Trade tensions encourage domestic tech firms to invest in chips

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02:45

Chinese tech firms have become increasingly concerned about chips development since the US government imposed a seven-year ban on telecommunications-gear maker ZTE on purchases of crucial American technology.

While the trade tensions between China and US may threaten the stability of imports, China has long been pushing the development of high-end semiconductors, at the same time, big tech firms around the world are doubling down on their investment in the chip-making industry.

However, developing a microchip industry is far from easy. The biggest problem in developing China’s chip industry is finding talent, however, smaller firms are still working hard developing their own chips, and tech giant are heavily investing. Shen suggested that companies need specialized chips in general, so they have to develop their own.

“In the past, all our chips for thermal imaging products were imported from France. But they put a lot of restrictions on them, such as the products could not be sold for military use. Also, you couldn't buy very high-end chips from them,” said Shen.

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Meanwhile, the chief analyst of Cinda securities, Chen Jiahe cautioned that it will take time for China to catch up with leading technology.

“If the US say we are going to block China from importing all our equipment, then that would be a good opportunity because the entire Chinese market will be no longer importing high-quaulity US products, and domestic companies will have a very large market left out by the US," Chen said.

"But if this is just targeting ZTE, then the market can still import a lot of US products, that means that domestic equipment makers will need 10, 15 or even 20 years of the commercial feature of the US products, that would be very hard for these companies to do,” he added.

Chen thinks that strong government objectives can be a key support for development. China has made chip growth one of the key goals of its "Made in China 2025" strategy. There is a national fund to support tech firms working in the sector, and as of 2017 the fund had put 118.8 billion yuan (approximately 18.8 billion US dollars) into 67 projects.