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China Taps Alibaba, Tencent To Beat US Sanctions

  • China has enrolled tech giants Alibaba Group Holding Limited (NYSE: BABA) and Tencent Holding Ltd (OTC: TCEHY) to aid its efforts in designing semiconductor chips to reduce its dependence on Softbank Group Corp (OTC: SFTBF) (OTC: SFTBY)-owned Arm.

  • Arm, headquartered in the U.K. but has significant operations in the U.S., is seen as vulnerable to any ramping-up of U.S. sanctions, Financial Times reported.

  • The Chinese government has established a consortium of companies and institute Beijing Open Source Chip Research Institute to create new chip intellectual property.

  • The group used Arm's rival Risc-V, an open-source chip design architecture, to create Xiangshan, a high-performance Risc-V computer-processing chip aimed at matching Arm's IP and boosting the development of a Chinese chip design market.

  • Before Beijing's push to combine resources, Chinese tech giants Alibaba and ByteDance had already set up teams using Risc-V architecture to develop high-performance chips that power AI algorithms and data centers.

  • However, Alibaba's chip arm T-head executive finds it a distant goal to develop Risc-V-chips to replace the existing Arm ones T-head due to falling profits at its parent company.

  • ByteDance Ltd said its work was in the preliminary stage, while Alibaba said its development capability was mainly in the Internet of Things sector.

  • "You don't know when the next round of U.S. restrictions will come . . . using Arm's architecture is too risky now, it's like exposing your biggest weakness to the enemy," said a Tencent engineer.

  • Rene Haas, Arm's CEO, said Arm has a significant advantage because it offers software alongside its designs and has a community of 50 million developers.

  • Intel Corp (NASDAQ: INTC) said Risc-V "has traction in embedded markets and is expected to make inroads into IoT, automotive, mobile and datacentre markets in the next 3-5 years".

  • However, it added that the open-source architecture is "still in its infancy and needs the support of the ecosystem to innovate further and drive market adoption."

  • However, several of Arm's biggest customers, like Qualcomm Inc (NASDAQ: QCOM), are not yet convinced about Risc-V's potential.

  • Photo by Body Stock and Dragon Claws by Shutterstock

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