Stung by the US trade war, the Chinese government has decided to end its dependence on foreign chip designs for all time and domestically source 40 percent of all chips used by Chinese industry by 2020, and raise that to 70 percent by 2025.
According to a Nikkei report, the self-sufficiency rate among Chinese chipmakers was just 15 percent in 2018. The gap between China’s nascent market and the US’s more mature market is just too big to overcome in such a short time.
“If we lose access to US software or can no longer receive updates, our chip development will run into a dead end”, a leading Chinese artificial intelligence chipmaker reportedly told Nikkei.
Part of the problem is that the global supply chain is extremely interconnected. Even the Chinese prefer imported chips over those made at home due to limited production, which makes Chinese chips cost more. Many businesses—especially those that require stable systems like banks—trust US chipmakers more because they’ve been around longer.
“Even if Huawei’s chips function as well as Qualcomm chips, we feel Qualcomm is a safer bet because of its decades-long experience in chipmaking”, a Chinese executive for a firm specialising in banking software told Nikkei.
While Beijing has supported domestic chipmakers in military and government projects, the U.S. crackdown on Chinese tech, especially Huawei, has taken its toll. Nikkei reports revenue is expected to grow 17.9 percent this year to about $42.9 billion, but it’s also the first time since 2014 that the rate has fallen under 20 percent.