microscopic precision and mysterious technologies owned by a handful of American, European, Japanese and other suppliers.

They include KLA Corp. in California for super-accurate measurement and Japan’s TEL for machines to apply coatings a few molecules thick. Many are subject to restrictions on “dual-use” technologies that can be used in weapons.

China “lags far behind” in tools, materials and manufacturing technology, the Semiconductor Industry Association said in a report this year.

Washington and Europe, citing security concerns, are blocking access to the most advanced tools Chinese chipmakers need to match global leaders in precision and efficiency.

Without these, China will fall further behind, said Bain’s Hanbury.

“The TSMC horse sprints away and the Chinese horse is stopped,” he said. “They can not move on.”

Washington increased the pressure on Huawei last year by preventing global foundries from using American technology to produce their chips. US suppliers can sell chips to the company, but not for next-generation “5G” smartphones.

The European Union, for its part, said it would review foreign investment following complaints that China was eroding Europe’s technology leadership by buying key assets such as German robot maker Kuka.

Alibaba’s Yitian 710 is based on architecture from Britain’s Arm, and highlights China’s persistent need for foreign knowledge. Alibaba said it will continue to work closely with longtime foreign suppliers Intel, Arm, Nvidia Corp. and Advanced Micro Devices, Inc.

T-Head’s first chip, the Hanguang 800, was announced in 2019 for artificial intelligence. The other, the XuanTie 910, is for self-driving cars and other features.

In November, Tencent Holding, which runs the WeChat messaging service, announced its first three pieces of artificial intelligence, cloud computing and video.

Beijing says it will spend $ 150 billion from 2014 to 2030 to develop its chip industry, but even that is a fraction of what global leaders invest. TSMC plans to spend $ 100 billion over the next three years on research and production.

China is trying to gain experience by hiring engineers from TSMC and other Taiwanese manufacturers. Taiwan, which Beijing claims is part of its territory and has threatened to attack, has responded by restricting job postings.

Beijing encourages smartphone manufacturers and other manufacturers to use suppliers in China, even if they cost more, but officials deny that China wants to secede from global industries.

“We will never go back in history by trying to disconnect,” Xi said in a video link to a November meeting of Asia-Pacific leaders in Malaysia.

The latest conflict is about photolithography, which uses ultraviolet light to etch circuits to silicon on a scale measured in nanometers, or billionths of a meter.

The leader is ASML in the Netherlands, which makes machines that can etch transistors at only 5 nanometer intervals. It would pack 2 million into a space one centimeter wide.

China’s SMIC is about a third as accurate at 14 nanometers. Taiwan’s TSMC is preparing to increase its precision to 2 nanometers.

SMIC wants to upgrade by buying ASML’s latest machine, but the Dutch government has not yet agreed.

“We will wait for your decision,” ASML spokeswoman Monica Mols said in an email.

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AP researcher Yu Bing in Beijing and AP writer Edith M. Lederer at the UN contributed.



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