AI euphoria masks long-term tech challenges

Moore Threads Technology Co's 425% first-day pop this month — China's most successful initial public offering since 2019 — capped a year in which investors have grown increasingly excited about the prospects for the country's AI chip advancement.

- DEBBY WU CHARLOTTE YANG

A Chinese flag is displayed next to a 'Made in China' sign seen on a printed circuit board with semiconductor chips, in this illustration picture taken on Feb 17, 2023.

(REUTERS)

That's despite basic technological hurdles that may hinder the industry's longer-term prospects.From Moore Threads to Cambricon Technologies Corp and MetaX, the market is celebrating a coterie of once-unknown names that now harbour bold ambitions to take on Nvidia Corp — at least at home.

Major players like Alibaba Group Holding Ltd and Baidu Inc are making headway into the semiconductors that underpin AI development — one of Beijing's top priorities.

Recently, Canadian research firm TechInsights took apart a Huawei Technologies Co smartphone and revealed a processor made using more advanced technologies than Chinese chipmakers were thought capable of. China is even now preparing a package of as much as US$70 billion to bankroll and support the sector, people familiar with the matter said.

The reality, though, is that China's chipmaking sector is struggling with technological bottlenecks that capital alone may not easily resolve — including in manufacturing.

To advance to the cutting edge, many like Huawei are relying on Semiconductor Manufacturing International Corp — a US-blacklisted firm that can’t procure the requisite equipment to efficiently crank out advanced chips. In its report, TechInsights cautioned that SMIC’s achievements came with “tradeoffs” in cost. Cambricon is making its best processors at about a 20% yield — meaning four out of five silicon dies that roll off the assembly line are discarded as unusable.

On Friday, Moore Threads warned that investors may be getting over-exuberant, triggering a 19% plunge in its shares.