Intel May Be Forced to Stop Selling Some Chips In China

Wall Street Journal | 3-10-04 | Ramstad and Chen

[at bay]

Intel Corp. said it could be forced to stop selling some computer chips in China this summer because it can't meet a deadline for compliance with a new Chinese government rule.

Intel's announcement was the first concrete indication that trade in key products could be hurt by the Chinese rule, which requires that personal computers, mobile phones and other wireless-data products sold in China must use a unique security standard developed by Beijing, starting June 1. It raised the temperature further in the simmering trade dispute between China and high-tech manufacturers from the U.S. and elsewhere over the controversial rule.

Regulators in Beijing met Wednesday to discuss how to proceed with implementation of the rule, amid growing pressure from multinationals and the U.S. administration to delay its implementation or rescind it altogether

[Clock King]

Or am I wearing too much tin foil?

Nope. IMHO, this is what would happen, and this is why Intel is complaining. They don't want to set up a separate manufacturing line just to meet China's need. That is a very expensive undertakeing, and would probably eat any profit they intented to make from the Chinese sale. The other half is that to make the chip the same for everyone would require re-tuning the current production lines, and that is also very very expensive.

Just another day in the life of trying to squeeze a buck out of a police state.

[oceanview]

the WTO exists only to act against the US.

[b4its2late]

personal computers, mobile phones and other wireless-data products sold in China must use a unique security standard developed by Beijing

Translation - If they can't be used for military purposes, we don't want them.....

[oceanview]

Intel will likely have to license this stuff from China, and the royalties will eat up any profits that Intel was making on the chips.

China is eventually going to produce intel processor clones that will dominate the market for PCs, just give american industry another 7-10 years to build up the chinese semiconductor industry through offshoring.

will someone please stop this friggin free trade madness!

[dennisw]

Another mega success story in "cracking" the Chinese market.

[philetus]

When is a new technological "standard" an affront to free trade? Steve Lohr reports.

http://www.smh.com.au/articles/2004/01/14/1073877901469.html

To high-technology companies, China has been a land of seemingly pure promise in recent years. Not only is it a fast-growing consumer market, but it has also become a low-cost global workshop for assembling technology products for American, European and Japanese companies.

But as China moves to expand its own technology industries, its Government has taken unusual steps that are leading to new trade tensions, say Silicon Valley executives, trade experts and US Government officials.

These measures include efforts to develop Chinese software standards for wireless computers, the introduction of exclusive technology formats for future generations of cell phones and DVD players, and even tax policies that favour computer chips made in China and sold in the Chinese market.

"The issue here is what path will China take as it develops its technology industries," says Bruce Mehlman, a former technology policy official in the Bush Administration who is executive director of the Computer Systems Policy Project, an industry group. "Will it take a more global, market-based approach, or will it try to change the rules and disadvantage others?"
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Concerns over China's strategies intensified last month when it announced that foreign computer and chip makers that want to sell certain kinds of wireless devices in China would have to use Chinese encryption software and co-produce their goods with a designated list of Chinese companies.

[Pentagram]

Hey, two or three hundred million Americans' wishes directed world technology for a few decades. Can't hardly blame a billion Chinese for wanting their turn at the wheel.

It's coming. Not just yet, though.

No, it will be about 2 years.

[philetus]

The semi-conductor market in China's mainland will see an annual growth rate of 35 percent and a requirement of 17 billion chips before 2005. By the year of 2010, China is going to be the second large semi-conductor market of the world.

Sept. 26, Shuguang Tianyan Information Technology Ltd. announced that China's first Server "Soaring Dragon" of its own intellectual property rights came into the world. The Server was brought out by using the universally-applied CPU "Dragon Chip" just developed and turned out by the Computer Institution of the Chinese Academy of Sciences.

Aside from that, used in the manufacture of the "Soaring Dragon" Server is a kind of specific main board with the "Dragon Chip" CPU jointly developed by Shuguang Co. and the Computer Institution of the CAS and the Shuguang LINUX operational system developed by Shuguang Co. alone. According to the analysis of persons from the business circle, the debut of the "Soaring Dragon" Server marks that China has set out on the marketization of its "Dragon Chip."

The "Dragon Chip", as a product of China's own intellectual property rights, has attracted the attention of the people in China ever since it came into the world. Undergoing many a strict examination and test by the Computer Institution of the CAS and other authoritative organizations in China, the Dragon Chip is proved to be very sound in performance, steady and reliable in operation and utterly sufficient to meet the working requirement of the server and website.

