China Sets Sights on Dominating Global AI Processor Market

China, the world’s largest market for silicon chips, has tried for years to challenge the dominance of Intel and Qualcomm in producing CPUs (central processing units). Some companies there are now seizing an opportunity to become No. 1 in the production of processors specifically aimed at artificial intelligence applications, from cars and smartphones to home appliances. Although Chinese companies jumped into AI from the beginning, they still face significant competition from Apple, Google, Intel and Qualcomm among others.

The Wall Street Journal reports that, in addition to having “the capital, the talent, a huge consumer market” and “rafts of data,” Chinese companies also have the full support of their government to create these “special-purpose chips.” In July, the Chinese government set the goal of making the country “the global leader in AI by 2030,” and created “a $20 billion chip-financing pool.”

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Local governments have also “set up at least 30 more semiconductor collections with announced financing of more than $100 billion.” Huawei Technologies has produced numerous engineers who left to found startups.

“This is the first time in history that a special-purpose chip can deliver a solution that is tens or hundreds of times better than the competition and that is addressing a fast-growing market that will be measured in the millions or tens of millions of devices,” said Moor Insights & Strategy analyst Karl Freund. “While previous attempts by Chinese companies to break into the digital semiconductor market have not been successful, I believe this time is different.”

Chinese AI startups are finding it easy to raise money. Cambricon Technologies, a startup founded by Chinese Academy of Sciences, received $100 million from “a government fund and the e-commerce company Alibaba Group Holding … giving it a valuation of $1 billion.” Cambricon’s latest chipset was developed with Huawei.

Horizon Robotics has raised $200 million since mid-2015 from Intel and Russian billionaire Yuri Milner among others. China is also a major consumer of AI chips, which San Diego startup Kneron discovered after it opened its doors in 2015. That company, founded by former Qualcomm and Samsung semiconductor engineers, “now works with a Chinese appliance maker designing chipsets that train TVs to activate parental-control settings when children are present.”

“I do not believe these companies are overly optimistic,” said Freund. “The potential is huge, and the barriers, while real, can be overcome given enough time and money.”