Its three-year-old chip unit, T-Head, unveiled its third processor in October, the Yitian 710 for Alibaba’s cloud computing business

To help make China a self-reliant ‘technology superpower,’ the ruling Communist Party is pushing the world’s biggest e-commerce company to take on the tricky, expensive business of designing its own processor chips — a business unlike anything Alibaba Group has done before.

Its three-year-old chip unit, T-Head, unveiled its third processor in October, the Yitian 710 for Alibaba’s cloud computing business. Alibaba says for now, it has no plans to sell the chip to outsiders.

Other rookie chip developers including Tencent, a games and social media giant, and smartphone brand Xiaomi are pledging billions of dollars in line with official plans to create computing, clean energy and other technology that can build China’s wealth and global influence.

Chips are a top priority in the ruling Communist Party’s campaign to end China’s reliance on technology from the US, Japan and other suppliers Beijing sees as potential economic and strategic rivals. If it succeeds, business and political leaders warn that might slow down innovation, disrupt global trade and make the world poorer.

Self-reliance is the foundation for the Chinese nation, President Xi Jinping said in a speech released in March. He called for China to become a ‘technology superpower’ to safeguard ‘national economic security.

We must strive to become the world’s main centre of science and the high ground of innovation, Xi said.

It’s hard to imagine any one country rebuilding all of that and having the best technology, said Peter Hanbury, who follows the industry for Bain & Co.

Beijing’s campaign is adding to tension with Washington and Europe, which see China as a strategic competitor and complain it steals technology. They limit access to tools needed to improve its industries.

China’s factories assemble the world’s smartphones and tablet computers but need components from the US, Europe, Japan, Taiwan and South Korea. Chips are China’s biggest import, ahead of crude oil, at more than $300 billion last year.

Official urgency over that grew after Huawei Technologies Ltd., China’s first global tech brand, lost access to U.S. chips and other technology in 2018 under sanctions imposed by the White House.

That crippled the telecom equipment maker’s ambition to be a leader in next-generation smartphones. American officials say Huawei is a security risk and might aid Chinese spying, an accusation the company denies.

Huawei and some Chinese rivals are close to matching Intel Corp., Qualcomm Inc., South Korea’s Samsung Electronics and Britain’s Arm Ltd. at being able to design ‘bleeding edge’ logic chips for smartphones, according to industry analysts.

But when it comes to making them, foundries such as state-owned SMIc in Shanghai are up to a decade behind industry leaders including TSMC (Taiwan Semiconductor Manufacturing Corp.), which produces chips for Apple Inc. and other global brands.

Even companies such as Alibaba that can design chips likely will need Taiwanese or other foreign foundries to make them. Alibaba’s Yitian 710 requires precision no Chinese foundry can achieve. The company declined to say which foreign producer it will use.

My country still faces a big gap in chip technology, said industry analyst Liu Chuntian of Zero Power Intelligence Group.

China accounts for 23% of global chip production capacity but only 7.6% of sales.

Packing millions of transistors onto a fingernail-size sliver of silicon requires some 1,500 steps, microscopic precision and arcane technologies owned by a handful of U.S., European, Japanese and other suppliers.

China ‘lags significantly’ in tools, materials and production technology, the Semiconductor Industry Association said in a report this year.

Washington and Europe, citing security worries, block access to the most advanced tools Chinese chipmakers need to match global leaders in precision and efficiency.

Without those, China is falling farther behind, said Bain’s Hanbury.

The TSMC horse is sprinting away and the Chinese horse is stopped, he said. They can’t move forward.

T-Head’s first chip, the Hanguang 800, was announced in 2019 for artificial intelligence. Its second, the XuanTie 910, is for self-driving cars and other functions.

In November, Tencent Holding, which operates the WeChat messaging service, announced its first three chips for artificial intelligence, cloud computing and video.