China is set on phasing out foreign microprocessors, including those from American giants Intel and AMD, from its government computers, signaling a major push towards utilizing domestically produced technology, as reported by Financial Times on March 24, 2024. This initiative extends to moving away from Microsoft’s Windows operating system and foreign-made database software, opting instead for local alternatives, marking a significant shift in Beijing‘s procurement strategy amidst escalating tensions with the United States.
According to the Financial Times, the new procurement guidelines introduced by China‘s finance ministry and the Ministry of Industry and Information Technology (MIIT) on December 26 of the previous year, demand that government agencies and party organs prioritize “safe and reliable” processors and operating systems in their purchasing decisions. This development is part of China‘s broader strategy, known as xinchuang or “IT application innovation”, aimed at achieving technological self-reliance in the military, government, and state-owned sectors.
The China Information Technology Security Evaluation Center, on the same day the guidelines were announced, released a list of endorsed processors and operating systems, all originating from Chinese companies, including Huawei and Phytium, both of which are on Washington’s export blacklist. This move underscores China‘s commitment to replacing foreign tech with local solutions, echoing similar nationalistic trends in technology procurement observed in the US.
Financial Times report highlights that this policy marks China’s most decisive step yet towards establishing domestic alternatives for foreign technology. The shift is expected to impact US companies significantly, as China represents a major market for firms like Intel and AMD. Intel, for instance, reported that China accounted for 27 percent of its $54 billion in sales last year, with AMD also drawing a substantial 15 percent of its $23 billion in sales from the country.
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Despite the stringent guidelines, some procurement officials in China have noted that there is still some flexibility in purchasing computers with foreign processors and operating systems, albeit with additional steps to justify such acquisitions. This nuanced approach suggests that while the push for domestic technology is strong, the transition may allow for some degree of foreign tech presence in the interim.
The initiative by China to bolster its technological independence through the xinchuang policy is poised to reshape the IT infrastructure landscape within government and state-owned enterprises, with an estimated investment of Rmb660 billion ($91 billion) needed from 2023 to 2027 for this transformation, as per analysts at Zheshang Securities.
As China forges ahead with its plans to localize its technology stack, the global tech industry watches closely. The outcomes of these efforts will likely have far-reaching implications for international trade, tech innovation, and the geopolitical landscape of technology. The Financial Times’ coverage of these developments offers a critical look into the evolving dynamics of global technology and trade.
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