TAIPEI When Chinese President Xi Jinping talked in April about how his country can foster new tech, he encouraged Chinese companies to work together to build a domestic chip industry.

Three months later, senior executives from 27 leading Chinese tech companies and research institutions -- including Huawei Technologies, Lenovo Group, ZTE and Tsinghua Unigroup -- formed the "high-end chip alliance." Its goal is in line with Xi's vision: to make inroads into a domestic market worth over $100 billion annually and eventually tap into the $300 billion global market.

"The launch of the alliance really shows our country's ambition in building a competitive chip industry," Zhao Weiguo, chairman of Beijing-backed conglomerate Tsinghua Unigroup, told other company chiefs at a gathering in Chengdu, the capital of China's southwestern Sichuan Province.

Zhao later told the Nikkei Asian Review in an email that the alliance has Xi's support.

The Chinese government wants to foster a strong chip ecosystem in the world's No. 1 semiconductor market for one important reason -- to reduce the country's dependence on foreign tech products and eventually make it fully self-reliant.

Chips serve as the brains of computers and smartphones.

THE SNOWDEN EFFECT Demand for chips is expected to grow exponentially with the rise of the internet of things, the new wave of connectedness that is putting everything from kitchen appliances to cars online. Research firm IC Insights estimates global IoT chip sales could reach $29.6 billion in 2019.

According to IC Insights, China's semiconductor output in 2015 accounted for only about 13% of the domestic market's $104 billion in sales. It is still relying on Intel for personal computer processors and is buying the majority of its smartphone chips from Taiwan's MediaTek and U.S.-based Qualcomm.

Beijing has proposed investing at least 1.2 trillion yuan ($177 billion) over a decade to build a domestic chip industry. Eventually, it wants to compete with Taiwan's world-class semiconductor producers and global chip titans like Intel and Qualcomm.

Tao Hong, chief executive of Hefei Semiconductor Industry Development, said that to ensure success, Beijing has formulated a comprehensive strategic framework for its chip initiatives, including bolstering policy directives, funds, task forces and adding more higher education institutions to cultivate homegrown talent.

Tao's company is in charge of attracting foreign semiconductor companies to invest in the central Chinese city of Hefei.

National security concerns are also fueling Beijing's chip efforts.

"The Edward Snowden leaks have led China to see the necessity of coming up with its own chips to better protect its data security," Tao said.

To quickly secure advanced technologies, Chinese chip companies have been aggressively acquiring foreign rivals.

OVERSEAS SHOPPING From the beginning of 2014 to the end of this past August, nearly a third of the 991 merger and acquisition deals in the global chip sector were China-related. Some $48.17 billion worth of Chinese capital was involved, according to researcher Dealogic.

In recent years, Zhao's Tsinghua Unigroup has been spearheading China's M&A charge, with mixed results.

This year, Tsinghua extended its shopping spree by investing in U.S. chipmakers Marvell Technology Group and Lattice Semiconductor, and by buying a 3% stake in Imagination Technologies Group, a U.K.-based graphic possessor provider and iPhone supplier.

Yet the Chinese conglomerate reportedly withdrew bids for U.S. memory chipmaker Micron Technology and hard disk supplier Western Digital out of concerns that Washington could block the acquisitions on national security concerns.

The Chinese conglomerate's attempt to acquire Taiwan's second-largest chip assembler, Siliconware Precision Industries, has been thwarted for the same reason. Its bids for two smaller Taiwanese chip assemblers, Powertech Technology and ChipMos Technologies, are pending approval.

Since the beginning of this year, Chinese businesses have announced bids for more than 70 chip companies, both domestic and foreign.

Potential overseas acquisition targets include venture-backed U.S. chipmaker Analogix Semiconductor, some parts of Dutch chipmaker NXP Semiconductors, German semiconductor equipment supplier Aixtron, Finnish silicon wafer maker Okmetic and U.S. power management chipmaker Integrated Memory Logic.

Beijing-controlled NavInfo's takeover of AutoChips, a MediaTek subsidiary in China, attracted some attention due to the growing rivalry between Chinese and Taiwanese chip companies.

LONG WAY TO GO Another notable China-related chase this year is the reported competition between Nantong Fujitsu Microelectronics and Tianshui Huatian Technology to buy Amkor Technology, the world's second-largest chip assembler.

The bidding war comes a year after Jiangsu Changjiang Electronics Technology, China's biggest chip assembler and tester, finalized its acquisition of Singapore's Stats ChipPac, with financial support from the government.

