The Cold War of Heat: Liquid Cooling is China's New Strategic Front for AI

Gabriele Iuvinale
2 ott
Tempo di lettura: 6 min

While global attention focuses on the advanced chip competition, a less visible but equally crucial battle is igniting China's AI nerve centers: the war for cooling. For Beijing, the ability to efficiently dissipate the heat generated by powerful AI chips has become a national security imperative and a decisive factor for technological self-sufficiency.

The liquid cooling market for Smart Computing Centers (智算中心) is booming. China's liquid server market reached $2.37 billion USD in 2024, marking a stunning 67.0% growth over the previous year. This expansion is just the beginning of a long-term strategy: China's direct-to-chip (DTC) cooling market is projected to grow at the fastest rate globally, with a 27.7% CAGR forecast through 2035, surpassing growth rates in markets like the United States (17.4%).

The Chinese strategy is two-fold. On one hand, there is the tactical dominance of the Cold Plate, the indirect-contact cold plate technology, which is the prevailing and prioritized solution in the short term due to its maturity, low risk, and compatibility with existing infrastructure. On the other hand, the country faces a critical chemical vulnerability in Immersion Cooling technology which, while offering maximum efficiency, depends on non-aqueous (dielectric) cooling fluids. This compels China toward a strategic "domestic substitution" (国产替代) effort, led by companies like Zhejiang Juhua (浙江巨化股份有限公司).

For the future, the emphasis is on extreme innovation. China is investing in frontier solutions to ensure technological superiority and geographical resilience, such as Submarine Data Centers; bold projects like those by Hailanyun (海蓝云) off Hainan and Shanghai exploit ocean water to achieve extremely low PUE (Power Usage Effectiveness). Research is also focused on two-phase cold plate systems to achieve the extreme efficiency of vaporization within a sealed system. Concurrently, to overcome poor component compatibility, efforts are underway to enforce unified interoperability (decoupling) standards nationwide through institutions like the China Academy of Information and Communications Technology (CAICT - 中国信息通信研究院).

In summary, China is building its AI infrastructure on a rapidly evolving technological foundation, but it must achieve self-sufficiency in critical materials and standardization to guarantee the independence and aggressive expansion of this key infrastructure.

Geopolitical Drivers and Energy Sovereignty

The People's Republic is strategically migrating its data centers toward ultra-high density architectures, with thermal loads potentially exceeding 100 kW per rack, making liquid technology non-negotiable. This transition is driven by three intertwined factors:

Extreme AI Power. AI chips and high-performance processors have dramatically increased their power density, rendering air cooling inadequate when single chips surpass 300W. Only liquid cooling guarantees operational stability and prevents thermal runaway.
Energy Security and PUE Targets. China has imposed strict government mandates on data center energy efficiency as part of its carbon neutrality strategy. The PUE for new large-scale data centers must fall below 1.3 by 2025. Liquid cooling is the essential path to meet these standards, potentially driving PUE below 1.05 in immersion applications. The significant energy consumption of data centers (around 1.68% of China's total electricity consumption in 2024) makes this transition vital for national climate goals.
Leadership Ambition. The government actively promotes the application of green technologies, recognizing that thermal infrastructure is as crucial as computing power for sustaining industrial growth.

The Technological Mosaic: Consolidation and Risk

The Chinese ecosystem operates on two well-defined technological tracks, reflecting its strengths and strategic vulnerabilities.

The Cold Plate Domain

This indirect-contact (Direct-to-Chip) technology is the dominant and pragmatic choice, accounting for the majority of the liquid server spend.

Technical Maturity. It is mature, leveraging experience from the aerospace and automotive sectors, and is easily integrated into hybrid air-liquid architectures. These systems primarily use water-based coolants (deionized water or glycol mixtures) which are cost-effective and easy to manage.

The Strategic Vulnerability of Immersion Cooling

Immersion (direct-contact) cooling is the technically superior solution for extreme efficiency.

The Open Flank of Critical Materials

The strategic vulnerability lies in non-aqueous (dielectric) cooling fluids, which are essential for immersion cooling.

Foreign Dependence. The market for these high-performance fluorinated fluids has historically been dominated by international firms like 3M, Mobil, and Dow. Control over the production and export of these materials represents a direct supply chain risk.
Domestic Substitution Effort. The race for self-sufficiency (国产替代) is a strategic imperative. Domestic chemical producers like Zhejiang Juhua (浙江巨化股份有限公司), Hexa Luo (海斯福), and Zhejiang Noah Fluorochemical (浙江诺亚氟化工有限公司) are investing heavily to develop products that can replace imports, mitigating tariff and sanction risks.

