Breaking Down China's Unstoppable AI Factory

Deep learning is powering the next revolution in global computing, and the power balance in this critical emerging field underlying modern artificial intelligence skews disproportionately toward China.

While US tech giants such as Amazon, Google, and Microsoft are investing billions in AI research and development, Chinese tech companies have the added benefit of a goverment and an economy that work in tandem to create both supply and demand for a homegrown AI boom. According to Deloitte's 2019 Technology, Media & Telecommunications (TMT) Predictions, China is poised for not only AI software innovation, but to leverage its massive computing hardware manufacturing sector to produce semiconductors purpose-built for AI tasks.

Deloitte forecasts that Chinese semiconductor revenue will grow by 25 percent from $85 billion in 2018 to hit $110 billion in 2019, driven by the homegrown manufacturing of more semiconductors built for the computing-intensive workloads of deep learning tasks.

China consumes more than 50 percent of all semiconductors produced each year, but up to this point Chinese manufacturers are only meeting about 30 percent of the country's own demand. The Chinese government and digital businesses aim to greatly ramp up homegrown manufacturing to meet the growing demand, according to Deloitte.

Chinese software giants Alibaba, Baidu, and Tencent are helping to drive this demand. The three tech giants have a combined market capitalization of more than a trillion dollars, and are only investing more heavily in AI. To reduce reliance on semiconductor importing and make China an even greater powerhouse in AI hardware exports, the government has invested $21.8 billion in chip production to meet the country's future goals.

Deloitte projects that by 2025, China will more than double its homegrown chip supply, meeting up to 70 percent of its internal and fast-growing semiconductor demand as it fuels a sustained AI boom that likely play a large part in dictating the future of the artificial intelligence industry.

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