Following the acquisition, JCET became the world's No. 4 chip assembler by revenue in 2015.

But a JCET executive said integration has been far more difficult and complicated than expected.

This admission highlights an important point: China will not be able to achieve its chip ambitions with money alone.

"It will take time for China to absorb colossal foreign entities and learn their technologies," said Wang Yanhui, secretary general of Mobile China Alliance, an agency affiliated with China's Ministry of Industry and Information Technology.

Mark Liu, co-chief executive of the world's largest contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), said that swift advancement in the semiconductor technology will also make it difficult for China to catch up with global chip titans soon.

"Based on Moore's law, semiconductor products go through a major overhaul once every two years," Liu said, "so China will not be able to build a full-fledged chip industry overnight."

He was referring to the decades-old industry saw that the number of transistors on a chip will double every two years. More transistors give a chip greater speed and power.

REVENUE SURGE For now, domestic chip companies can only meet a small portion of Chinese demand. But they are mushrooming and growing at a pace not seen anywhere else in the world.

Chinese chip designers are flourishing because China now has money to recruit and cultivate the talent needed to grow the sector. Another advantage: The nation does not have to invest heavily in production equipment and facilities like foundries, according to Mark Li, an analyst at Sanford C. Bernstein.

"It's an inevitable and irreversible trend that China's chip industry will eventually surpass Taiwan, currently the world's No. 2 player after the U.S. by revenue, and eventually become a potential threat to U.S. chipmakers," Li said.

China gained 10% of the global chip design market in 2015, up from 5% in 2010, according to IC Insights.

By way of comparison, Taiwan's chip design houses together last year held 18% of the global market. U.S. chip designers, led by Qualcomm, the world's No. 1 mobile chip supplier, controlled 63% of the global market at the end of 2015.

Financial numbers of China's four major chip designers paint a clear picture of their unstoppable rise.

The combined revenue of Huawei's HiSilicon Technologies, Tsinghua Unigroup-controlled Spreadtrum Communications, ZTE Microelectronics Technology and GalaxyCore, a CMOS image sensor and LCD driver chip provider, surged more than 45% in 2015. The global design sector had single digit growth in the same period.

HIGH-PROFILE INVESTORS On the foundry, or chip production front, China's No. 1 player, Semiconductor Manufacturing International, has long lagged far behind TSMC, which controls 55% of the global market.

Beijing is not giving up, even though the foundry game is a tough one. Industry leaders need scale, intensive capital expenditure and advanced tech -- all of which brings us back to acquisitions.

It is possible that China will eventually snatch up Abu Dhabi-controlled Globalfoundries, the world's No. 2 contract chipmaker, after an extended pursuit, according to Bernstein's Li.

"If Globalfoundries eventually comes under China's control, it's bad for almost every foundry player in the world," Li said.

China's semiconductor mania is also spilling into its push into memory chips, for which the nation has almost no foundation.

Here, too, Tsinghua Unigroup is leading the charge under government direction. In addition to foreign acquisition efforts, Tsinghua Unigroup has also been expanding domestically.

In August, Tsinghua Unigroup bought a major stake in Beijing-controlled memory chip maker Wuhan Xinxin Semiconductor Manufacturing, or XMC, combined the acquisition with its own memory facility and established a new entity called Changjiang Storage.

Changjiang Storage has attracted high-profile investors, including National Integrated Circuit Industry Fund and an investment vehicle of China's Hubei Province.

"We still have a long way to go in order to make a dent in global memory chip production," Zhao said in his email to the Nikkei Asian Review. "In the next five years we have planned to invest $24 billion in Changjiang Storage, mainly to develop our own memory chip facilities."

But this is another thorny path.

"It's extremely difficult for China to challenge the world's leading and dominant makers of memory chips, such as Samsung Electronics and SK Hynix of South Korea, anytime soon, as China has very limited capability now," said Avril Wu, an analyst at DRAMeXchange.

Samsung and SK Hynix together control around 75% of world's output of dynamic random access memory, or DRAM, a key component in personal computers and mobile devices.

As for NAND flash memory, the other major component used to store data in smartphones and other devices, Samsung, Toshiba, Western Digital and Micron control over 85% of the global market.

Still, every step forward, no matter how small, counts.

"Almost everyone in the semiconductor industry around the globe now knows China's ambitions," said Wang of Mobile China Alliance. "That opens a lot of doors for us to form partnerships and reach high-ranked management in Europe, Korea and the U.S. easily."