Why Alibaba wants to develop its own chips

September 20, 2018 12:02
Alibaba aims to develop customized chips and processors to support the group's push into the fast-growing cloud and Internet of Things businesses. Photo: AFP

Alibaba chairman Jack Ma last week signaled that the group is about to enter the next stage of its development when he announced that he is stepping down as chairman next year and passing the mantle of leadership to Daniel Zhang, the current chief executive.

After transforming the retail landscape over the past two decades, the e-commerce giant is now ready to help the manufacturing sector in entering the era of the Internet of Things. And one of its key initiatives in this respect is its plan to launch a self-designed computer chip next year.

Alibaba announced on Wednesday that it is setting up a company that will make customized chips and processors to support the group's push into the fast-growing cloud and Internet of Things (IoT) businesses.

The name of the new firm is Pingtouge Semiconductor Company, which refers to the Chinese monicker for the honey badger, an animal known for its tenacity in the face of adversity.

The new company will be spearheaded by a team from Chinese microchip maker Hangzhou C-SKY Microsystems, which Alibaba acquired in April. It aims to launch its first chip next year.

The news came amid the intensifying trade conflict between China and the United States.  

US President Donald Trump has accused Chinese firms of stealing core technologies from the US. And recently, Washington banned Chinese telecoms equipment maker ZTE from obtaining supplies from American firms, an order that was recently lifted but may be reinstated even after the Chinese firm has complied with the US demands.

Alibaba's Jack Ma himself has bewailed China's over-reliance on foreign chips and underscored the need for China to develop its own core technologies.

In announcing Alibaba's new semiconductor business, chief technology officer Jeff Zhang said the group's advantages in algorithm and data put it in "a unique position to lead real technology breakthroughs in disruptive areas, such as quantum and chip technology".

In particular, DAMO Academy, a research and development arm of Alibaba, will focus its efforts on developing quantum processors, building cloud-accessed systems, and developing algorithms to solve fundamental problems in such areas as machine learning and optimization.

In effect, DAMO will play a key role in implementing digital transformation in a range of industries, including e-commerce, logistics, finance, materials and pharmaceuticals. The academy will also nurture and expand its partnership network to explore quantum-enhanced solutions for Alibaba’s commercial customers.

Established last year, DAMO now has over 300 researchers in eight cities around the world. Its focus has been on machine intelligence, robotics, fintech, data computing and quantum computing.

The academy expects to introduce its first artificial intelligence (AI) inference chip, called “AliNPU”, by the middle of next year. The chip could potentially be used for autonomous vehicles, smart cities and smart logistics.

Ma has acknowledged that new manufacturing will be an important growth driver of China’s economy, and called on manufacturers to embrace IoT, cloud computing and big data analytics.

He said manufacturers need to dig deep with AI and data tools to understand and address the needs of its customers. 

In fact, Alibaba’s cloud business has become the third largest player in the world behind Amazon Web Service and Microsoft.

The Chinese government requires companies to use local cloud service providers, making Alibaba's cloud business a key growth driver within the group.

The launch of its own AI chips could also support Alibaba’s data center to expand into IoT businesses such as smart city, smart logistics and autonomous driving.

Alibaba’s cloud business is now operating in 24 countries around the world. It expects to generate half of its revenue from overseas markets in the near future.

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EJ Insight writer