The Shuguang Co. says, the brought-out of the "Soaring Dragon" Server has not only turned over a leaf in Chinese history that there was "no chip" in China's server trade but also strengthened greatly the national defense, national security and actual strength in many sectors of crucial importance. It has made China's computer industry to follow its own and independent track of development.

The person also made a further explanation, saying that China used the US chip in the past. Information security constitutes the first and foremost line in national defense. However, the line was built on the foreign technology and completed with materials from a foreign country, and so we cannot but be worried about it.

The birth of "Dragon Chip" is considered a landmark on the road for the development of national sci-tech industry. Nevertheless, people are worried about it, thinking that though the "Dragon Chip" is designed on our own it will fall into the trap of foreign intellectual property rights provided it is compatible with that of the others. Dr Sun of the VIA Tech., the only chip-maker in the world able to match with the Intel was ever worried, since the old-brand manufacturers of the Intel CPU entered early into the market, applied and acquired many patent rights it was very difficult for the newcomers to make a detour away from these patents. Moreover, the Intel's monopoly of the market has made it to turn out an actual standard-maker in the market.

But according to the analyses of the experts present at the meeting, the VIA is different from the "Dragon Chip" of China for the competition between the Intel and the VIA is mainly focused in the PC market while the "Dragon Chip" is basically used on servers in the service of businesses and trades, such as banking business and information industry. What's more important is that the CPU of the PC market is based on the Intel's framework of X86 and so it's quite easy to fall into the intellectual property right trap the Intel laid out, whereas the Shuguang "Soaring Dragon" Server is based on the RISC structure, a totally another standard. Therefore, it will not fall into the intellectual property right trap.

According to the estimation of the Ministry of Information Industry the semi-conductor market in China's mainland will witness an annual growth rate of 35 percent before 2005 to reach a scale of US$40 billion with the chips needed to amount to 17 billion pieces. By the year of 2010 China is going to turn out the second large semi-conductor market in the world.

In correspondence to this, 2001 saw the semi-conductor market in China's mainland reach US$13 billion but that produced by it fell short of 10 percent. Experts come to conclusion that China has to develop chips of its own intellectual property rights so long as it wants to stand out a giant in the world of semi-conductor industry.

(People's Daily September 28, 2002)

[RicocheT]

1. "Corporate America thinks they can make money in China, just like a mouse thinks he can get cheese out of the trap."

2. "Will this end up in front of the WTO?"

No. one is exactly correct. No. two is answered by "no."

China didn't sign the part of WTO that keeps them from putting barriers to outside companies. This chip "design standard" isn't for spying, it is a way to keep out foreign cpu, memory and other chips now that China wants to dominate its home market with domestic production.

China says a goofy feature has to go in and no outside company wants to redesign its present chips as that is needless expense. Without the feature, China can say no to imports.

The other way China messes with outside companies is by dangling a big contract and then telling the winning bidder it has to transfer the technology to Chinese companies. GE is letting them in on electric turbine secrets just to sell a few now. GE will find no further turbines will be bought as the China co. will have a clone soon.

WTO has turned a blind eye to this abuse. Why, WTO is just a collection of western governments that are under pressure from their own companies to open up new, short-term, markets. The long term health of the west's economy isn't a factor.

Our companies are run by directors that think profit one quarter at a time. China has a long view and she is winning that way.

[adam_az]

AFAIK this isn't for CPU's, it's for wireless devices, intended as a replacement for the easily cracked WEP.

Of course, the chinese standard isn't open... so it probably has similar weaknesses to what plagues WEP. Crypto without peer review is basically worthless.

With good crypto, the algorithm being public doesn't weaken the strength at all.

I would urge Intel not to bother. By the time they implement this in a chip, it will already be cracked.

An article from Cryptonomicon: http://www.cryptonomicon.net/modules.php?name=News&file=article&sid=570

China Increases Number of WAPI Licensees
Posted on Tuesday, January 06 @ 12:55:00 EST by mhamrick



Network World Fusion is running a story on their site (China grants WLAN technology rights to more companies) reporting that the Chinese government has announced it will increase the number of WAPI licensees. WAPI (Wired Authentication and Privacy Infrastructure) is the 802.11 / WEP alternative developed for the Chinese market. The report indicates that the government will increase the number of licensees from 11 to 20. The names of the new licensees were not released.




As reported in our earlier story (Chinese Wireless Snafu Looming?,) China has drawn criticism from international trade groups who accuse Beijing of exclusionary trade practices. The government is requiring that all wireless lans in that country adhere not to the internationally recognized 802.11, but to the domestic GB15629.11-2003 standard.

