🔗 Share this article

The US has held sway over the global technology market for many years. But, the World's Second Largest Economy aims to change that landscape.

This economic powerhouse is allocating huge amounts of capital into AI technologies and robotics. Significantly, Beijing is also directing significant investment toward creating the high-end chips that fuel these state-of-the-art technologies.

Recently, Jensen Huang highlighted that the Chinese semiconductor industry was only "slightly trailing" the US in processor advancement.

Therefore, will Beijing equal US innovations and break its dependence on imported high-end chips?

Following the DeepSeek Launch

The Chinese AI Company DeepSeek made headlines through the tech world in 2024 when it unveiled a rival to the widely-used AI chatbot.

The announcement by a little-known company was notable for multiple factors, not least because the company reported it required less funding to develop than top artificial intelligence systems.

Reports indicated to have been developed using far fewer high-end chips than its competitors, and its debut temporarily sank the chip giant's stock price.

Moreover, momentum in the Chinese technology industry has continued. This year, some of the nation's major tech firms have stated that they plan to take on the AI chip leader and emerge as the primary high-end semiconductor providers for domestic firms.

In September, Chinese state media announced that a recently unveiled processor developed by Alibaba can rival the capabilities of Nvidia's H20 semiconductors while being more efficient. These processors are adjusted processors made for the China under US export rules.

Another Chinese Tech Giant also unveiled what it described as its most powerful chips ever, along with a multi-year strategy to challenge Nvidia's dominance of the artificial intelligence sector.

This major firm also declared it would make its blueprints and computer programs available to the general audience in China in an attempt to draw companies away from their reliance on US products.

Additional semiconductor firms in China have also secured significant deals with large corporations in the country. One such company is providing high-end processors for organizations like government-run telecommunications firm a major Chinese carrier.

Another hotly-tipped potential challenger to Nvidia is Beijing-based Cambricon Technologies.

The company's stock have surged in value over the recent quarter as market participants bet that it will benefit from Beijing's push for domestic companies to use locally produced advanced semiconductors.

Tencent, which operates the super app WeChat, is another notable tech giant that has heeded the government’s call to use domestic processors.

There has also been no shortage of state-backed events, promoting domestic tech firms in a effort to attract investors.

"The competition has clearly emerged," a spokesperson for Nvidia stated in reply to questions about the latest developments made by China's semiconductor companies.

"Customers will choose the most effective solutions for running the world's most popular business software and open-source models. We will continue to work to earn the trust and support of mainstream developers worldwide."

However, some experts have cautioned that claims made by Chinese chipmakers should be viewed skeptically due to a absence of open information and consistent testing benchmarks.

Chinese processors are comparable to the American chips in predictive AI but fall short in advanced data processing, said computer scientist a researcher, who has tested both processors from the US and China.

"The difference is clear and it is certainly narrowing. But, I don't think they will close it in the near future."

China's Strengths and Weaknesses

During a technology and business podcast in September, Nvidia's Jensen Huang emphasized the strengths of the Chinese technology industry, attributing its hardworking and large workforce, fierce domestic competition and advancements in semiconductor production.

"It represents a dynamic innovative, advanced, modern industry," he said, urging the United States to compete "to maintain its position."

His assessment is likely to be received positively by authorities in the Chinese capital.

China has long vied to become a global leader in tech, partly to lessen its dependence on the Western nations.

For years, China has invested heavily into what the country's leader calls "high-quality development", which includes industries from renewables to AI.

Even before the reappearance of Donald Trump to the White House, the Chinese government had allocated billions of USD as part of its initiatives to shift its vast economy from the "global manufacturing hub" for basic products to a center of cutting-edge industries.

An ongoing tariffs war with the United States under Trump has only made that mission more pressing.

Xi has vowed to make his country more independent and not depend on "external assistance."

The Nvidia CEO has also warned that the United States should trade freely with China or risk handing it the advantage in the AI race.

This comes against a backdrop of Beijing exerting more pressure on the chip maker as it initiated an investigation into market dominance into the firm recently.

But, the government-directed strategy can also be an barrier to innovation if all participants in the industry only focuses on a "common objective", said academic expert a technology scholar from National Taiwan University.

This may make it harder for disruptive ideas to challenge conventions, she commented.

The Chinese semiconductor sector has also yet to overcome concerns that its products can be more challenging to use than those of Western rivals like Nvidia.

Prof Yang thinks these challenges can soon be solved by China's huge number of talented tech industry workers.

"You cannot underestimate the capability of China to close the gap."

'China's Negotiating Tool

She characterized the latest reports from China about the chip sector as a "bargaining chip" in its months-long tariffs negotiations with the US.

Chinese officials seeks to pressure US authorities into selling its high-tech tools or lose its standing in such a significant economy, stated the analyst.

These announcements demonstrate capability on China's part, even though it is {