China Excludes US Chipmakers from Telecom System, Turns to Domestic Alternatives
In a move to replace foreign technology with domestic alternatives, the Chinese government has directed the country’s largest telecom carrier to phase out foreign processors from its networks by 2027. This decision is expected to impact U.S. chip giants Intel and Advanced Micro Devices (AMD), who have supplied core processors for network equipment in China and around the world in recent years.
The Ministry of Industry and Information Technology‘s deadline is aimed at speeding up efforts to replace core chips in China’s telecommunications infrastructure. Regulators have instructed state-owned mobile operators to examine their use of non-domestic semiconductors in networks and draft replacement schedules.
The push to move away from foreign semiconductors in the Chinese telecom industry has been slow in the past due to a lack of high-quality domestic chips. However, recent improvements in the quality and stability of domestic chips have led Chinese telecom operators to turn more to local alternatives.
China’s efforts to wean off U.S. chips come amid a technology war between the U.S. and China that is fragmenting global industries. U.S. lawmakers have prohibited Chinese telecommunications equipment in the U.S. over national security concerns and restricted U.S. chip companies from selling certain products to China.
China has also issued procurement guidelines discouraging the purchase of laptops and desktops equipped with Intel and AMD chips. This directive aligns with Beijing’s goal of sourcing domestically for critical supply chains, including semiconductors. Computers equipped with foreign chips must undergo safety evaluation by government agencies, while those with domestic chips are pre-certified for sale.
The move towards domestic alternatives may impact Intel and AMD’s sales in China, one of their most significant markets. Intel reported that China accounted for 27% of its revenue in 2023, while AMD saw 15% of its revenue coming from China in the same year.
As China continues to develop its domestic CPU alternatives, industry experts believe that the country will become a major source of demand for mobile communication equipment in the coming years. Companies like Huawei Technologies’ HiSilicon and Hygon Information Technology have made significant progress in developing Chinese chips, which are increasingly gaining traction among Chinese telecom customers.
While Intel and AMD are facing challenges in the Chinese market due to localization policies, they are also navigating geopolitical tensions and export control regulations that impact their business prospects in the region. Despite these challenges, both companies are working to adapt to the changing landscape and maintain their position in the global semiconductor market.