China’s push for the public sector to step up its use of domestically produced semiconductors is best exemplified by Huawei’s Qingyun L540 laptop.
The “safe and reliable” devices are equipped with domestically designed processors and Chinese-made operating systems, eliminating as many foreign components and software as possible.
The computers, which are being snapped up by governments and agencies across the country, have become a poster child for a localization campaign known as “Xinchuang,” China’s “IT application innovation.”
Chinese officials have dreamed of building a domestic high-tech supply chain for decades, especially in basic components such as semiconductors. Progress has been slow, but Washington’s gradual tightening of trade embargoes on tech goods has prompted Beijing to redouble its efforts.
“We must strengthen research and development of semiconductors, machine tools and basic software,” President Xi Jinping exhorted leading scientists and policymakers this summer. “These will provide the technological foundation for an independent, secure and controllable supply chain,” he said.
Chinese authorities now combine heavy state spending and financial support with top-down mandates to buy domestic technology, particularly in the semiconductor sector.
Late last year, state buyers were instructed to phase out computers with U.S.-made processors.
Since implementing the directive in March, central government agencies have gone from buying only laptops with Intel and AMD processors last year to now buying three-quarters of their devices with chips from Chinese companies including Huawei, Shanghai Zhaoxin and Huawei’s Qingyun L540, according to public records.
What began as a campaign to remove foreign high-tech products from government and state-owned enterprise offices has gradually expanded to a broader range of products.
Automakers, including major European groups that make cars in joint ventures with Chinese state-owned enterprises, have been told to step up their use of domestically produced semiconductors, according to four people familiar with the matter.
Two of the people said the companies had been given a target to use 25% Chinese chips by next year, but that the consequences of failing to meet that target had not yet been decided. Nikkei Asia previously reported on the directive.
China’s Ministry of Industry and Information Technology is leading the country’s technology localization effort and has outlined plans for national standards for auto chips. The ministry said in December that the goal is to “provide room for China’s indigenous innovation in auto chips.”
An engineer at a major European automaker said he has begun looking into component inventory and chip sources. “It’s not easy to incorporate Chinese chips into a design,” this person said. “But if it works, we’re hopeful that we’ll see Chinese chips being used in products around the world because they’re so much cheaper.”
Major foreign telecom equipment makers are also being encouraged to use domestically produced chips in their equipment to maintain sales, according to two people familiar with the matter.
State-run China Telecom recently issued a tender for 150,000 servers for its network, with two-thirds of the order being for servers with domestically produced processors, procurement records show.
The Huawei Qingyun laptop tested by the Financial Times also has Chinese software running on Chinese hardware. The device ran the Chinese-made Unity operating system, which is based on Linux. Users can play music, edit photos and create word documents and spreadsheets, just like they would on a Windows machine. But the applications are all Chinese.
The Huawei Qingyun laptop tested by the FT comes with Chinese-made software running on local hardware, allowing users to play music, edit photos and create Word documents and spreadsheets. © FT/TechInsights
The laptop’s Word-like application was developed by Chinese software group Kingsoft and saves text files in the .wps format rather than the .docx format used by Microsoft. Chinese agencies including the Ministry of Industry and Information Technology, the State Administration of Taxation and the Coast Guard have begun releasing some government documents in this format.
But Huawei’s Xinchuang laptops have yet to be fully insulated from foreign technology, illustrating the challenges ahead for Xi’s campaign.
According to research by research firm TechInsights, Huawei’s Kirin 9006C processors were manufactured in Taiwan in 2020, ahead of the tightening of U.S. export controls on major Chinese companies that came into effect in September of that year. Huawei had stockpiled a large number of 5-nanometer chips before the sanctions were lifted.
The laptop’s USB controller hub is made by American company Microchip, and two of the memory chips are from South Korea’s SK Hynix. TechInsights reports that the 512GB storage was packaged in December 2020.
SK Hynix said it strictly complies with U.S. export controls and has suspended business with Huawei since the restrictions were announced. Microchip did not respond to a request for comment.
Lin Qingyuan, a China hardware expert at Bernstein, said while Beijing’s innovation policy has accelerated the adoption of domestic technology, Washington’s sanctions are actually having a more pronounced impact.
“When companies have no choice, it creates a market for local companies such as AI chips,” he said.
Most of the critical chips are designed by Chinese groups, accounting for about $109 of the $182 worth of integrated circuits in a laptop, according to an analysis by TechInsights.
Stacey Wegner, a senior technology analyst at TechInsights, said this is something you don’t see in a normal laptop. “This was a laptop with a lot of Chinese-made ICs,” she said. “That’s for sure.”
