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China Aims to Curb US Dependency With New Data Center Chip

Supriyo Bose
After being beaten down in the final quarter of 2018, pot stocks staged a nice comeback this year on the renewed appeal for riskier assets.

Amid the ongoing negotiations between the United States and China to reach a long-term solution to the trade dispute, the latter has been stepping up efforts to develop chips and other telecom components to end the dependency on imports from Western countries. Huawei Technologies Ltd., the leading smartphone manufacturer of China, is the latest to join this bandwagon as it launched a new processor chip for data centers and cloud computing.

Dubbed Kunpeng 920, the new chip is specially designed for servers that handle huge data from smartphones, video and other network services. The initiative is an integral part of the "Made in China 2025" project that aims to indigenously built products in telecom, robotics and other fields. Based on the ARM system typically used in smartphones and distributed computing, the chip reportedly competes with traditional industry leaders like Intel Corporation INTC, Advanced Micro Devices, Inc. AMD and NVIDIA Corporation NVDA. However, management refuted claims that the new product is in direct competition with Intel, which had been a strategic supplier for Huawei for years.

Meanwhile, Huawei is likely to record annual sales of more than $100 billion across the globe despite widespread sanctions and trade restrictions in various countries. Time and again, the U.S. administration has asked federal agencies to abstain from using China's ZTE and Huawei products over perceived risk of espionage. The Pentagon has also banned the sale of smartphones from these manufacturers from all military establishments. The U.S. officials had even reached out to allied countries to persuade them to refrain from using Huawei telecom equipment, accusing it of sophisticated and intensified cyberattacks to siphon off data for possible collection and analysis.

Although the underlying issue is cited to be related to national security concerns, the bone of contention perhaps stems from an innate desire between the two warring nations to claim dominance in cutting-edge technologies and the next generation of wireless services.

Relations between the United States and China were further strained when Meng Wanzhou, the chief financial officer of Huawei, was arrested in Canada over potential violations of sanctions on Iran. Serving as the deputy chairwoman of the management board, Meng is the daughter of the founder of Huawei. Consequently, the detention and eventual arrest of such a high-profile business tycoon rattled the markets and put the political environment on high alert.

Although Meng has been granted bail, the matter remained a potboiler as she faced probable extradition to the United States. The Sino-American tensions elicited strong protests from China against the perceived undemocratic act and threatened to derail the 90-day truce offer to initiate negotiations related to the tariff war. However, officials from both countries have reportedly initiated trade talks to ease the tariff restrictions imposed on each other.

Meanwhile, after a series of accusations of being a security threat, Huawei has hit back at its detractors asking them to prove the allegations. The leading Chinese telecom manufacturer has faced roadblocks across several countries, denting the company’s global ambitions. It seems that Huawei will now aim to counter these charges as the 5G race heats up.

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