The ongoing trade war between two of the world's largest superpowers has led to the disruption of major supply chains. As such, tech giant Alibaba has recently commented that the company might resort to producing its own microchips in order to avoid huge trade tariffs imposed on various goods.
Semiconductors are one of the most valuable pieces of supply that bear the burden of the trade war. Based on market data, it would appear that China imports thrice as many semiconductors as the country can produce domestically. This data is based on a study published by research firm Gavekal Dragonimics.
Should the industry trend continue to push as originally anticipated, the firm estimates that the country's semiconductor trade will reach more than $60 billion come 2020. That will propel China's semiconductor market to second biggest in the world, trailing only to South Korea.
In order to shift its semiconductor dependence away from import, China is pushing hard on a project which many analysts simply call "semiconductor sovereignty."
Tech giants like Google and Microsoft have already established their own in-house microprocessor development teams. Alibaba, China's largest cloud service provider, is slowly following this trend. According to the Chinese tech giant, it should be able to release its first microprocessor by next year.
While Chinese companies have never come close to rivaling companies from Taiwan, South Korea, and the United States in terms of producing advanced computer chips, China has been pushing towards this road for quite some time already.
With the advancement of Artificial Intelligence, China is pushing aggressively towards getting a huge chunk of this very lucrative market. Market and tech analysts have predicted that AI will be the next big thing, a notion that supports the aggressive push towards powerful chips.
According to Alliance Bernstein LP analyst Mark Li, the trade war between China and the United States have pushed the former to strengthen its own supply chain instead of relying on outside providers. A report published by Bernstein revealed that at least 13 Chinese companies are currently working on microchips that are specially designed to handle AI algorithms and software. Chief among these companies are three of China's largest tech companies: Alibaba, Huawei, and Baidu.
Alibaba's core business is e-commerce. However, the company has recently decided to diversify its revenue stream. With this, it is only reasonable for the company to invest in the next big thing. Based on market data, Alibaba has already invested in at least six semiconductor companies.
