China has launched indigenous PCs, O/S, and Microsoft Office equivalent.

PCs are identified with Intel / AMD technology, Microsoft Windows, and Office software worldwide. Intel, AMD, and Microsoft shall be affected in the long run.

Approximately 45-50 million PCs were shipped in China last year alone. The PC market is worth about US$ 40 Billion.

Presently, the processing power of the Chinese PC is equivalent to the Intel i5 processor. That is about four years behind on technology compared to Intel/AMD.

Chinese company Loongson has developed a processor and O/S, while a large ecosystem of PC manufacturers has launched the PC in China.

Asus, a Taiwanese computer manufacturer, and Lenovo have reportedly joined the project.

Loongson and others may enter the international market with low-cost PCs in another year or two.

techcrisp.org investigates.

Background

According to a report in the Financial Times, the Chinese Ministry of Finance and Ministry of Industry and Information issued guidelines to Chinese Government bodies and Party offices to buy ‘ Safe and Reliable Processors and O/S’ and databases. The China Information Security Evaluation Center issued a list of qualified companies on the same day. Unsurprisingly, it comprised only Chinese technology companies. This was in December 2023.

The Chinese Xinchuang initiative translates to IT Application Innovation and aims to transition to domestically developed technologies by 2027.

The Chinese government’s directive is part of a broader strategy to mitigate risks in supply chains associated with U.S. core technologies fostering homegrown alternatives under the constant threat of US sanctions.

Xinchuang claims it generated US$25 billion worth of indigenous business in 2023, which will rise above US$100 billion by 2025.

This initiative involves developing domestic processors and operating systems and evaluating technology for government and state-owned enterprises to ensure compliance with security and reliability standards.

The government has already compelled overseas cloud providers like Amazon Web Services and Microsoft Corp. to establish joint ventures for operations within mainland China. Additionally, Apple Inc. has transferred its user data storage business to a government-backed operator in Guizhou.

While details about the Xinchuang committee remain limited, companies with more than 25% foreign ownership are excluded from participation, effectively barring overseas suppliers such as Intel Corp., AMD, and Microsoft.

The committee has over a thousand members, including prominent entities like Beijing-based CPU manufacturer Loongson, server maker Inspur, and operating systems developer Standard Software.

As of 2020, the country invested significant resources ($420bn) in science and technology, with over 60% of the funding directed towards companies.

The Global Innovation Index, published by the World Intellectual Property Organisation, ranks China at number 12.

China’s innovation agenda is divided into three main thrusts: replicating critical technologies, pioneering new technologies ahead of the rest of the world, and prioritizing “future industries,” encompassing cutting-edge fields like photonic computing, brain-computer interfaces, nuclear fusion, and digital twins.

China is already at the forefront of various sectors, such as e-commerce, high-speed trains, renewable energy, and electric vehicles (EVs).

An estimated 45-50 million PCs (US$40 billion) were sold in 2023 in China and is supposed to rise to 70 million PCs in 2027.

Loongson – Chinese PC

Loongson has launched a PC processor, the 3A6000. It has characteristics of both the MIPS and RISC-V architectures and is supposedly equivalent to the i5 Intel processor. Intel still ships the i5 Processor for the PC and laptop market. Technically, the i5 is good enough for an average PC user for routine office work. Loongson also claims it competes with the AMD Zen 3 3100 processor, which was launched in 2020.

Experts estimate that Loongson is four years behind Intel and AMD. Intel’s high-end offering for the PC segment is the i7. At the same time, AMD has a Ryzen 7000X3D processor.

China is Intel’s largest market, accounting for 27% of US$ 54 Billion sales. Lenovo alone, a Chinese PC manufacturer, buys 10% of the total processors made by Intel. As per Intel’s 10 K 2023 Annual report, revenues of US$ 54 Billion were reported, while operating margins were US$ 93 million. Intel changed its depreciation policies in 2023, increasing the life of fabrication assets from 5 to 8 years; analysts estimate that Intel would have otherwise shown a loss of about US$ 7 billion. AMD gets 15 % of its total revenue of US$ 23 Billion from China.

Loss of revenue from the Chinese market shall affect Intel and AMD immediately.

Loongson announced that over 50 partners have developed products based on the chip. Some use cases include PCs, laptops, storage kits, network security equipment, and industrial control computers.

Asus, a major Taiwanese PC manufacturer, and  Lenovo, another prominent PC manufacturer with an international footprint, have partnered with Loongson.

Multiple Chinese computer brands, including Tongfang, Ipason, Founder, and Hair, have launched new computer series based on the Loongson 3A6000 processor.

Loongson has developed its O/S based on open-source Linux.

A Russian company has also developed an alternative O/S.

Kingston Office Software of Beijing has developed WPS Office Software, which comprises a word processor, spreadsheet, presentation suite, and PDF editing software for various O/S. WPS is quite good and highly cost-competitive.

Sales of computers based on the Loongson processor, including its O/S and WPS software, are rising in China’s Government bodies.

Technology Challenges for Loongson

The processor was built on a 12/14nm process.

In China, the only foundry capable of producing 14-nm chips is Semiconductor Manufacturing International Corp (SMIC). SMIC was reportedly able to make a 7-nm chip last year.

Loongson is evaluating the advanced 7-nm process from several foundries to manufacture its future chips.

Intel is moving towards 1.4 to 1 nanometer in its future fabs coming up in the US by 2026/2027.

As per US sanctions, it will be extremely difficult for China to access such advanced technology. Chinese chip developers may be restricted to 7 nanometers, provided SMIC can deliver them. Incorporating more transistors, GPU, and AI modules into the processor will be difficult.

This would dampen Loongson’s future growth.

Loongson initially licensed technology from US-based MIPS Computer Systems in 2011. Since 2021, it has moved to open-source RISC-V architecture. Under present sanctions, Intel or ARM will not license their technology.

The RISC-V Foundation was established to promote cooperation and growth in chip design. The RISC-V specification is open and available globally. To maintain neutrality, the foundation is incorporated in Switzerland. With RISC-V and the Linux ecosystem, users can create whatever they desire. Several Chinese companies, including the Chinese Academy of Sciences (CAS), have joined the foundation as Development Partners.

China’s concerns about dependency on American technology, which causes vulnerable chokepoints, have expedited a push to work on  RISC-V. This has driven RISC-V’s development to become a competitor to the chip architecture of both ARM and Intel.

The USA is profoundly concerned with the RISC-V Foundation model. Many US Senators have written to the US Government to take action on this account. RISC-V technology was developed at the University of Berkley, USA.

Microsoft Windows has a large ecosystem of millions of software applications and tools. In the foreseeable future, very few developers will be interested in porting their software to a new and technically inferior processor and Linux-based operating system for a closed market.

Conclusion

Chinese government and chip companies are relentlessly pursuing improved processor design, open-source operating systems, and application software.

This pursuit will likely lead to the introduction of indigenous solutions within China’s government, party offices, and large government companies. It remains to be seen how the solution is accepted in the domestic and commercial markets.

Should Chinese companies launch their PCs in international markets through Asus and Lenovo, purchase decisions will be based on price points, functionalities, and the availability of solutions developed for Linux. MS Windows has a more extensive application ecosystem than Linux in the PC segment.

Chinese chip manufacturers may be unable to move beyond 7 nanometers for quite some time. Their solutions will be less compute-intensive, lack powerful GPU or AI features, and be energy-inefficient compared to Intel and AMD.

Over time Intel and AMD will lose market share in China, which they cannot afford.