This article originally appeared on ABACUS The world’s biggest consumer of computer chips makes few of them itself. But China is trying to change that. Ever since President Trump briefly threatened to ban ZTE from buying US tech, China has been stressing the need to rely less on foreign imports. Billions of dollars of have been poured into propping up domestic chip makers. And Chinese tech titans from Alibaba to Tencent have responded to Beijing’s rallying cry. (Abacus is a unit of the South China Morning Post, which is owned by Alibaba.) Any progress is going to take time. Even Chinese officials have admitted that the nation’s biggest chip maker is only a tenth the size of leading global companies. But if there’s anything stopping the domestic industry from growing, it’s not the quality of engineers. The reason I say that traces back to Hong Kong, some two decades earlier. Before the world had smartphones, PDAs like the Palm Pilot demanded powerful portable chips. And before Samsung, Qualcomm and others came to dominate mobile chips, the market leader was Motorola. At its peak, three out of every four PDAs ran on Motorola’s DragonBall processors . Besides the company’s own devices, the chips were also found in handsets from Palm, Sony, Samsung and other brands. Their inventors? A team in Hong Kong -- a city known better as a glitzy financial center than a tech manufacturing hub. The Motorola engineers in Hong Kong worked out of a tiny industrial area called Tai Po, nestled among lush green hills in the New Territories -- north of Hong Kong’s financial hub, approaching the border with China. The team were inspired by Apple’s Newton PDA. A bulky device with a hefty price tag to match, the Newton turned out to be an enormous commercial failure -- but it gave the Motorola team an idea. One reason why the Newton was so big and pricey was that it needed separate integrated circuits for each task. But what if there was one single chip to control everything? The Hong Kong team pitched the concept to Tom Gunter, the Motorola executive who led the creation of the 68000 CPU that powered early Apple Macintosh computers. “The biggest challenge was to convince the management in the US to let us do this,” recalled H.L. Yiu, a local engineer who co-founded the DragonBall team. “But Gunter shared our vision.” The head office gave their blessings, and within a year the DragonBall processors were born. The name came from the Japanese anime series that Yiu and many in his team were obsessed with. Released in 1995, the DragonBall chips were quickly adopted by Palm, who would become Motorola’s biggest customer for mobile chips . The Palm Pilot became an instant hit, thanks partly to their relatively affordable prices . At the time, the pocket handhelds represented the pinnacle of mobile technology -- the precursor to modern smartphones as we know them today. Few, if any engineers from Hong Kong or mainland China have managed to replicate the runaway success of the DragonBall chips. Huawei, which has its own chip production unit, doesn’t sell its Kirin processors to other manufacturers. Most other Chinese phone giants rely on chips designed and assembled overseas -- like Xiaomi, who buys from Qualcomm. One could argue that the DragonBall team in Hong Kong had the support of Motorola’s established infrastructure and intellectual property. And even then, only the design and assembly was done in Hong Kong, while the wafers (thin slices of silicon with rows of chips printed on it) were made in the US. Under Beijing’s expansive “Made in China 2025” plan , it wants 70% of domestic products to use homegrown chips -- up from 16% currently. But Yiu believes it’s difficult for China to surpass the United States overnight, whose chip makers and tech companies have spent more than half a century perfecting their know-how and -- and they keep improving. “No matter how fast you try to catch up, you’re still using the technology that [US companies] invented,” he said. “You’ll always be chasing after them.” Quality control is another concern, especially for products with stringent safety requirements, such as cars. “That’s why a lot of mission-critical products in China are still made using foreign chips,” said Yiu. Instead, he thinks China’s biggest strength lies not in hardware, but in algorithms and setting up standards for new technology such as 5G. The country is already striving to become a world leader in AI by 2030 -- and Huawei has invested millions into research and patents on 5G . There’s no doubt that China will continue to drive money into these areas. But neither will it give up on its chip ambition without a fight. And as trade war tension with the US simmers, one can only expect China to become more determined. The godfather of Taiwan’s chip industry retires For more insights into China tech, sign up for our tech newsletters , subscribe to our Inside China Tech podcast , and download the comprehensive 2019 China Internet Report . Also roam China Tech City , an award-winning interactive digital map at our sister site Abacus .
