🔗 Share this article

The US has controlled the global technology market for decades. But, the World's Second Largest Economy wants to transform that situation.

This economic powerhouse is pouring massive amounts of funds into AI technologies and automated systems. Significantly, Beijing is also directing heavy funding toward developing the advanced semiconductors that drive these cutting-edge systems.

Last month, Jensen Huang highlighted that the Chinese semiconductor industry was just "slightly trailing" the American tech sector in processor advancement.

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

Following the DeepSeek Launch

The Chinese AI Company DeepSeek created a stir through the tech world in 2024 when it launched a rival to OpenAI's ChatGPT.

This revelation by a little-known company was impressive for multiple factors, including because the company stated it was more economical to train than leading AI models.

It was said to have been built using significantly less advanced processors than its rivals, and its launch briefly reduced Nvidia's market value.

And, momentum in China's tech sector has continued. Recently, some of the country's major tech firms have made it clear that they intend to take on the AI chip leader and emerge as the primary advanced chip suppliers for local companies.

Earlier this year, Chinese state media reported that a new chip introduced by the tech giant Alibaba can match the performance of Nvidia's H20 chips while being more efficient. These processors are modified chips made for the Chinese market under US export rules.

Another Chinese Tech Giant also unveiled what it called its most powerful chips ever, along with a three-year plan to contest Nvidia's leading position of the artificial intelligence sector.

This major firm also announced it would make its blueprints and software accessible to the public in China in an initiative to attract firms away from their reliance on US products.

Additional semiconductor firms in China have also obtained significant deals with big businesses in the nation. One such company is supplying advanced chips for organizations like government-run telecommunications firm China Unicom.

Another highly anticipated possible competitor to the chip giant is headquartered in Beijing Cambricon Technologies.

Its Shanghai-listed shares have significantly increased in price over the last three months as market participants speculate that it will benefit from Beijing's push for domestic companies to use locally produced advanced semiconductors.

The Tech Conglomerate Tencent, which owns the all-in-one platform WeChat, is an additional prominent tech giant that has responded to the government’s call to use Chinese chips.

There has also been no lack of government-supported exhibitions, promoting Chinese technology companies in a bid to draw in investors.

"The competition has undeniably arrived," a spokesperson for Nvidia stated in response to queries about the recent progress made by China's semiconductor companies.

"Users will choose the best technology stack for operating the globally dominant commercial applications and publicly available AI systems. We will continue to work to gain the confidence and backing of leading programmers worldwide."

Yet, certain analysts have warned that assertions made by China's semiconductor producers should be taken with a pinch of salt due to a absence of publicly available data and consistent testing benchmarks.

Chinese processors are comparable to the US in forecasting applications but lag behind in complex analytics, said tech expert Jawad Haj-Yahya, who has tested both American and Chinese chips.

"The gap is evident and it is certainly shrinking. However, it is unlikely it's something they will catch up on in the near future."

Where China Leads - and Lags

During a industry discussion in last month, Nvidia's Jensen Huang emphasized the strengths of China's tech sector, crediting its hardworking and vast workforce, fierce domestic competition and advancements in semiconductor production.

"This is a dynamic entrepreneurial, high-tech, contemporary sector," he said, urging the US to vie "for its survival."

His assessment is likely to be received positively by authorities in Beijing.

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

For years, China has poured significant resources into what the country's leader calls "high-quality development", which covers sectors from clean energy to AI.

Prior to US President Donald Trump's return to the White House, China had allocated billions of USD as part of its efforts to transform its large economic system from the "global manufacturing hub" for standard goods to a center of advanced sectors.

An ongoing tariffs war with Trump's America has only made that mission more pressing.

The Chinese President has vowed to make his country more independent and not depend on "anyone's gifts."

Mr Huang has also cautioned that the US should trade freely with the Asian nation or face the possibility of handing it the edge in the AI race.

This comes against a context of Chinese authorities applying more scrutiny on Nvidia as it launched an investigation into market dominance into the firm recently.

But, the government-directed strategy can also be an barrier to innovation if everyone in the sector only focuses on a "shared goal", said computing professor Chia-Lin Yang from National Taiwan University.

It can make it more difficult for disruptive ideas to challenge conventions, she commented.

China's chip industry has also yet to overcome criticism that its offerings can be more challenging to use than those of competitors from the West like the industry leader.

Prof Yang believes these challenges can quickly be resolved by the large quantity of talented technology professionals.

"One should not downplay the capability of China to close the gap."

'China's Negotiating Tool

The expert characterized the latest reports from China about the chip sector as a "negotiating tool" in its months-long tariffs negotiations with the US.

Beijing seeks to compel Washington into selling its advanced equipment or risk its standing in such a large market, said Dr Jawad.

These announcements demonstrate strength on behalf of China, even though it is {