With large companies like Huawei being blocked off American technology, China is pushing its chip industry ahead. Experts feel that it’ll take another decade for China to catch up with the USA in this sector. However, when it eventually happens, American firms and their profits could be hurt tremendously.
Huawei, a Chinese company, was blacklisted by the US. American companies now need permission from the government to sell technology or software to Huawei. The telecom equipment manufacturer is dependent on Google & Microsoft. Although a reprieve has been granted for 90 days, the threat still looms ahead. Other Chinese firms like HikVision and ZTE are also undergoing similar problems. Recent events have forced China to provide additional stimulus to its semiconductor industry, as per Gu Wenjun, an analyst at ICWise.
Beijing aims to manufacture 40% and 70% of its semiconductor usage domestically by 2020 & 2025 respectively, as per the MIC 2025 plan. Billions are being funneled to the industry for this purpose. Tax breaks were also announced for domestic software developers and semiconductor companies.
Presently, 16% of China’s demand is produced domestically, with half of that belonging to foreign firms. China is still dependent on American tech for most purposes.
Recent events have rapidly quickened the pace. Huawei manufactures its very own Kirin processor series as well as a 5G-capable modem. Designed by Hi Silicon, a subsidiary, Huawei is ready to face the oncoming storm in the US. Other giants like Xiomi and Alibaba are considering manufacturing their own processors.
Mario Morales, VP at IDC stated that US-China tensions will only intensify China’s spending on these technologies. China’s progress in this field could hurt the USA as it could forge better ties with South Korea and Japan, leaving the USA as a minor player.
Qorvo and Lumentum had to lower revenue forecasts as Huawei accounted for 15% and 18% of their sales respectively. However, China won’t be overtaking the US anytime soon as it lacks suppliers. Most of their supplies still come from British and American companies, which may turn out to be off-limits.
But Morales cautioned that China would be able to leverage home resource talents to increase its development and develop a strong system, completely independent of American influences.