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China Pushes Alibaba to Develop Its Own Chips to Promote Self-Sufficiency, Raising Global Concerns

The ruling Chinese Communist Party is pushing Alibaba to take on the complex and costly business of developing its own processor chips to help China become a technology superpower in its own right – a business unlike anything the world’s largest e-commerce company has. done before.

T-Head, formed 3 years ago, introduced its third processor, the Yitian 710, to Alibaba’s cloud computing business in October. Alibaba says it has no plans to sell the chip to outsiders just yet.

Other emerging chipmakers, including Tencent, the gaming and social media giant, and smartphone brand Xiaomi, are pledging billions of dollars in pledges in line with official plans to build computing, clean energy and other technologies that could boost prosperity and global prosperity. influence of China.

Processor chips are playing an increasingly important role in products, from smartphones and cars to medical devices and home appliances. The shortage due to the coronavirus pandemic is undermining global production and heightening supply concerns.

The 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 Beijing sees as potential economic and strategic rivals. If it succeeds, business and political leaders warn that it could slow innovation, disrupt global trade and make the world a poorer place.

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

“We must strive to become the world’s premier center for science and the pinnacle of innovation,” Xi said.

Beijing could be haunted by costly disappointments. Even with huge official investments, businessmen and analysts say that chipmakers and other companies will find it difficult to compete if they separate from global suppliers of advanced components and technologies – a goal that no other country pursues.

“It’s hard to imagine any country rebuilding this and having the best technology,” said Peter Hanbury, who oversees the industry at Bain & Co.

Beijing’s campaign is fueling tensions with Washington and Europe, which view China as a strategic rival and complain that it is stealing technology. They limit access to the tools needed to improve the industry.

If the world is divided or divided into markets with incompatible standards and products, American or European-made parts may not work in Chinese computers or cars. Smartphone manufacturers with one dominant global operating system and two networking standards may need to create unique versions for different markets. This could slow down development.

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

In factories in China, the world’s smartphones and tablet computers are assembled, but components from the USA, Europe, Japan, Taiwan and South Korea are needed. Chips are China’s largest imports, ahead of crude oil, at over $ 300 billion (approximately Rs 22.47,804 crore) last year.

The official relevance of this issue has increased after Huawei Technologies Ltd., China’s first global technology brand, lost access to American chips and other technologies in 2018 due to sanctions imposed by the White House.

This undermined the telecom equipment maker’s ambition to become a leader in the next generation of smartphones. US officials say Huawei poses a security threat and could contribute to Chinese espionage, but the company denies this.

According to industry analysts, Huawei and some Chinese competitors are close to catching up with Intel, Qualcomm, South Korea’s Samsung Electronics and Britain’s Arm in developing “cutting edge” logic chips for smartphones.

But when it comes to making them, foundries like the state-owned SMIC in Shanghai are ten years behind industry leaders like TSMC or Taiwan Semiconductor Manufacturing Corporation, which makes chips for Apple and other global brands.

Even companies like Alibaba that can design chips will likely need Taiwanese or other foreign foundries to make them. Alibaba’s Yitian 710 requires precision that a Chinese foundry cannot achieve. The company declined to disclose which foreign manufacturer it would use.

“My country still faces a large chip technology gap,” said industry analyst Liu Chuntian of the Zero Power Intelligence Group.

China accounts for 23% of the world’s chip manufacturing capacity, but only 7.6% of sales.

It takes about 1,500 steps, microscopic precision, and mysterious technology from a handful of suppliers in the United States, Europe, Japan, and other countries to fit millions of transistors on a silicon wafer the size of a fingernail.

These include KLA Corporation in California for ultra-precise measurements and Japan’s TEL for multi-molecule coating machines. Many are subject to restrictions on “dual-use” technologies that can be used in weapons.

China is “lagging 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 keep up with the world’s leaders in accuracy and efficiency.

Without them, Bain’s Hanbury said China would fall further behind.

“The TSMC horse is running away and the Chinese horse is stopped,” he said. “They can’t move forward.”

Washington stepped up pressure on Huawei last year by banning global foundries from using American technology to make their chips. US sellers can sell the company’s chips, but not for the next generation “5G” smartphones.

For its part, the European Union has said it will reconsider foreign investment following complaints that China is undermining Europe’s technological leadership by buying important assets such as the German robot manufacturer Kuka.

Alibaba’s Yitian 710 is based on British Arm architecture, highlighting China’s continuing need for overseas know-how. Alibaba said it will continue to work closely with long-standing overseas suppliers Intel, Arm, Nvidia and Advanced Micro Devices.

The first T-Head chip, the Hanguang 800, was announced in 2019 for artificial intelligence. Its second, XuanTie 910, is for self-driving cars and other functions.

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

Beijing says it will spend $ 150 billion between 2014 and 2030 to develop its chip industry, but even that is a small fraction of what the world leaders are investing. TSMC plans to spend $ 100 billion (approximately Rs 7,498,278) over the next three years on research and production.

China is trying to buy experience by hiring TSMC engineers and other Taiwanese manufacturers. Taiwan, which Beijing claims to be part of its territory and has threatened to attack, has responded by imposing restrictions on job advertisements.

Beijing is encouraging smartphone makers and other manufacturers to use suppliers in China, even if they are more expensive, but officials have denied China wants to break away from the global industry.

“We will never go back in history trying to secede,” Xi said in a video link address at the November Asia-Pacific leaders meeting in Malaysia.

The latest conflict revolves around photolithography, which uses ultraviolet light to etch circuits in 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 just 5 nanometers apart. That would fit 2 million in a one centimeter wide space.

The accuracy of the Chinese SMIC is about one-third by 14 nanometers. Taiwanese TSMC is preparing to improve the accuracy to 2 nanometers.

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

“We will await their decision,” said ASML spokeswoman Monica Mols in an email.

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