China to Invest $29 Billion to compete directly with AMD and Intel

China is reportedly set to invest a whopping 204 billion yuan ($29 billion) in its domestic semiconductor industries. The state fund will benefit both chip design and manufacturers. This is likely in response to the ever-escalating trade war with the US. This will, in turn, reduce the state’s dependency on AMD and Intel, both major US chip companies.

China’s Ministry of Finance invested 22.5 billion yuan while the China Development Bank invested 22 billion yuan. This resulted in a snowball effect which led to investments from other local governments and public enterprises, including China Tobacco. The US has been cutting off the flow of chips to targetted companies like Huawei for a while now. The Chinese government’s decision will reduce its reliance on US chipmakers. At the same time, it will provide a major boost to domestic industries including processors, smartphones and the datacentres.

AMD and Intel

How does this affect AMD and Intel? About one-sixth of Intel’s $1.2 billion quarterly revenue comes from China. AMD has a joint venture with Chinese partners to produce and sell its Zen 2 processors in China. AMD also has partnerships to sell its EPYC server chips as well as their x86 based processors.

With China being the second-largest economy in the world, it is heavily dependent on new technology. The processors that power this economy are designed in the US. With the current trade war between the two, the US has blocked exporters of the latest silicon from shipping to China. This has resulted in China increasing domestic chip production at a very fast pace to meet the goal of the Made in China 2025 project. AMD and Intel will likely face some stiff competition from the domestic chips in the upcoming future.

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