China Tells Telecom Carriers To Phase Out Foreign Chips – Report

China continues to respond to pressure from the United States, in a move that spells more bad news for the likes of Intel and AMD.

The Wall Street Journal (WSJ), citing people familiar with the development, reported that Chinese officials had earlier this year directed the country’s largest telecom carriers to phase out foreign chips that are key to their networks by 2027.

This latest tit-for-tat move comes as the United States continues to tighten chip export restrictions to China.

Earlier this month the Biden administration revised the export rules to make it harder for China to access US artificial intelligence (AI) chips and chipmaking tools.

US export restrictions

It comes after the US in October 2022 had banned the export of the A100 and more powerful H100 chips to mainland China and Hong Kong.

Then in October 2023 the US also banned export of the slower A800 and H800, which had been specifically developed for sale to China.

The Commerce Department, which oversees export controls, said it plans to continue updating its restrictions on technology shipments to China as it seeks to bolster and fine-tune the measures.

Last week for example the US government asked the Netherlands to stop its top chip equipment maker (ASML) from servicing some chip-making machines and tools in China.

Chinese retaliation

Beijing has previously lashed out at the toughened export controls from US.

Now the Wall Street Journal has reported that China’s Ministry of Industry and Information Technology has ordered state-owned mobile operators to inspect their networks for non-Chinese semiconductors and map out timelines to replace them.

Procurements by Chinese telecom carriers show they are increasingly switching to domestic options, according to the WSJ report. This has apparently been made possible in part by the improved quality and stability of local chips,.

During his recent state visit to Beijing, Dutch Prime Minister Mark Rutte personally discussed a recent incident of cyber espionage, which the Netherlands directly blamed on the Chinese state, during talks with President Xi Jinping.

Chinese President Xi however told Dutch Prime Minister Mark Rutte that no force can stop the pace of China’s technological progress.

“Creating scientific and technological barriers and severing industrial and supply chains will only lead to division and confrontation,” Xi reportedly said last week.

And Beijing has already issued guidelines to phase out American processors, in favour of domestic chips for government and state computers.

The Chinese government is also reportedly seeking to sideline the use of Microsoft’s Windows operating system, as well as foreign-made database software.

It has also been reported, but not verified, that state-owned enterprises were instructed in 2022 to replace office software systems with domestic products by 2027.

Chip firm impact

The US export restrictions is hurting US chipmakers, including the likes of Intel and AMD, as well as Nvidia.

China was Intel’s largest market last year and was responsible for more than 27 percent of Intel’s total revenue, the WSJ report noted.

In January Nvidia admitted it was seeing significantly reduced demand in China for slowed-down chips, as it prepared its line-up to comply with the US export controls.

But also in January it was reported that high-end Nvidia AI chips had been purchased by Chinese military organisations, state-run AI research institutes and universities over the past year in spite of US export controls.

While those purchases were small, they apparently illustrated the difficulty for the US in its attempts to completely cut off China’s access to advanced AI chips, which could be used to develop the country’s AI and military capabilities.