Apple($AAPL) has delayed production of some Macbooks and iPads; NIO($NIO) has decided to suspend production in JAC Motors(SHA:600418) for five days; SAIC Volkswagen(SHA:600104) has stopped its production on some models, and General Motors($GM) has extended its production reduction plan in North America. At the moment, the shortage of chips is affecting many industries and becoming more serious.
This wave of chip shortage has affected every part of the semiconductor industry. Since Huawei chips were cut off on supply, the phrase " making chips " has become very popular online. As long as there is news on domestic enterprises making chips, it will be discussed a lot. Recently, some netizens found that according to Tencent's official website, there is some recruitment information on jobs related to R & D of chips, which has drawn more attention on media. Is Tencent going to make chips? Later, relevant people from Tencent responded that, based on the needs of some businesses, Tencent has tried to develop some chips in specific fields, such as AI acceleration, but not general chips.
According to media statistics, among the top 20 Internet giants in China, except for Pinduoduo ($PDD), KE Holdings ($BEKE), TAL Education Group($TAL), and New Oriental ($EDU), more than 75% of Chinese Internet enterprises want to step into chip businesses to get more recognized. Such phenomenon has extended globally: global Internet giants such as Apple($AAPL), Google($GOOG), Amazon($AMZN) and Microsoft($MSFT) have also joined in the line of "making chips".
So, why exactly do those Internet giants want to "make chips"?
While chips are in shortage, China encourages enterprises to invest in the integrated circuit industry. This allows Internet giants to see the new trend of the chip industry, vigorously investing in the R & D of chips, and helping the development of enterprises.
As for the BAT group, Alibaba($BABA) and Baidu($BIDU) came out earlier than Tencent in the chip field. Alibaba announced the establishment of T-Head at the Yunqi Conference in September 2018, with the main task of engaging in self-research, development, and the strategic layout of chips. As a dominating domestic search engine, Baidu has been developing AI accelerators based on FPGA since 2011. In 2018, it officially launched the first full-featured cloud AI chip "Baidu Kunlun".
Traditional chip manufacturers cannot meet the needs of special scenarios of industrial development, such as virtual reality, AI, autonomous driving (autopilot), Internet of things, and etc. If Internet giants can make chips, they can get rid of the U.S. restrictions on China's science and technology industry to a certain extent. In China's automobile industry, which is most affected by the lack of chips, companies like Xpeng ($Xpeng), BYD(HKG:01211), Geely(HKG:00175), Dongfeng Automobile (SHA:600006). have all invested in self-developed chips. They might need more capital to actually have the chip. If more Internet giants can invest in making chips, the development process of Chinese chips can be accelerated for sure.
"The acceleration of the localization in the semiconductor industry is helpful for domestic equipment manufacturers to seek development opportunities. The recent shortage of industrial chain and the restrictions on China's semiconductor industry chain in the United States will promote downstream manufacturers to promote chip supply more diverse and local, so as to improve the security of their supply chain, which will be conducive to the expansion of domestic chip manufacturers and the development of domestic semiconductor equipment manufacturers. " Duncan, an analyst with Sichuan finance securities, said earlier.
The technology competition starting from the chip war is a test of the leading elites of China and the United States. At the same time, it is also conceivable that there will be an increase in unconventional but covert access to information and technology from China. Finally, if it takes time for China to be completely independent, it will not take short for the United States to reach the target of Biden, as well the European Union and Japan. However, it is clear that the United States has far more Allies than China and it cannot rest in this race. Otherwise, China will take the high ground. Of course, China's chip technology is developing, with the help of policy, money, and its good performance.
With the continuous increase in semiconductor demand globally, the fact that the supply cannot meet the demand is expected to continue until the end of the year. The performance expectation of the semiconductor sector in the whole year was increased with the rising demand, thus bringing investment opportunities. As the ten-year golden period of the chip sector in China mainland is approaching, a number of leading companies entering a new stage.
When compared with the American's established players, the Chinese companies still are unable to offer any cost competition. As a latecomer in the industry, Chinese enterprises have to invest more in human resources, finance, and time to stand out in the industry.
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