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Despite China’s efforts to regulate the production of all types of chips and processors and the US’s efforts to block Chinese companies from accessing American CPUs, GPUs, and ASICs, Chinese companies are reluctant to change domestic alternatives, according to a DigiTimes report. . Ideally, this applies to all types of semiconductors, from automotive components and circuits to the most sophisticated AI and HPC processors.
This reluctance to adopt chips made in China is based on a variety of factors, including the country’s limitations in advanced chip production, the availability of established and reliable alternatives from international companies in Europe, Japan, or Taiwan, low volumes of production, and the lack of mandatory government requirements.
AI and HPC are the most challenging areas for Chinese chip makers and users. While US sanctions have limited their access to advanced solutions such as Nvidia’s H100 or H200, other domestic solutions cannot compete even with Nvidia’s cut-down HGX H20 processors to a large extent due to insufficient software. Firms worry about losing their competitiveness and often choose reduced methods or rely on other research methods, such as illegal sales. Also, some Chinese cloud service providers rent overseas data centers to avoid sanctions. Also, given their limited access to advanced tools, it is unclear whether Chinese companies, such as SMIC, can develop enough AI chips for the country’s needs.
In the automotive chip market, Chinese companies face challenges in matching the skills and reliability of established American and European integrated product manufacturers (IDMs), such as Bosch and NXP. The dominance of global players, combined with their ability to produce at scale, creates significant obstacles for small Chinese firms.
More generally, European and Taiwanese chip makers are increasingly challenging the world by offering high-tech, competitively priced chips that are reliably delivered in volumes. These alternatives make it difficult for Chinese chips to gain traction.
Some progress was made in specific areas, such as display driver ICs (DDICs), where some orders were shifted to domestic manufacturers. However, the rate of adoption remains limited, and the pace is far from changing, according to the report. Despite efforts to build a large technology (important for DDICs), global competitors continue to dominate the field with better products and manufacturing capabilities.
The report says that without significant government intervention or significant advances in semiconductor technology, the slow pace of progress cannot be accelerated. Chinese compute performance-hungry companies still have access to the latest (though not a large test) technology developed in America, which reduces the need for AI processors developed in China. Companies in other sectors are reluctant to switch to domestic methods for various reasons. As a result, the reliance of Chinese companies on foreign chips is expected to continue for the foreseeable future.