China has recently introduced new guidelines that prohibit the use of CPUs made by Intel and AMD for government PCs and servers. Instead, the country has approved 18 processors manufactured by domestic companies Loongson and Phytium, despite the United States blacklisting them. This move is part of China's nationwide strategy to reduce reliance on foreign technology and respond to US sanctions, which have imposed restrictions on various Chinese goods.

The Chinese Finance Ministry and the Ministry of Industry and Information Technology issued this guidance on December 26 of last year. In addition to government entities, state-owned companies have also been instructed to transition to locally made CPUs by 2027. This shift towards homegrown options aligns with China's efforts to bolster its own technological capabilities and reduce dependence on foreign suppliers.

China's tech market is a crucial one for major companies such as AMD, Nvidia, and Intel. In 2020, China accounted for 27% of Intel's sales, generating a staggering $54 billion, while AMD amassed $23 billion in sales, according to the Financial Times. However, China aims to replace not only foreign CPUs but also Microsoft's operating system with domestically developed alternatives, which currently contribute 1.5% of the company's revenues.

Nonetheless, China may face significant challenges in delivering competitive chips on a large scale. While the country has acquired numerous chipmaking tools in recent months, it still lags behind in terms of technology. Intel CEO Pat Gelsinger believes that China's progress in the chipmaking industry will leave it a decade behind other players in the foreseeable future. In contrast, chipmaking companies like TSMC and Intel are actively constructing new fabrication plants in the United States, with support from the Biden administration.

It is worth noting that Intel holds an export license with Huawei, a major Chinese tech company, while AMD's attempts to have it revoked have been unsuccessful. This raises further questions about the complexities of the international tech landscape and the connections between companies and countries.

While China may face significant challenges in fully transitioning to domestically made CPUs, it is uncertain whether its citizens will readily adopt home-grown options. The country's reliance on imported raw materials and technology from other semiconductor makers, such as SMIC and HLMC, may hinder a complete shift. Furthermore, the sanctions imposed on Russia by the US and the EU have resulted in the cessation of many services and imports. Although Russia currently imports computing hardware from China, it remains unclear if it would consider using Chinese-made CPUs.

China's pursuit of self-made CPUs represents a considerable undertaking in terms of both financial investment and R&D. Despite potential advancements through reverse engineering and stolen technology, the establishment of fabrication plants and the overall sustainability of the chipmaking industry require a multifaceted approach. China's Zhaoxin KX-7000 CPU, although still using x86 architecture, is considered to be six years behind in terms of performance.

As China strives for self-reliance in CPU production, time will tell if the country can overcome the challenges it faces and establish a strong domestic industry.