SHANGHAI -- Global telecom equipment leader Huawei Technologies is taking on the world's biggest semiconductor companies with chips to power artificial intelligence in data centers, even as allegations of Chinese espionage intensify concerns about the security of the industry's supply chain.
"We will provide solutions for all scenarios ... and I don't see anyone in the market having the capability to develop this or roll out similar things," Eric Xu, Huawei's rotating chairman, said on Wednesday as the Chinese company unveiled new AI chips that challenge U.S suppliers like Intel, Qualcomm and Nvidia.
Huawei does not plan to sell these chips but instead will build on them "to provide AI modules, AI acceleration cards, AI servers and mobile PCs that will enable autonomous driving," Xu said.
Huawei's AI offensive comes in the wake of allegations, reported by Bloomberg Businessweek, that Chinese spies placed malicious microchips in equipment used by about 30 U.S. companies and government agencies. Though Huawei was not implicated, the claims raise further security concerns around China's tech industry.
The company in August was banned from participating in building Australia's 5G network after a national security review. Japan is weighing a similar ban on Huawei's telecom gear, citing espionage concerns, while an earlier report by the U.K.'s National Cyber Security Center also highlighted risks associated with the company's products.
American officials attempted recently to stop Huawei from building an internet infrastructure program in Papua New Guinea, hoping to curb Beijing's growing influence in the South Pacific.
Asked about the spy chip controversy and the escalating trade tensions, Xu told the Nikkei Asian Review that he would not comment on anything related to politics. But market watchers said the Chinese company was likely to face growing headwinds overseas when trying to sign deals for the new products.
"Huawei will find it more challenging to sell telecom gear, networking equipment, cloud computing solutions and even smartphones in certain areas of the world, no matter whether its products have AI or not," said Sean Yang, a semiconductor analyst at Shanghai-based research company CINNO.
Yang said the spying claims, whether true or not, will make many governments and companies more cautious when buying equipment.
Huawei has developed the Kirin series of chips for its premium smartphones, as well as its own semiconductors for use in networking devices, but this marks the first time it has unveiled major semiconductor designs for its servers.
Some analysts called Huawei's technology so formidable that it represents an obvious target for Washington in trying to curb Beijing's growing leadership in crucial industries.
"Huawei has an edge in technology, and it would also get great support from the Chinese government," said Liu Chia-hao, an analyst at Taipei-based research company TrendForce. "Don't forget: It has a massive home market. Compared with other smaller Chinese companies, Huawei is much less dependent on external suppliers, and it aims to do more on its own."
Huawei said its new Ascend 910 chip would offer the world's greatest computing density, providing a faster solution for large data centers. A second chipset, the Ascend 310, will use power efficiently to enable AI features for individual edge servers, the company said. Some companies use these to store data locally within the intranet.
The Ascend 910 will be available for clients in February, while the Ascend 310 launches immediately. Huawei also said it will introduce a wide range of AI chips for smartphones, industrial applications and various connected devices in 2019.
Both chips are designed by Huawei semiconductor arm HiSilicon Technologies -- China's top chip designer by sales -- and produced by Taiwan Semiconductor Manufacturing Co., the world's biggest contract chipmaker and the sole supplier of iPhone core processors. Huawei's secretive chip unit, which mainly makes products for in-house use, has matched the roughly $4 billion revenue of U.S. chipmaker Advanced Micro Devices, according to IC Insights.
The decision to invest heavily in developing AI-enabling servers and modules reveals the scale of Huawei's ambitions. The group recently surpassed Apple as a smartphone supplier by units to become the second-largest player globally, and it has vowed to overtake leader Samsung Electronics within one to two years. The company already leads the world by market share as a maker of telecom equipment, ahead of Ericsson and Nokia, and ranks as the fifth-biggest server builder behind Dell, HP, Lenovo Group and IBM, according to market intelligence firm IDC.
Huawei expanded into cloud computing services last year by forming a business unit that will compete against Amazon Web Services, Google and Chinese internet giants Alibaba Group Holding, Tencent Holdings and Baidu.
"Huawei faces a challenging task in building trust, credibility and scale," said Geoff Blaber, a vice president for research at CCS Insight. The company is entering "an extremely competitive data center environment," he said
"Nvidia is top of the tree today but Intel and a barrage of others are seeking to address the opportunity as workloads become increasingly diverse and specialized. "
In late July, Huawei vowed to increase research and development spending to between $15 billion and $20 billion. The company spent 89.7 billion yuan ($13 billion) on R&D in 2017, accounting for nearly 15% of its total revenue of $92.5 billion.