China Presses Alibaba To Design Chips


China's ruling Communist Party is pushing Alibaba Group Holding Ltd BABA to take on the tricky, expensive business of designing its processor chips to help make China a self-reliant "technology superpower," Gadgets 360 reports.

  • In October, Alibaba's 3-year-old chip unit, T-Head, showcased its third processor, the Yitian 710, for Alibaba's cloud computing business. 
  • Alibaba says, for now, it has no plans to sell the chip to outsiders.
  • Other rookie chip developers, including Tencent Holdings Ltd TCEHYXiaomi Corp XIACY XIACF, pledged billions of dollars in line with official plans to create computing, clean energy, and other technology that can build China's wealth and global influence.
  • China accounts for 23% of global chip production capacity but only 7.6% of sales.
  • Beijing's campaign adds to the tension with Washington and Europe, which see China as a strategic competitor and complain it steals technology.
  • China's factories assemble the world's smartphones and tablet computers but need components from the U.S., Europe, Japan, Taiwan, and South Korea.
  • Huawei Technologies Ltd and some Chinese rivals are close to matching Intel Corp INTCQualcomm Inc QCOM, South Korea's Samsung Electronics Co Ltd SSNLF, and Britain's Arm at being able to design "bleeding edge" logic chips for smartphones, according to industry analysts.
  • However, China foundries like state-owned SMIC are up to a decade behind industry leaders, including Taiwan Semiconductor Manufacturing Co Ltd TSM, which produces chips for Apple Inc AAPL and other global brands.
  • Even companies like Alibaba require Taiwanese or other foreign foundries to make chips. 
  • China's SMIC is about one-third as precise at 14-nm. TSM looks to increase its precision to 2-nm. SMIC wants to upgrade by purchasing ASML Holding NV's ASML latest machine.
  • Price Action: BABA shares traded lower by 1.31% at $115.06 in the market session on the last check Tuesday.
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