China has initiated a strategic shift in its technology infrastructure within government bodies, signaling a push towards technological independence.
Following the disclosure of new mandates, China plans to gradually eliminate foreign technology, specifically U.S. hardware and software, from its governmental systems.
Central to this strategy is the replacement of foreign central processing units (CPUs) and operating systems with domestically produced alternatives.
In December, strict criteria were put in place to ensure that government agencies beyond local townships prioritize “safe and reliable” technology in procurement decisions.
These criteria favor processors and software from Chinese enterprises, like Huawei and Phytium. These products utilize a variety of technological architectures, including x86, Arm, and unique Chinese-developed designs.
Key Points:
- Substitution of Foreign Technology: CPUs from Intel and AMD along with Microsoft Windows and non-Chinese database software to be replaced by local products.
- Safety and Reliability Standards: New procurement rules prioritize technology deemed secure and dependable for government use.
- Domestic Product List: China Information Technology Security Evaluation Center lists approved Chinese CPUs encompassing x86, Arm, and proprietary architectures.
The implications of these guidelines are significant for U.S. technology corporations.
For Intel, 27% of its revenue originated from China, amounting to $54 billion. Similarly, AMD saw 15% of its sales, around $23 billion, from the Chinese market. Conversely, Microsoft’s stake in these changes is deemed minimal, as its revenue from China forms a meager 1.5%.
These modifications occur against the backdrop of escalating geopolitical frictions, particularly in the technology sector, between China and the United States.
The U.S. government has taken steps to limit China’s advancements in semiconductor manufacturing, including restricting exports of high-end artificial intelligence products from companies such as Nvidia. In response, Nvidia has developed less sophisticated versions for the Chinese market.
U.S. Response:
- Semiconductor Independence: U.S. CHIPS Act incentivizes the relocation of semiconductor production to U.S. soil, with Intel receiving $8.5 billion in funding plus incentives.
- Impact on Major Tech Firms: U.S. tech firms, such as Apple, face declining utilization of their products in China’s governmental offices.
The cumulative effect of these decisions emphasizes a broader approach by China to bolster its technological capabilities and diminish its dependency on foreign tech, aligning with its ‘Made in China 2025’ initiative. The initiative aims to transform China from being globally recognized as a mass production hub to becoming a leader in technological innovation.