China represents a huge, and still largely untapped, market for computer makers: in a country of 1.3 billion people, only 40 million computers were bought in 2008, when the 300 million people living in the United States bought 66 million. As Chinese incomes rise and computer ownership grows, chip makers that establish themselves now will reap vast profits and dominate the market for years. Currently, China depends on Intel, ARM, and other Western companies for the CPUs that power its digital infrastructure, but the Chinese government is determined that a homegrown alternative will share in the spoils.

China's ambitions hang on a state-­sponsored project, started in 2001 at the Institute of Computing Technology in Beijing, aimed at developing a family of indigenous processors that can be used in everything from cheap netbooks to supercomputers. To save costs, the chips are made using older silicon technologies and are based on an architecture invented in 1981 and owned by MIPS Technologies, based in Sunnyvale, CA. China chose to license an existing architecture because creating a new one would have meant re­inventing the extensive software libraries that programmers need to create applications, not to mention educating the programmers themselves. The Chinese have surrounded the basic MIPS design with their own subsystems, adding instructions in recent versions so that the chips can run software written for the x86 processors that Intel and AMD make for personal computers.

The chips are commercially manufactured outside China by Geneva-based STMicroelectronics (see "Companies to Watch") under the trade name Loongson. They already appear in cheap netbooks and desktop PCs. If China succeeds in making Loongson chips an alternative to Intel- and AMD-based systems in its emerging market, the implications could be felt throughout the developing world, with its billions of potential customers, for decades to come.