By Li Yuan
The silicon part of Silicon Valley needs to watch out.
Competitors in China think it's finally their turn to shine.
As the world's largest market for semiconductors, China has
tried mightily--without much success--to challenge the dominance of
Intel Corp. and Qualcomm Inc. in making central processing units,
the brains of computers and smartphones.
Now, some ambitious Chinese companies see an opportunity to take
the lead in building processors that use artificial intelligence to
make phones, cars and home appliances interact with us more
seamlessly. Think of home air conditioners that can recognize
family members and adjust to their temperature preferences.
If you think about technological evolution in terms of soccer,
Team China totally missed the game for personal computers,
according to Yu Kai, founder of Horizon Robotics, a startup that
designs chips that use AI. For the mobile internet, he says, China
didn't enter the game until the second half, but managed to play
catch-up by building competitive applications.
"In the age of AI, we got into the game almost from the
beginning," Mr. Yu said. "There's a chance China could win the AI
chip race."
Past Chinese efforts to dominate the chip industry foundered
because of poor technology and political interference. And the new
crop of Chinese AI chip companies could still fail. They face
formidable competition, from old hands like Intel and Qualcomm and
deep-pocketed new entrants such as Apple Inc. and Alphabet Inc.'s
Google.
This time around, Chinese chip makers and some analysts say, the
stars are aligning. China has the capital, the talent, a huge
consumer market and--crucially--rafts of data that fuel AI
programs. Another huge plus: the government has set its sights on
making China an AI powerhouse.
Given how new these AI technologies are, everyone around the
world is starting out from the same point.
Any device with a chipset, from a smartphone to a car, is
expected to perform an ever-growing list of tasks. To do that more
efficiently, the industry is creating special-purpose chips that
crunch vast troves of data to recognize patterns and identify
objects with an AI process called deep learning. These chips
perform functions inside the device without having to exchange data
with servers in the cloud.
"This is the first time in history that a special-purpose chip
can deliver a solution that is tens or hundreds of times better
than the competition and that is addressing a fast-growing market
that will be measured in the millions or tens of millions of
devices," says Karl Freund, an analyst at Moor Insights &
Strategy. "While previous attempts by Chinese companies to break
into the digital semiconductor market have not been successful, I
believe this time is different."
Consider these positives, say startup executives and analysts
like Mr. Freund:
First, buckets of money are available for the industry.
Star AI startups are being showered with funding. Less than 18
months after scientists with the Chinese Academy of Sciences set up
Cambricon Technologies Co. to design AI chips for smartphones and
cameras, it received $100 million from investors--including a
government fund and e-commerce company Alibaba Group Holding
Ltd.--in August, giving it a valuation of $1 billion.
Mr. Yu's Horizon Robotics has raised $200 million since
mid-2015. The company--whose slogan is "the Intel of the AI
era"--counts Intel and Russian billionaire Yuri Milner as
investors.
Second, with more than 750 million people online, China provides
plenty of consumers and data for companies to use.
Kneron Inc., a San Diego, Calif., startup founded in 2015 by
former semiconductor engineers from Qualcomm and Samsung
Electronics Co., quickly found that its biggest market is in China.
The company now works with a major Chinese appliance maker
designing chipsets that train TVs to activate parental-control
settings when children are present. In addition, its chipsets can
teach robot vacuum cleaners to identify and avoid dog poop.
Albert Liu, Kneron's chief executive, says he was thrilled when
one of China's internet giants gave his team troves of online data
to boost the performance of its chip algorithms on the giant's
network. That scenario, he says, isn't likely to occur in the U.S.,
given its more stringent privacy concerns.
Both Cambricon and Kneron say they're already profitable, while
Horizon Robotics expects to break even by 2019.
And third, AI chip players enjoy state support.
In July, the government set a goal of making China the global
leader in AI by 2030. It listed AI chips as one of eight key
technologies.
Beijing has created a $20 billion chip-financing pool-- dubbed
the Big Fund--and local governments have set up at least 30 more
semiconductor collections, with announced financing of more than
$100 billion.
Fourth and finally, China has the Huawei factor: China can tap
into a growing reservoir of talented engineers. Take Huawei
Technologies Co. While not known for its mobile-chip technologies,
the telecom gear and phone maker has poured resources into
developing them. Its newest AI chipset, developed with Cambricon,
runs on its newest flagship Mate 10 phone.
Huawei gives business to startups like Cambricon. Huawei's
engineers also leave to join or form startups. Horizon Robotics'
head of chip design is a Huawei alumnus.
"If you add all this together," says Mr. Freund, the analyst, "I
do not believe these companies are overly optimistic: the potential
is huge, and the barriers, while real, can be overcome given enough
time and money."
Write to Li Yuan at li.yuan@wsj.com
(END) Dow Jones Newswires
January 04, 2018 05:18 ET (10:18 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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