China reportedly ordered operators to phase out foreign chips from networks

Earlier this year China’s Ministry of Industry and Information Technology told state-owned mobile operators that foreign processors, such as those from Intel and AMD, should be phased out of their networks by 2027, according to the WSJ report, citing people familiar with the matter.

The report also says that Chinese operator’s procurements show they are switching more to domestic alternatives, which has been made possible partly because the quality of Chinese made chips has improved and their performance has become more stable.

The regulator has told operators to inspect their networks for non-Chinese semiconductors and draft timelines to replace them, say the unnamed sources.

In terms of where Chinese operators can turn to instead for the chips required to run their networks, yesterday it was reported that Chinese telecoms vendor Huawei is close to finishing a new research and development complex in Shanghai, and according to Nikkei Asia one of the main areas of research will be semiconductor equipment.

The site is reportedly costing around $1.6 billion and the campus is designed to accommodate 35,000 workers, among which are expected to be former employees of major chip kit firms such as Applied Materials and Dutch company ASML, who owns technology vital to producing cutting-edge chips.

This is the latest development in what has become a technology trade war between the US and China. Last month it emerged that the CCP had issued a directive that it only wants Chinese hardware and software on government PCs and servers, which would mean kicking out the likes of Intel, AMD, Microsoft and Oracle – all of whom are ubiquitous in the global IT sector.

‘Beijing’s procurement revamp is part of a national strategy for technological autarky in the military, government and state sectors that has become known as xinchuang or “IT application innovation”,’ said the FT which was the first to report it. ‘The standards “are the first nationwide, detailed and clear instructions for the promotion of xinchuang”, said a local government official managing IT system substitution.’

This follows years of the US ratcheting up restrictions against Chinese firms, particularly Huawei, which most of the West has followed suit on. Some form of retaliatory bans on US tech firms – despite US grumblings – was probably inevitable, and it without much evidence that relations are about to get any better, presumably they’ll be more to come.