Key Players and Industrial Policy Maneuvers

The Chinese ecosystem is a consortium of state-backed giants and tech leaders operating in strategic coordination.

Hardware and Solutions Players

The supply chain is highly integrated, with major server manufacturers offering full-stack solutions:

Inspur Information (浪潮信息). A leader in servers and CDU (Cooling Distribution Unit, 冷量分配单元) solutions. Noted for introducing negative-pressure CDU systems to minimize leak risk.
Huawei (华为). A supplier of end-to-end solutions. It boasts liquid-cooled cabinets that can reduce cooling energy consumption by up to 96%.
Sugon (曙光/中科曙光). Strong in liquid servers and advanced R&D.
H3C (新华三). Active with liquid servers and immersion solutions, focusing on optimizing thermal efficiency.
Cloud Pioneers: Alibaba (阿里巴巴) and Tencent (腾讯) are the adoption engines, with Alibaba implementing single-phase immersion servers, cutting energy consumption by 35%.

The Challenge of Interoperability (Decoupling)

A technical challenge with geopolitical repercussions is the lack of standardization among various vendors' products. The absence of unified standards for critical components like Quick Disconnect Couplings (QDCs) or Manifolds creates costly "vendor lock-in".

Institutional Role: The CAICT (中国信息通信研究院) and the ODCC (Open Data Center Committee) are the main bodies working to impose unified standards for interoperability (decoupling, 解耦). This is a critical move to allow state operators (China Mobile, China Telecom, China Unicom) to freely combine servers and cooling infrastructure, bolstering national resilience.

Frontier Innovation and the Next Technological Leap

Chinese policy is pushing for radical innovation to redefine the very concept of the data center.

The Blue Frontier: Submarine Data Centers

China's most daring thermal strategy is the investment in Submarine Data Centers (海底数据中心). This frontier technology, led by companies like Hailanyun (海蓝云), is a direct response to environmental and space constraints along the eastern coast.

Strategic and Technical Advantages.

Extreme Thermal Efficiency. Exploiting the stable, low temperature of the ocean water allows data centers to achieve theoretical PUEs near 1.05, or even lower.
Space and Time Savings. Submerged modules solve the land scarcity problem in densely populated coastal areas like Shanghai and Hainan and can be deployed much faster than traditional construction.
Resilience. The pressurized, sealed environment protects servers from natural disasters and significantly reduces component failure rates due to the absence of oxygen and humidity.

The Next Technological Leap: Plate to Boiling

The focus of domestic technical competition is shifting to next-generation cold plates. The goal for firms like Sugon (曙光) and Inspur (浪潮信息) is mastering Two-Phase Cold Plate Systems.

This technology is the conceptual bridge between the extreme efficiency of immersion and the practicality of the single-phase cold plate. It leverages the latent heat of vaporization of the dielectric fluid (boiling and re-condensing) within a sealed plate, removing heat with superior efficiency and tackling thermal densities that standard cold plates cannot handle. Success here requires advancements in micro-channel design and pressure management, making it a high-stakes R&D area.

Ecosystem Maturation: Growth of Services

With rising systemic complexity, the Chinese market is seeing a rapid shift in value from hardware components to Services (服务). The services segment is projected to grow at a 23.0% CAGR.

This reflects that sophisticated liquid systems require specialized expertise for:

Installation and Maintenance (O&M): Precision is required for leak management, fluid quality monitoring, and sensor calibration.
Intelligent Control: The integration of Intelligent Control Systems (智控系统) is key. Platforms from Huawei and Alibaba use AI algorithms to predict loads and dynamically adjust pump speeds and valves, ensuring the system operates at peak energy efficiency in real-time.

These services, covering the entire data center lifecycle, cement the transition from simple hardware sales to the provision of strategic infrastructural solutions. The control over these services is fundamental to maintaining the operational security and efficiency of China's AI base.

In conclusion, China is investing immense resources and coordinating political action to build a robust thermal sovereignty. Success in component standardization and, most crucially, overcoming foreign dependency for critical dielectric fluids, will determine the speed and resilience of its leadership in the age of Artificial Intelligence.