🧠 Food for thought

Implications, context, and why it matters.

High R&D spending runs on investor bets in a protected market

• High R&D-to-revenue ratios fit companies still in an early, loss-making phase. In 2024, Moore Threads reported a loss, while MetaX lost 1.4 billion yuan (US$205 million) 1.
• Investors keep backing that spending. MetaX shares jumped 700% on its market debut 2.
• That excitement rests on a view that U.S. sanctions have fenced off a home market for Chinese chip designers. The companies hold the same view and call the restrictions both a risk and a “potential tailwind” that speeds local substitution 1.
• Beijing is also propping up demand by subsidizing local companies that buy Chinese-made graphics processing units (GPUs) 3.

R&D spending hides manufacturing and supply chain barriers

• More money for chip design does not fix China’s manufacturing chokepoints, which still weigh on Moore Threads and MetaX.
• AI chipmaker Cambricon, a Chinese company that designs AI processors, depends on Semiconductor Manufacturing International Corp. (SMIC), China’s biggest contract chipmaker, and its N+2 (7nm-class) process. Yields are roughly 20% for Cambricon’s largest dies 4.
• That scarce advanced capacity also serves other state priorities, including Huawei’s Ascend AI processors and smartphone system-on-chip (SoC) processors built at SMIC 4.
• Chinese chip designers also rely on foreign technology for High Bandwidth Memory (HBM) and advanced packaging to build competitive AI accelerators. That dependence limits how much their designs can deliver in practice 4.