Tencent gets into the chip business

Tencent Holdings has unveiled its first chips, showcasing a year-long foray into silicon design as the Chinese tech giant seeks to grow beyond digital entertainment.

The offerings include an artificial intelligence chip for search and recommendation, another for compressing video files, and a networking chip for cloud servers, executives said on Wednesday at the company’s annual cloud summit. It’s unclear if the chips have already been put into use.

“Chips are the key components of hardware and the core infrastructure of the industrial Internet,” Tencent senior vice president Dowson Tong said during the event. As part of Tencent’s push into enterprise software, Tong pledged US$3-billion worth of resources to help its cloud business partners in the next three years.

Tencent derives most of its revenue from online content like videogames as well as its WeChat super app — areas that have been targeted by China’s crackdown — and the new chips will allow the company to better align with Chinese President Xi Jinping’s goals. The government has made tech self-sufficiency a top national priority, setting aside billions in government funding and offering a wide range of policy support to help local firms overcome US sanctions on the semiconductor industry.

Tencent isn’t alone in answering to Beijing’s call to build a homegrown chip industry. Earlier this month, Alibaba Group unveiled a new server chip based on 5-nanometre technology for its own use. Search leader Baidu has already produced its AI chips for applications like smart vehicles, while TikTok-owner ByteDance is putting together a team to build server chips.

Tencent established its chip unit in 2020, and it has invested in local chip start-ups like Enflame Technology. Its shares rose as much as 1.3% on Wednesday afternoon trading in Hong Kong, erasing losses from earlier in the day.  — Reported by Zheping Huang, (c) 2021 Bloomberg LP