Visitors look at Alibaba's "light-containing" chip at the 2021 Hangzhou Computing Conference in Hangzhou, East China's Zhejiang Province, Oct 18, 2021. (BLOOMBERG)

Alibaba Group Holding Ltd unveiled a new server chip that’s based on advanced 5-nanometer technology, marking a milestone in China’s pursuit of semiconductor self-sufficiency. 

The Chinese tech giant’s newest chip is based on micro-architecture provided by the SoftBank Group Corp-owned Arm Ltd, according to a statement Tuesday. Alibaba, which is holding its annual cloud summit in Hangzhou, said the silicon will be put to use in its own data centers in the “near future” and will not be sold commercially, at least for now. 

“Customizing our own server chips is consistent with our ongoing efforts toward boosting our computing capabilities with better performance and improved energy efficiency,” said Jeff Zhang, president of Alibaba Cloud Intelligence and head of Alibaba’s research arm Damo Academy. “We plan to use the chips to support current and future businesses across the Alibaba Group ecosystem.” 

Customizing our own server chips is consistent with our ongoing efforts toward boosting our computing capabilities with better performance and improved energy efficiency.

Jeff Zhang, president of Alibaba Cloud Intelligence 

With the pandemic fueling increasing demand for cloud services, tech giants worldwide are increasingly seeking ever-more powerful and energy efficient semiconductors to gain an edge. Alibaba’s server chip is one of the most advanced by a Chinese firm yet, as it joins global rivals like Amazon.com Inc and Google in gradually replacing silicon from traditional chipmakers like Intel Corp and Advanced Micro Devices Inc with products custom-designed for their data centers and workloads. 

The development signals how China’s effort to build a homegrown semiconductor industry is bearing fruit. 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 industry. 

Alibaba is one of a number of Chinese firms that has answered Beijing’s call to invest in the development of cutting-edge technologies and manufacturing capacities. Known as Yitian 710, the Arm-based server chip is the third semiconductor introduced by the e-commerce giant since 2019, following an artificial intelligence chip as well as one used for internet-of-things. 

But with limited domestic semiconductor manufacturing capabilities, Alibaba will likely still have to outsource production. While the company didn’t disclose its manufacturing partner, Taiwan Semiconductor Manufacturing Co and South Korea’s Samsung Electronics Co are the only two companies capable of mass-producing 5-nm chips.

Each nanometer, equal to one billionth of a meter, measures the size of transistors within a chip. By making them smaller, manufacturers can cram in more of them to make semiconductors smaller and more powerful. Apple Inc is among other companies using the leading-edge technology for the chips that power its iPhones and Macs.