DeepSeek’s plan to utilize Huawei’s advanced AI chips at its massive data center in Inner Mongolia and Malaysia’s evaluation of similar chips from Huawei to support its AI initiative are two recent examples showing the importance of China’s production of homegrown chips.  Such production determines not only China’s level of self-reliance but also the country’s potential role in the international AI ecosystem.

Since Huawei announced its new approach to building chips in May, China has stepped up regulatory measures to accelerate the development of chips.  Notably, China published technical specifications for chips that “relevant AI chip development entities, testing and assessment agencies, and end-users” in China are expected to follow.  The response of foreign governments to chips developed in line with these technical specifications should be observed closely.

Huawei’s New Approach to Building Chips

In May, Huawei presented the Tau (τ) Scaling Law to explain an alternative approach to building chips.  For decades, the guiding principle relied upon has been Moore’s Law, which essentially explains that more computing power can be gained by shrinking transistors to allow a single microchip to contain more transistors to process data.  However, as transistors approach atomic dimensions, it has become extremely difficult and costly to reduce their size.

The Tau Scaling Law focuses on reducing the time it takes for data to move through an electronic system.  To achieve this, Huawei utilizes LogicFolding, among other innovative technologies, to place circuits closer together to shorten physical signal paths.  Huawei has claimed that this new approach is central to its goal of producing—without any advanced manufacturing machinery currently blocked by sanctions in the West—chips that perform as well as cutting-edge 1.4-nanometer chips by 2031.

“The Tau Scaling Law focuses on reducing the time it takes for data to move through an electronic system.”

Last week, Huawei launched the Mate XT 2, a tri-fold smartphone powered by the company’s Kirin 9050 Pro chips developed by using the LogicFolding method.  This smartphone will likely be analyzed by stakeholders to determine whether the Tau Scaling Law, upon which LogicFolding is based, is indeed the breakthrough it has been claimed to be.

China’s New Measures for Homegrown Chips

Regardless of the analytical results of the Mate XT 2, Huawei’s ability to overcome difficult hurdles to develop potentially promising chips has already produced an impact on China’s regulatory environment.

In July, less than two months after Huawei’s announcement of the Tau Scaling Law, the State Council issued a revised version of the Regulation on the Protection of Layout-Designs of Integrated Circuits, which will take effect on October 15.  This is the first revision of the regulation since it was issued in April 2001.  The most significant change is the expansion of the scope of intellectual property protection in China to layout-designs of integrated circuits containing integrated photonics and quantum technologies.  This change signals the country’s intention to encourage more breakthroughs in the chips industry.

To motivate talented individuals working for legal persons and unincorporated organizations to create innovative layout-designs of integrated circuits, the revised regulation also requires these entities to financially reward such individuals in accordance with the “Law of the People’s Republic of China on Promoting the Transformation of Scientific and Technological Achievements and relevant provisions of the State”.  The aforementioned law has a provision stating that if an entity has not reached any agreement with its personnel on rewards for making significant contributions to the completion and commercialization of a work-related scientific and technological achievement, the personnel who have made such contributions shall still be granted rewards in accordance with the standards set forth in the law.  One type of reward is related to licensing: if the scientific and technological achievement is licensed by the entity to another party for implementation, the personnel shall be granted at least 50% of the net income derived from licensing.

In addition, to protect the legal rights and interests of all creators of proprietary layout-designs, including individuals, legal persons, and other entities, the revised regulation introduces punitive damages.  An infringer could face damages of up to five times “the actual losses suffered by the right holder due to the infringement or the profits gained by the infringer from the infringement”, depending on the circumstances of each case.  To reduce the possibility of infringement of these layout-designs, the revised regulation bans anyone from “inspecting or copying electronic versions of the reproductions or drawings of layout-designs”, except in situations where it is necessary for state organs to perform their duties in accordance with law, such as in litigation or administrative proceedings.

China’s Technical Specifications and the International AI Ecosystem

China’s strong interest in developing homegrown chips is also reflected in the release of the Practice Guide for Cybersecurity Standards—Technical Specifications for Security Functions of AI Accelerating Chips in January 2026.  The guide was formulated by a team consisting of representatives from universities, research institutes, and enterprises including Huawei and Alibaba Cloud Computing Co., Ltd., and led by the Secretariat of the National Technical Committee 260 on Cybersecurity of the National Standardization Administration of China.  Established in April 2001, the National Standardization Administration of China is authorized by the State Council to oversee China’s work surrounding standardization.

“The guide was formulated by a team consisting of representatives from universities, research institutes, and enterprises including Huawei and Alibaba Cloud Computing Co., Ltd. […].”

The guide sets forth technical requirements and assessment methods for AI accelerating chips, with a particular focus on seven categories of security, including hardware security, interface security, firmware security, and data protection.  The guide is not presented as a set of binding national standards, but is rather described as “applying to relevant AI chip development entities, testing and assessment agencies, and end-users, providing technical support and a reference for regulatory compliance to ensure the secure development of the [chip] industry”. This description suggests that the targeted parties are expected to follow the technical requirements and assessment methods stated in the guide.

Chinese authorities should expect the guide to draw more scrutiny from foreign governments when these governments decide whether their chipmakers should be allowed to sell advanced chips to China, as “end-users” in China will likely feel obligated by the guide to only use foreign chips made in compliance with the technical requirements and assessment methods stated in the guide. Despite this potential scrutiny, the guide’s release suggests that China’s primary focus is chips produced by Chinese chipmakers, which will undoubtedly support the authorities in accomplishing the stated goal of the guide to “achieve the high-quality development of AI chip products while ensuring security and controllability”.

The guide may also lead to more scrutiny from foreign governments that are interested in buying China’s homegrown chips, such as the Malaysian government.  How these foreign governments ultimately weigh the guide’s technical requirements and assessment methods with their countries’ interests—and the extent to which they may push China to forgo certain requirements and methods when manufacturing chips customized for their countries—should be observed closely.  The more receptive foreign countries are to chips produced in accordance with China’s requirements, the more likely this will lead to an international AI ecosystem where China’s AI gears—and the requirements set by the Chinese Communist Party for these gears—are able to play a crucial role.

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• The citation of this article is: The Editorial Board of SINOTALKS^®, China’s Homegrown Chips and the International AI Ecosystem, SINOTALKS.COM^®, SinoExpress™, Sept. 16, 2026, https://sinotalks.com/sinoexpress/china-homegrown-chips-international-AI. ↩︎

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