(Yicai) Oct. 9 -- Chinese chip producers are reaping the rewards as state-owned enterprises China Unicom and Industrial and Commercial Bank of China launch server tenders worth nearly CNY11 billion (USD1.5 billion), with most of the contracts going to domestic suppliers, industry insiders told Yicai.

China Unicom’s recent annual centralized tender for general-purpose servers worth CNY7.96 billion (USD1.1 billion) was split between 11 manufacturers, while Inspur Electronic Information Industry won ICBC’s entire CNY3 billion (USD421 million) server project.

All servers for ICBC will use China-made Hygon processors, rather than foreign chips, an insider at Beijing-based Inspur told Yicai.

For China Unicom’s project, there was one package worth around CNY895 million (USD125.6 million) that was specifically for servers using Intel central processing units. The rest of the winning bids went to suppliers using homegrown chips.

This means that out of the nearly CNY11 billion in contracts, approximately CNY10 billion went to servers powered by Chinese chips.

The increased use of domestic processors by major enterprises is a sign of how fast China’s chip industry is advancing, with Hygon Information Technology and Huawei Technologies leading the way.

“Chinese chip companies have made significant progress in recent years, helped by strong policy support,” said an industry insider. China’s chipmakers are growing rapidly and gaining a firm foothold in the market. For example, Bank of Nanjing recently issued its own server tender, requiring only servers powered by Hygon chips, he added.

Annual sales at one major server supplier, which uses Huawei’s Kunpeng and Ascend chips, have soared from several hundred million Chinese yuan, which is equivalent to tens of millions of US dollars, to over CNY10 billion in just a few years, the manager told Yicai.

“The biggest growth drivers are the financial and internet sectors,” he said. Over the past four years, the company’s server sales to financial institutions surged 20-fold to CNY6 billion (USD842 million), while orders from telecom operators jumped from zero to another CNY6 billion.

Huawei’s Kunpeng chips now account for around 70 percent of the domestic server chip market, while Hygon chips make up around 30 percent, he added.

Foreign chip giants such as Intel, AMD and Nvidia still dominate globally with strong ecosystems, posing a barrier for Chinese chip producers to expand. However, the adoption by state-owned enterprises of domestically developed chips as well as the rise of new artificial intelligence technologies are providing new opportunities.

“We will continue to work hard to increase our market share,” a senior executive at a Chinese chip manufacturer told Yicai earlier.

Editors: Tang Shihua, Kim Taylor