China has dealt a fresh blow to U.S. chipmakers Intel and Advanced Micro Devices (AMD) by directing the country's largest telecom carriers to phase out foreign chips from their networks by 2027, according to a report by the Wall Street Journal on Friday. The move comes as Beijing ramps up efforts to replace Western-made technology with domestic alternatives amid escalating Sino-U.S. tensions and tightening U.S. curbs on high-tech exports to its rival.

Citing people familiar with the development, the Journal reported that Chinese officials had instructed state-owned mobile operators to inspect their networks for non-Chinese semiconductors and map out timelines to replace them earlier this year. The decision is expected to have a significant impact on Intel and AMD, whose shares were down more than 1.5% in premarket trading following the news.

China was Intel's largest market last year, accounting for more than 27% of its total revenue. The company declined to comment on the report, while AMD did not respond to a Reuters request for comment.

The move to phase out foreign chips is part of a broader push by Beijing to reduce its reliance on Western technology. In 2022, state-owned enterprises were instructed to replace office software systems with domestic products by 2027, marking the first time such specific deadlines were imposed, according to five brokerage firms that cited a September 2022 order from China's state asset regulator. Reuters could not independently verify the order.

The Financial Times had reported in March that China had introduced guidelines to phase out U.S. chips from Intel and AMD from government personal computers and servers. The new rules seek to block foreign technology from federal computers, including operating systems like Microsoft's Windows and other database software made overseas.

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

The U.S. has also been stepping up efforts to curb Chinese advanced chipmaking. Bloomberg reported that U.S. officials have requested South Korea, one of China's key trading partners, to adopt export controls on semiconductor tools. The U.S. is reportedly set to reveal the names of Chinese companies on its blacklist for receiving U.S.-made chipmaking equipment, with American companies being restricted from sending equipment to Chinese semiconductor factories.

As the chip wars between China and the United States continue to escalate, the impact on global technology supply chains and the semiconductor industry as a whole remains to be seen. The push for self-reliance in critical technologies by both nations is likely to reshape the landscape of the industry and have far-reaching consequences for businesses and consumers alike.

Intel and AMD, two of the world's leading chipmakers, find themselves caught in the crosshairs of this ongoing battle. The loss of the Chinese telecom market, which has been a significant source of revenue for both companies, could have a substantial impact on their bottom lines and force them to reevaluate their global strategies.