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China is interested in tech ‘self-reliance,’Global unease is fuelled

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BEIJING () — To help make China a self-reliant “technology superpower,” the ruling Communist Party is pushing the world’s biggest e-commerce company to take on the tricky, expensive business of designing its own processor chips — a business unlike anything 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 claims that it does not intend to sell the chip to anyone outside of its cloud computing business.

Other rookie chip developers including Tencent, a games and social media giant, and smartphone brand Xiaomi are pledging billions of dollars in line with official plans to create computing, clean energy and other technology that can build China’s wealth and global influence.

From smartphones and cars to home appliances and medical devices, processor chips play a critical role in products such as smartphones and cars. Global manufacturing is being disrupted by the coronavirus pandemic, which has also caused supply problems.

Chips are a top priority in the ruling Communist Party’s marathon campaign to end China’s reliance on technology from the United States, Japan and other suppliers Beijing sees as potential economic and strategic rivals. Business and political leaders warn that it might slow down innovation, disrupt global trading and make the world less prosperous if it succeeds.

“Self-reliance is the foundation for the Chinese nation,”In a March speech, President Xi Jinping stated these words. He called for China’s accession. “technology superpower”To protect “national economic security.”

“We must strive to become the world’s main center of science and the high ground of innovation,”Xi said.

Beijing may be looking for a costly disaster. Even with huge official investments, businesspeople and analysts say chipmakers and other companies will struggle to compete if they detach from global suppliers of advanced components and technology — a goal no other country is pursuing.

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

Beijing’s campaign is adding to tension with Washington and Europe, which see China as a strategic competitor and complain it steals technology. They restrict access to the tools necessary to improve its industries.

If the world were to split into different markets, or decouple, parts made in the USA or Europe might not be compatible with Chinese cars or computers. Smartphone manufacturers with a dominant global operating system and two network standards may need to create unique versions for different markets. This could slow down development.

Washington and Beijing must cooperate “avoid that the world becomes separated,”In September, U.N. Secretary General Antonio Guterres spoke to The Associated Press.

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

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

That crippled the telecom equipment maker’s ambition to be a leader in next-generation smartphones. American officials claim that Huawei is a security threat and could aid Chinese spying. This accusation is denied by the company.

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

However, when it comes time to make them, foundries like the state-owned SMIC, Shanghai, are up to a decade behind industry leaders such as TSMC or Taiwan Semiconductor Manufacturing Corp. (which produces chips for Apple Inc. and many other global brands).

Even companies like Alibaba that can design chips will likely need Taiwanese or foreign foundries to produce them. Alibaba’s Yitian 710 requires precision no Chinese foundry can achieve. The company declined the request to specify which foreign producer it will use.

“My country still faces a big gap in chip technology,”Liu Chuntian, Zero Power Intelligence Group’s industry analyst, said:

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

The 1,500 steps required to pack millions upon millions of transistors onto one-inch-thick silicon chip require microscopic precision, arcane technologies, and some 1,500 steps.

They include KLA Corp. in California for super-precise measurement and Japan’s TEL for machines to apply coatings a few molecules thick. Many are protected by restrictions “dual use”Technologies that can be used in weaponry.

China “lags significantly”The Semiconductor Industry Association reported this year that tools, materials, production technology are all important.

Washington and Europe have blocked access to the most advanced tools that Chinese chipmakers require to match global leaders in efficiency and precision, citing security concerns.

Without those, China is falling farther behind, said Bain’s Hanbury.

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

Washington put more pressure on Huawei last year, preventing global foundries from using American technology for its chips. U.S. vendors are allowed to sell chips to the company but not for next generation chips. “5G” smartphones.

For its part, the European Union said it will review foreign investments after complaints China was eroding Europe’s technology lead by purchasing important assets such as German robot maker Kuka.

Alibaba’s Yitian 710 is based on architecture from Britain’s Arm, highlighting China’s enduring need for foreign know-how. Alibaba said that it will continue to cooperate with long-term foreign suppliers Intel, Arm, Nvidia Corp., Advanced Micro Devices, Inc.

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

Tencent Holding, the company behind WeChat, announced in November its first three chips for artificial Intelligence, cloud computing, and video.

Beijing claims that it will spend $150Billion from 2014 to 2030 to develop its chip sector, but that is just a fraction compared to what global leaders invest. TSMC expects to spend $100 billion over the next three-years on research and manufacturing.

China is looking to buy experience by employing engineers from TSMC or other Taiwanese companies. Taiwan, claimed by Beijing as part of its territory and threatened to attack, has responded with restrictions on job advertisement.

Beijing encourages smartphone and other manufacturers in China to use suppliers even if they are more expensive, but officials denied that China wanted to be detached from global industries.

“We will never go back in history by seeking to decouple,”Xi made the remarks in a speech through video link to a meeting of Asia-Pacific leaders in Malaysia in November.

Photolithography, which uses ultraviolet light in order to etch silicon circuits into silicon, is the latest controversy. It uses ultraviolet light to do so on a scale of nanometers or billionthsof a meter.

ASML in the Netherlands is the leader, with machines that can etch semiconductors at a distance of 5 nanometers. This would pack 2,000,000 in a space only one centimeter across.

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

SMIC wants to upgrade by purchasing ASML’s latest machine, but the Dutch government has yet to agree.

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

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