China has initiated a policy shift to eliminate U.S. processors from government computers and servers, the Financial Times reported. The decision, aimed at phasing out processors from AMD and Intel from systems used by Chinese government agencies, will mean lower sales for U.S. chipmakers and higher sales of China’s own CPUs.
New procurement guidelines, quietly rolled out in late 2023, require government entities to prioritize “safe and reliable” processors and operating systems when purchasing. The directive is part of a concerted effort to support domestic technology, similar to similar efforts to adopt Chinese-designed technology within state-owned enterprises.
The list of approved processors and operating systems published by the China Information Technology Security Assessment Center only includes Chinese companies. There are 18 approved processors using hybrid architectures, including x86 and ARM, while the operating system is based on open source Linux software. Notably, the list includes chips from Huawei and Phytium, both of which are on the U.S. export blacklist.
This shift toward domestic technology is a cornerstone of China’s national strategy for technological autonomy across its military, government, and state sectors. The guidance provides clear and detailed instructions for using only Chinese processors, marking an important step in China’s pursuit of technological self-reliance.
State-owned enterprises are required to complete the transition to domestic CPUs by 2027. At the same time, Chinese government entities must submit IT system maintenance progress reports every quarter. Although some foreign technology is still allowed, the emphasis is clearly on the adoption of local alternatives.
The shift away from foreign hardware is expected to have a significant impact on U.S. technology companies. China is a key market for AMD (15% of sales last year) and Intel (27% of Intel’s revenue), accounting for a large portion of their sales. In addition, although Microsoft did not disclose specific figures, it acknowledged that China accounts for a small portion of its revenue. At the same time, it’s worth noting that most of AMD and Intel’s sales in China are to PC manufacturers rather than government agencies.
Analysts interviewed by the Financial Times predict that the transition to domestic processors will be faster for server processors than for client PCs because the software ecosystem that needs to be replaced is less complex. They estimate that China will need to invest approximately $91 billion between 2023 and 2027 to completely transform the IT infrastructure of government and adjacent industries.