The government has also announced that foreign firms wishing to produce and market "legal" WLAN (Wireless LAN) equipment in China will be forced to do so under a co-production agreement with a domestic Chinese firm.

Chinese officials site security concerns to justify mandatory use of GB15629.11-2003 and WAPI. International security observers are concerned, however. Xi'an-based China Broadband Wireless IP Standard Group, which developed the new standard, has yet to publish technical details of the WAPI standard, a move that has network security experts crying foul.

"There's a consensus among the academic crypto community that one of the reasons that WEP was so weak is that it was not subject to expert external review before publication." quotes one expert who asked to remain anonymous, "It looks like China may be using Snake Oil to protect their wireless infrastructure." (Snake Oil is a term used by security experts to describe inadequate security components that are represented as providing adequate protection.)

[philetus]

Your so right.

As soon as China has everything it wants and needs from all the tech companies that have moved into China, we'll start seeing another business model.

I wonder how many of these companies are allready working on projects for China.

Think China has any of them looking into a super-cavatating torpedo?

[adam_az]

http://www.aavextechnology.com/newsletter/newsarticle122203-3.htm

China's Wi-Fi security stance ruffling feathers
By Patrick Mannion and Mike Clendenin, EE Times
Dec 19, 2003 (10:01 AM)
Commsdesign

MANHASSET, N.Y. — China's controversial decision to mandate a proprietary encryption scheme for Wi-Fi systems used within its borders has industry groups, chip makers, OEMs and even U.S. government officials scurrying for answers. While China has a history of going its own way on technological standards, few attempts have aroused the ire of this spec.

The staunch proprietary position on what China calls its Wired Authentication and Privacy Infrastructure (WAPI) — implemented on Dec. 1 as part of the nation's GB 15629.11-2003 Wi-Fi standard — caught the wireless-LAN industry off-guard.

The ruling means that any Wi-Fi chip or system imported into China or manufactured there for domestic use must employ the WAPI encryption scheme, which is incompatible with IEEE 802.11. Charges of protectionism and license gouging are flying, along with complaints that a China-only standard will raise equipment costs. Some fear that China will push WAPI as a global standard and thereby fracture the entire WLAN industry.

The effects are bound to be far-ranging, given WLAN market growth in China. In 2002, according to numbers from IDC, China accounted for $17.2 million of a $2.2 billion global WLAN market. The figure “represents 182 percent growth over 2001, while the global market [overall] only grew at 23 percent,” said Dennis Eaton, chairman of the Wi-Fi Alliance. “The Chinese market is expected to grow to $50 million by the end of this year and to $500 million by 2007,” he added.

But “the ripple effect is even greater,” said Eaton, pointing to systems with embedded Wi-Fi connectivity, such as laptop computers and PDAs. “This forces people, such as Dell and iPAQ [Hewlett-Packard's PDA], to revisit their embedded plans. There's some redesign needed here.”

Though China's Wi-Fi standard has been nearly two years in the making, the WAPI encryption algorithm seems to have caught the industry by surprise. The standard was created by the China Broadband Wireless Internet Protocol Standards (BWIPS) group, and no details of the encryption algorithm have been disseminated to non-Chinese chip makers (although Intel Corp. said that it's reviewing a copy of the spec).

More worrisome, say observers, is that chip and equipment makers will have only a six-month “grace period” — until June 1 — to comply with the mandatory standard. The products that qualify for the grace period include those imported and produced before Dec. 1 or for which delivery contracts were signed prior to that date.

The standard itself was not discussed publicly until July and was not available for review until August. It was at this point that some industry watchers noted that a core piece of the guideline — namely, WAPI encryption — was a proprietary, mandatory system. This is unusual, since in the past several years China has traditionally gone along with ITU/ISO global standards; with 802.11 and .11b recently elevated to International Organization for Standardization status, many assumed China would do the same again.

Even the domestic standards China has been determinedly crafting — ranging from mobile-phone network protocols (TD-SCDMA) to audio/video compression, optical-disk technology and operating systems — all have been voluntary, relatively open processes that encouraged foreign participation.

China did use the ISO's IOS/IEC8802-11 and -11b versions as the basis for its own new standard. However, pointing to what it saw as security “flaws” in the present version of Wi-Fi that it believes “greatly restrict the spread and application of wireless LAN,” the BWIPS organization opted to develop a proprietary encryption algorithm.

