Alibaba is getting into the chipmaking business

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Alibaba is setting up its own company to make computer chips as China seeks to cut its dependence on foreign technology.

China’s biggest tech firm announced Wednesday that the new business will develop artificial intelligence chips for cloud computing, internet-connected devices and other sectors.

Alibaba’s chief technology officer, Jeff Zhang, said the e-commerce company’s advantages in algorithms and data put it in “a unique position to lead real technology breakthroughs in disruptive areas, such as quantum and chip technology.”

Alibaba (BABA) has previously made several investments in chipmakers. Earlier this year, it bought C-Sky, a Chinese chip design firm.

Alibaba Executive Chairman Jack Ma has been vocal about addressing China’s heavy reliance on foreign-made chips.

“The market for chips is controlled by America … and suddenly if they stop selling, what that means, you understand,” Ma told university students in Tokyo in April. “That’s why China, Japan and any country — you need core technologies.”

Ma’s remarks came shortly after the US Commerce Department blocked American companies from selling parts to ZTE (ZTCOF), a Chinese tech company that relied on US suppliers, including chipmakers, to manufacture smartphones and telecommunications equipment.

The ban — since lifted with strict conditions — brought ZTE to its knees and highlighted the risks of China’s dependence on foreign-made technology.

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“The ZTE incident was a wake-up call” for Chinese leaders, Minxin Pei, professor of government at Claremont McKenna College in California, said at a conference in Hong Kong this month.

But China’s homegrown chipmakers, which benefit from government support, are struggling to catch up with more established foreign rivals.

Alibaba provided few details on its new chip business and didn’t respond to requests for more information.

The company’s name, Pingtouge Semiconductor Company, references a Chinese nickname for the honey badger.

Zhang said at a conference Wednesday that he hoped the new company would be inspired by the animal’s spirited nature.

“It’s afraid of nothing. It dares to do everything,” he said.

The honey badger became internet famous after a video with cheeky narration showed it persevering in the face of extreme adversity.

— Serenitie Wang contributed to this report.

CNNMoney (Hong Kong) First published September 19, 2018: 5:44 AM ET

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