🔗 Share this article

America has held sway over the global technology market for decades. However, the World's Second Largest Economy wants to alter that landscape.

The nation is pouring massive sums of capital into artificial intelligence (AI) and automated systems. Significantly, Chinese authorities is also channeling significant investment toward creating the high-end chips that drive these state-of-the-art technologies.

Last month, Nvidia's CEO cautioned that China was just "close behind" the American tech sector in chip development.

Therefore, can China equal US innovations and reduce its dependence on imported high-end chips?

Following the DeepSeek Launch

China's DeepSeek made headlines through the tech world in 2024 when it unveiled a alternative to OpenAI's ChatGPT.

The announcement by a little-known company was remarkable for several reasons, including because the company claimed it cost much less to develop than leading AI models.

Reports indicated to have been built using significantly less advanced processors than its rivals, and its debut caused a drop in Nvidia's market value.

And, advancement in the Chinese technology industry has continued. This year, some of the nation's leading technology companies have declared that they plan to compete with the AI chip leader and emerge as the primary high-end semiconductor providers for local companies.

Earlier this year, official sources announced that a new chip introduced by Alibaba can match the capabilities of Nvidia's H20 chips while using less energy. H20s are scaled-down chips made for the Chinese market under US export rules.

Huawei also revealed what it called its strongest processors to date, along with a three-year plan to dispute Nvidia's leading position of the AI market.

The Chinese tech giant also stated it would make its blueprints and software accessible to the general audience in the country in an initiative to pull companies away from their dependence on American technology.

Other Chinese chip developers have also secured major contracts with big businesses in the nation. MetaX is supplying high-end processors for entities like government-run telecommunications firm a major Chinese carrier.

A further highly anticipated potential challenger to the chip giant is Beijing-based a rising semiconductor firm.

The company's stock have significantly increased in price over the last three months as market participants bet that it will profit from the government's initiative for domestic companies to use domestically made advanced semiconductors.

Tencent, which operates the super app WeChat, is an additional notable tech giant that has heeded the government’s call to use domestic processors.

There has also been no shortage of state-backed exhibitions, promoting domestic tech firms in a bid to draw in investors.

"Rivalry has undeniably emerged," an official from the chip maker commented in reply to queries about the recent progress made by Chinese chip firms.

"Users will choose the best technology stack for running the globally dominant commercial applications and publicly available AI systems. We'll persist in our efforts to gain the confidence and support of leading programmers worldwide."

Yet, some experts have cautioned that claims made by China's semiconductor producers should be viewed skeptically due to a lack of open information and standardized performance measures.

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

"The difference is clear and it is certainly shrinking. However, it is unlikely they will close it in the short-term."

Where China Leads - and Lags

During a technology and business podcast in last month, the CEO of Nvidia emphasized the advantages of China's tech sector, attributing its hardworking and vast workforce, fierce local rivalry and advancements in chipmaking.

"It represents a dynamic entrepreneurial, advanced, contemporary sector," he said, urging the US to compete "for its survival."

This evaluation is likely to be received positively by authorities in the Chinese capital.

China has consistently aimed to become a global leader in technology, partly to reduce its reliance on the West.

Over time, China has poured significant resources into what the country's leader calls "advanced growth", which covers industries from clean energy to AI.

Even before US President Donald Trump's return to the White House, China had spent tens of billions of dollars as part of its initiatives to shift its vast economy from the "world's factory" for basic products to a home of cutting-edge industries.

A continuing trade dispute with Trump's America has only rendered this goal more pressing.

Xi has pledged to make his nation more independent and not depend on "external assistance."

Mr Huang has also warned that the United States should trade freely with China or risk giving it the edge in the AI race.

This occurs against a context of Chinese authorities exerting more scrutiny on the chip maker as it initiated an anti-monopoly probe into the firm last month.

However, China's state-led approach can also be an obstacle to innovation if all participants in the industry only focuses on a "common objective", said computing professor Chia-Lin Yang from a leading educational institution.

This may make it more difficult for disruptive ideas to challenge conventions, she commented.

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

The Professor thinks these issues can soon be solved by the large quantity of skilled tech industry workers.

"One should not downplay China's ability to close the gap."

'China's Negotiating Tool

She described the latest reports from China about the semiconductor industry as a "bargaining chip" in its months-long trade discussions with the US.

Chinese officials aims to pressure Washington into selling its high-tech tools or risk its position in such a significant economy, said the analyst.

Such reports project strength on China's part, even though it is {