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Tencent reveals new chips as China’s tech giants become semiconductor designers

Written by Jiaxing Li Published on     2 mins read

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While Chinese firms are designing new processors, the path to mass production remains unclear.

Tencent has designed three new chips, the company’s vice president Qiu Yuepeng said on Wednesday. The announcement was made at a time when China’s tech companies are flocking into semiconductor development to shore up technical capabilities and supply chain resilience.

The three chips are artificial intelligence chip Zixiao, which can process video, images, and natural language; video transcoding chip Canghai; and network interface controller Xuanling. Substantial progress has been made in these three areas, Dowson Tong Tao Sang, president of Tencent’s cloud and smart industries group, said at Tencent’s Digital Ecosystem Summit in Wuhan.

“Chips are the core part of hardware and the core infrastructure of the industrial internet,” Tong said, adding that Tencent has a long-term R&D and investment plan for the sector. The company’s representatives didn’t reveal details of the chips’ production plans.

The move comes after Tencent’s main rival Alibaba showcased its proprietary server chip, the Yitian 710, which will go into the company’s new Panjiu servers in Alibaba Cloud’s data centers. Alibaba says these new assets will boost its cloud computing and data storage capacity.

More broadly, the development of new semiconductors by Tencent, Alibaba, and other tech companies is in line with China’s national plan to elevate domestic chip-making expertise, as the country’s manufacturing sector has been hampered by a shortage of processors that are crucial components in mobile phones, home appliances, and automobiles.

The value of China’s domestic semiconductor market exceeded USD 140 billion in 2020, but the chips made by domestic companies only met 5.8% of the demand, according to investment research firm Equal Ocean. There’s a long way to go before domestic suppliers meet 70% of the country’s semiconductor needs—a key goal set by the government. To reach that milestone, regulators said they will roll out favorable policies, including subsidies and tax cuts for chip developers.

Tech firms are joining the race to make viable chips, with the likes of Tencent and Alibaba competing to realize China’s “chip self-sufficiency.”

Other companies are in various stages of developing semiconductors for a variety of uses. Baidu is one of the most promising developers as its Kunlun AI chip was put into mass production in August. Meanwhile, smartphone maker and IoT powerhouse Xiaomi has invested heavily in chip-related companies, including chip developers and chip equipment makers. ByteDance, Huawei, Oppo, and others each have business divisions devoted to designing new processors.

However, the main challenge in this roadmap is chip production rather than design, Victor Wang Qiang, co-founder of venture capital firm ZhenFund said to Sina Tech. China’s largest chipmaker, Semiconductor Manufacturing International Corporation (SMIC), is still years behind its global rival, TSMC.

Chip production is only possible with an integrated industrial chain, Pan Helin, an expert in economics at the Zhongnan University of Economics and Law told Beijing Daily. At the moment, Chinese tech companies are still in the design phase. Their manufacturing capabilities, from hardware to software, still depend on foreign suppliers, Pan said.

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