China rallies its own chip industry : NPR

SHENZHEN, China — Technology company SiCarrier is hardly a household name. The government-backed Chinese firm makes things most people have probably never heard of, such as epitaxy equipment and atomic layer deposition tools used in microchip production.

Strange thing.

But this fall at a chip industry trade show in the southern Chinese city of Shenzhen, crowds filled the booth, taking photos, live-streaming and admiring its products.

“Their products are very good – they are excellent,” said Zhang Hengming, who appeared at the SiCarrier booth waving the blue flag of the artificial intelligence electronics alliance he heads. “We support products made in China so they can grow stronger and reach the world.”

The US is using ever-tightening trade restrictions to limit the flow of high-quality microchips into China, as well as the equipment to make them. The goal is to try to keep pace with Beijing in artificial intelligence and prevent the Chinese army from acquiring better chips.

But this chip “blockade,” as some see it, has become a rallying cry in China—even as Trump appears poised to ease it.

Zhang said that overall, disagreements with the United States over technology have benefited the Chinese chip industry. “Chinese chips will be able to compete in the world. No problem,” he said.

SiCarrier, known as Xinkailai in Chinese, is only four years old. But he is described as a key player in China's “national team,” a group of state-backed companies struggling to overcome Western technological limitations. (SiCarrier did not make any executives available for NPR interviews at the show.)

In the shadow of U.S. export controls, the Chinese government has redoubled efforts to achieve technological self-sufficiency, investing more than $200 billion in efforts to create a modern and self-sufficient chip industry.

Chinese chips lag behind the best in class, especially in artificial intelligence. And while China can design and prototype relatively advanced chips, it has not mastered mass production.

In April, Chinese leader Xi Jinping said China needed scientific breakthroughs if it wanted to achieve superiority in artificial intelligence and pledged significant political support, according to state media.

Hundreds of companies attended the exhibition in Shenzhen and thousands of people came to see the best that China has to offer.

Jarod Wang, who works at a Shenzhen-based chip design firm, says creating a competitive and cutting-edge chip industry will be a challenge.

In his speech at the exhibition, Wang listed the problems: China cannot buy the best graphics processing unit (GPU) chips for artificial intelligence data centers; he is prohibited from purchasing high-quality equipment for the production of microcircuits; it faces limitations on cloud computing; modern artificial intelligence software is designed for foreign chips. The list went on.

“So every company, from a development perspective, really needs to innovate,” Wang told NPR after his speech. In other words, he said, they need to move beyond the copy-and-paste mentality.

“They can no longer simply continue with their old development thinking,” he added.

He said Wang is optimistic about China's ability to forge ahead in innovation on its own because there are no major technical hurdles in chip production. “It just takes time and resources,” he said.

This is familiar territory for China. The ruling Communist Party regularly portrays the country as an underdog that, under the party's leadership, has time and again relied on itself to achieve technological breakthroughs. So it became a nuclear and space power.

Zeng Yaoguang works for a company that makes precision pneumatic tools that were exhibited at the Shenzhen chip show. The equipment is used in chip factories and other factories.

“15 years ago in China it was high technology,” he said. “They are very common here now. We think chips are so advanced, but in 50 or 30 years they might not be.”

The Chinese work hard and work smart, he said. And when it comes to the semiconductor industry, he believes China could quickly surpass the United States.

Experts cannot rule this out. And some are perplexed by the Trump administration's actions. decision this month lift some restrictions on chips and allow California-based Nvidia to sell one of its top graphics processors, the H200, to China. Nvidia is now the world leader in producing such chips, which are used in artificial intelligence data centers to train and operate models.

On social networks Trump said that the H200 would be sold to select customers in China in a manner that ensures “continued strong” US national security, and that the US would receive a 25% share of sales. Nvidia will still be prohibited from selling its top-of-the-line products to China.

Administration officials have argued that giving China access to good but not advanced chips from the US will keep it hooked on US technology and weaken China's push for chip independence.

Chris Miller, author of the book Chip War: The Fight for the World's Most Important Technology and a Tufts University professor is skeptical. Private companies in China might be willing to buy American chips, but the government remains focused on its long-term priorities. “The Chinese government is committed to creating its own chip ecosystem, something it has been trying to do for over a decade,” he said.

“Over the last six months, we've seen the Chinese government tell Chinese tech companies that they can't buy certain types of American chips because they want those companies to build the Chinese ecosystem,” Miller continued. “I think this shows that even if we want China to remain dependent on our chips, the reality is that China is trying to find its own sources and doesn't trust US supply chains.”

David Sachs, a China specialist at the Council on Foreign Relations, says that whatever Trump's rationale for offering China H200 chips, it poses a strategic risk.

“If you believe that AI will change the economy and maybe even change the way war is fought,” he said, “why give your archrival the tools they need to potentially beat you in that race?”

Jasmine Ling contributed to this story.