Beijing's decision this week to ban Chinese companies from using microchips made by US firm Nvidia indicates the country is increasingly confident about replacing them with domestically produced chips, experts say.
Experts believe that after years of research, China can now produce chips that could replace the H20, the most powerful model chip Nvidia is allowed to export to China.
As the Artificial Intelligence (AI) race between the two countries heats up, multiple companies in China are developing large language models (LLMs) and other AI products that require huge amounts of cutting-edge chips.
"Maybe they [Chinese domestic alternative] are not equivalent to Nvidia chips, but they can do the job quite well," Shahriar Akter, an AI expert from the University of Wollongong, told the ABC.
"They are not far behind in catching up."
New 'supernodes'
On Wednesday, the Financial Times reported that the Cyberspace Administration of China (CAC) had instructed domestic tech firms, including ByteDance and Alibaba, to halt purchasing Nvidia's latest RTX 6000D chips.
Nvidia chief executive Jensen Huang said he was "disappointed" by the ban and told Reuters that Washington and Beijing "have larger agendas to work out".
The revelation came just days after China's State Administration for Market Regulation accused Nvidia of violating the country's Anti-Monopoly Law.
On Thursday, Chinese tech giant Huawei outlined its chip strategy and pledged to launch the world's most powerful computing system.
At a conference in Shanghai, Vice Chairman Eric Xu said Huawei would roll out three new chips by 2028, along with a series of new "supernodes", which are rack systems housing numerous chips.
These nodes can be linked into "clusters" to generate massive computing power.
"These new products will set new standards for AI infrastructure, drive AI advancement, and create greater value." Mr Xu said.
Domestic alternatives are 'catching up'
Huawei is not the only company trying to catch up to Nvidia.
In a news program broadcast on Tuesday night, China Central Television (CCTV) revealed a chip named Pingtouge from Alibaba that reportedly outperformed Nvidia's H20 and H800 chips in several metrics such as memory capacity, bandwidth and power efficiency.
Pingtouge or T-head is the name of Alibaba Group's chip design arm. The company's Hong Kong-listed shares rose 6 per cent the day after the state media showcase.
Tech companies like Tencent and Baidu are also developing advanced AI chips, some of which have already been used in training AI models.
Professor Akter pointed out that concerns about potential backdoor and remote control of those American chips also prompted China to quickly develop its own alternatives.
In July, China initiated an investigation into Nvidia concerning alleged security risks associated with its H20 chip.
CAC urged Nvidia to address concerns that the H20 chip might contain "backdoor" features, potentially allowing for remote tracking, data extraction, or even shutdown capabilities.
"China has this regulatory weapon, and they basically can use this weapon to control any foreign technologies," Professor Akter said.
"Chinese regulators think, for the security and the productivity of their industry and for self-reliance, the best strategy is moving forward.
"If we see this AI race, Donald Trump has got the bargaining chip that are these Nvidia chips, but if China can develop its own ecosystem, chips, servers and algorithms, then they don't need to rely on American chips.
"And Donald Trump will not have an advantage."
Long Guodong, an expert on AI and machine learning from University of Technology Sydney, said from the perspective of industrial sustainability, producing alternative chips domestically was a viable way out for China.
"If you frequently purchase a product that could face supply disruptions at any moment, you must prepare an alternative," Dr Long told the ABC.
Technical barriers remain
At Huawei's conference on Thursday, Eric Xu acknowledged that Huawei's single-chip computing power still lagged behind Nvidia's products.
Huawei founder Ren Zhengfei said in an interview with a Chinese state media: "We are still one generation behind the United States in single-chip technology.
"Therefore, by using cluster computing to bridge the gap of single-chip, we can achieve practical results."
Professor Akter said: "If we compare the computing power, the Chinese chips have to work harder. The industry is very new. It is growing in terms of computing power, security, data centre capability, server compatibility."
Professor Long said Chinese chips may still lag behind Nvidia's offerings in terms of versatility but "the exact extent of this gap remains unclear".
He said the latest ban on Nvidia chips was unlikely to slow down China's AI development.
"I would expect the relevant authorities to have conducted thorough research, and possibly even consulted the companies that would be affected [before imposing the ban]," he said.
"Perhaps these firms already possess sufficient chip stocks, or have identified suitable alternatives.
"Otherwise, it seems unlikely that China would deliberately harm its own industries by imposing such a ban."
Asked about the latest ban on Nvidia, China Ministry of Foreign Affairs spokesperson, Lin Jian, said China had consistently opposed discriminatory practices against specific countries in economic, trade, and technological matters.
"China is willing to maintain dialogue and cooperation with all parties to safeguard the stability of global industrial and supply chains," Mr Lin said.
The ABC contacted the CAC for comment.
