China won't back down on chips
Bloomberg News
Thursday, March 11, 2004
Wireless encryption rules to stand despite Intel complaints
Chinese officials said Thursday that they would not back down on a plan to require computer makers to adopt a new standard for encrypting wireless communications despite a pledge by the chipmaker Intel to halt sales of its Centrino technology in China.
Intel, the world's biggest chipmaker, will stop sales of the wireless communications chipset after balking at government demands for alterations before June 1. A quarter of all laptops sold in China last year used the chip, including those made by Legend Group, the country's largest personal-computer maker.
"The government's position is unequivocal," said Wang Xilin, deputy director of the Standardization Administration of China in a phone interview from Beijing. "June 1 is the deadline. That's not going to change."
Intel spent $300 million promoting its Centrino chip package last year as the company tried to tap demand for laptops. The U.S. government last week wrote a letter of complaint arguing that China's ruling was an unfair barrier to sales in the world's second-biggest PC market.
Intel has been unable to produce a technical solution that uses the Chinese standards and works as well as existing products, said Chuck Mulloy, a spokesman for the company, which is based in Santa Clara, California.
Under the new rule, overseas makers of computers and chips trying to sell devices in China that allow wireless communications must use a Chinese encryption software and make the products with designated mainland companies.
"There is a likelihood consumers will delay laptop computer purchases in China because top-of-the-line technology may not be available for a while," said Kitty Fok, a Hong Kong-based analyst at market researcher International Data Corp.
Texas Instruments, the largest maker of chips for cellphones, also makes chips that do not conform to the new Chinese standard and wants the rules changed, said Sharon Hampton, a spokeswoman for the Dallas-based company. The rule affects imports of devices other than computers, including mobile phones, personal digital assistants, scanners and network cards.
China is also developing its own standards for video compression, digital television signals and high-speed mobile-phone networks, as the government seeks to encourage domestic manufacturers to expand.
Consumers and businesses are choosing laptops over desktop PCs, and demand for notebooks with so-called wireless-fidelity, or Wi-Fi, Internet access is rising. Laptop sales will grow 25 percent in 2004, compared with an estimated 6.5 percent growth in desktops, according to a January forecast by UBS.
Intel does not break out sales to China, its second-largest market. The Asia-Pacific region accounted for 40 percent of the chipmaker's fourth-quarter revenue.
Intel will still be able to sell the main processor in the Centrino package, the Pentium M, Mulloy said. The company is continuing talks with the Chinese authorities, he said.
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