China Puts Gun to Head of U.S. Tech Companies

China Puts Gun to Head of U.S. Tech Companies

Dave Eberhart, NewsMax.com
Saturday, Mar. 27, 2004

As the Wi-Fi boom takes hold around the globe, China is putting a gun to the head of U.S. chip makers –

Either turn over your patented technology – and accept our standards – or we won’t allow U.S. companies to enter Chinese markets.

Wi-Fi refers to “wireless fidelity” – the ability to transmit internet and other broadband connections though wireless transmitters to computers and other wireless devices. With Wi-Fi, plugging your computer into a telephone line will be a thing of the past. And already, there’s talk of Wi-Fi telephones, radio and more.

The Wi-Fi craze is taking root here in the U.S. – with “hot spots” or “Wi-Fi nodes” sprouting up in airport lounges, hotels, public parks, and even Starbucks.

Now, Chinese IT companies are poised in the wings, salivating to create computer “hotspots” at trendy Chinese airports, restaurants and the ubiquitous Starbucks -- anxious to serve a huge computer savvy populace breathless for wireless Internet connectivity (WLAN).

The bogeyman in this frenetic scene: China’s Wired Authentication and Privacy Infrastructure (WAPI) security specification.

The rub: China’s newly developed WAPI security spec isn’t compatible with the U.S. and World 802.11 standard. A 802.11 network refers to a family of specifications developed by the IEEE for wireless LAN technology. The numeric specifies an over-the-air interface between a wireless client and a base station or between two wireless clients. The IEEE accepted the specification in 1997.

IEEE is the Institute of Electrical and Electronics Engineers, an organization composed of engineers, scientists, and students -- best known for developing standards for the computer and electronics industry. In particular, the IEEE 802 standards for local-area networks are widely followed.

Worst of all: China doesn’t seem to care.

In fact, China has pulled out a .357 magnum and pointed it at the head of U.S. tech companies: China is now demanding that non-Chinese vendors must partner with one of 24 Chinese-sanctioned vendors to make any Wi-Fi products used in the People’s Republic – incorporating, of course the nettlesome WAPI.

At stake: the slamming of the door on the huge Chinese IT market.

China’s surprise game of hardball has much of the IT world and its cadre of pundits in a dither:

Some think that forcing the foreign companies to work with the Chinese vendors is just a WTO-dissing ruse to pump up the country’s flagging economy.

Others suggest that the forced partnerships put foreign Intellectual Property rights in jeopardy. China, after all, has a bad rep in this department. While working with the foreigners to muscle in the new Chinese WAPI, the Chinese vendors will get the inside scoop on a bunch of trade secrets held by their guests’ gear and spirit it away -- reprising the nation’s stunt with cell phone technology in the last decade.

Conspiracy addicts suspicion that WAPI just might include a “back door” that would allow the Chinese government access to encrypted data.

Some opine that the Chinese checkers move is just the salient in a long-term move to make the Chinese WAPI the world standard, dissing long-standing entities such as IEEE and the Wi-Fi Alliance.

The Wi-Fi Alliance is an organization made up of leading wireless equipment and software providers with the missions of certifying all 802.11-based products for interoperability and promoting the term Wi-Fi as the global brand name across all markets for any 802.11-based wireless LAN products.

And the biggest fear: Chinese companies will use Western Wi-Fi technology to build the expertise needed to grab a big share of the growing market for chips in China. So far, the budding Chinese IT industry is benignly churning out low-end semiconductors, including commodity memory chips, for relatively simple goods. No one, save for the Chinese, is anxious to see that happy situation change.

Not so to all-of-the-above, argue the Chinese, who suggest that they are only interested in security. The present World standards are at best second-rate, they say, and need to be abridged (particularly to quell the national paranoia in all things relating to security).

Between a Rock and a Hard Place

In any event, all this brouhaha has put the leading foreign manufacturers between a rock and a hard place.

Everyone would like to humor the hugely profitable customer. The customer, after all, is always right. However, the rock at one end is that tech companies don’t want to give away trade secrets that will eventually grow low-cost rivals. And the hard place is that if they spurn China’s demands, they risk being frozen out of a fast-growing market.

Dilemma or no, Intel Corp. has tossed down the gauntlet, announcing that it won’t ship any Wi-Fi chips to China after May of this year. It seems that Intel’s Centrino integrates a Wi-Fi transmitter with a microprocessor. That unhappy fact -- for reasons at best vague to the technically-disadvantaged -- makes it a cinch that the U.S. giant would have to cough-up key know-how to finagle the Chinese standard WAPI thingamajig to work in its own gear.

No one to dis a big client, Intel has eschewed any reference to the shopping list of colorful charges above, revealing only that the use of the WAPI gadget would undermine the quality standards of its products and that the technical challenges of converting to WAPI were too great to meet the deadline of June 1.

Chip maker Broadcom has also come out as against the WAPI mandate. They will also stop selling Wi-Fi chips to China – also starting in May.

But there is hardly a united front. Atheros is going to go ahead full bore with full support for WAPI.

Enter the Mysterious ‘ARM core’

Jason Tsai, senior manager for the Connectivity Products Division at Taiwan-based Silicon Integrated Systems, has signaled his company’s malleability to the mandate:

“In our design, we can move in two directions -- modify the hardware architecture as soon as possible” or “try to implement an ARM core into the chip to have the flexibility to modify the firmware to fit the WAPI spec.”

“Firmware” or not, some out there in IT-land are still hoping for some kind of compromise to break the logjam. After all, some argue, chipmakers have already agreed upon improved international standards to address many of the Wi-Fi security issues China raises.

Perhaps China, a relatively new member of the World Trade Organization, will buckle under the pressure coming from those who maintain that Beijing’s policy violates WTO rules. Some of the fine print in those rules, for instance, says that governments are not allowed to treat foreign companies differently from domestic ones.

Ann Rollins, director of technology and trade policy at industry lobby group ITI sees it this way:

“China is a new member of the WTO. And the people that developed the standard don’t quite understand that there are principles and obligations to uphold.”

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