Bruce Schneier, chief technology officer of Counterpane Internet Security Inc. and author of several books on cryptography and security, said all indications are that China did not accept IEEE standards because it did not want second-rate encryption. “If the Chinese government wanted crappy security, they would use what's there now,” Schneier said.

“From my point of view, 802.11i is a worldwide standard, and maybe they [BWIPS] should come and help us enhance it,” said Stuart Kerry, chair of the 802.11 working group. “They need to tell us what .11i does not do and we can make a future amendment.”

But the differences between China's WLAN standard and 802.11 may not end at encryption. The BWIPS uses similar language when describing its quality-of-service efforts (GB 15629.1103-2003) as it did when laying out its security spec (GB 15629.1106-2003). This has raised the specter of QoS differentiation also. “There has been nothing official on this yet,” said Eaton of the Wi-Fi Alliance. “But it does appear they're also working on .11e-like QoS and other things that might track back into the IEEE's work.”

Working off what little information is available at large, Eaton pinned the proprietary component in WAPI as a sort of elliptic-curve encryption with a block cipher. The 802.11i draft standard now calls for the 128-bit Advanced Encryption Standard (AES), which is also a block cipher, and that scheme has already been widely deployed as part of Wi-Fi Protected Access, which uses draft 3.0 of the .11i spec.

“We're now on draft 7.0 and expect to ratify the standard in March or June,” said Kerry. “And it will have full-blown AES.”With respect to the authentication process, Eaton believes it's architected in a manner similar to the Radius scheme used in 802.11. But he cast doubts on the ability of the WAPI authentication scheme to scale sufficiently to support WLANs without using expensive access points (APs). “With a small AP and, say, 50 users, we think the whole authentication scheme they have set up is going to bog down the network, bring it to a grinding halt,” Eaton said.

Colin Macnab, the newly appointed vice president of marketing and business development at Atheros Communications (Sunnyvale, Calif.), put the authentication processing requirement at about 80 Mips per user, vs. 15 to 20 Mips for 802.11i.

Soon after the standard was announced early this month, rumors began to spread that only a handful of Chinese companies would be allowed to see the spec and that those 11 firms would be responsible for licensing it to foreign companies, some of which could be direct competitors. In fact, some small Chinese companies are already at work on 802.11 chips. “We will have an advantage in this niche because we are familiar with the security standard,” said Kuang Zhangpu, a manager at Beijing-based LHWT Microelectronics Inc.

“The way that they are trying to implement this makes it clear that, whatever national-security argument there may be for encryption, the real motivator is to promote the interests of certain Chinese companies over other companies,” said Anne Stevenson-Yang, the managing director of the U.S. Information Technology Office in Beijing. Ann Rollins, director of technology and trade policy at industry lobby group ITI (Washington), was somewhat more forgiving. “China is a new member of the WTO,” she said. “And the people that developed the standard don't quite understand that there are principles and obligations to uphold.”

“This is protectionism,” said Philip Solis, senior analyst at Allied Business Intelligence (Oyster Bay, N.Y.). “The only result will be higher prices for everyone as the industry loses the economies of scale [associated with a single global standard].”

U.S. vendors have talked to the International Trade Organization and, according to Kerry, the issue has gone up to the presidential level. But so far, “We don't want this to become an international trade issue,” said ITI's Rollins.“[The Chinese] do have a competitive technology industry and it would really be in their best interest to be a larger player in the international community.”

Others fear intellectual-property price gouging by the “anointed” Chinese companies, and the possibility of having to open up their own IP chests to one or more of the 11. “That's a concern of all companies,” said Dominic Wilde, director of product marketing at Vernier Networks (Mountain View, Calif.). “IP is your lifeblood.”

Though many foreign chip makers are in the dark about the particulars, they are formulating plans to quickly adopt the standard when the IP is made available. “In our design, we can move in two directions,” said Jason Tsai, senior manager for the Connectivity Products Division at Taiwan-based Silicon Integrated Systems: “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.”

More worrisome, for many, is the possibility that China may leverage its considerable weight to push WAPI as a global spec. Indeed, “It's possible that we'll apply the standard to become an international standard,” said BWIPS spokesman Liu Chao-yang. “Currently, I don't have the road map on that. Meanwhile, some U.S. companies have already asked to join our working group. To my knowledge, HP and Cisco are among them, and their admission to the working group is just a matter of time.”

- Samuel Ni of sister publication EET China and Loring Wirbel contributed to this story.

[maui_hawaii]

So what.

This is part of the invisible hand (/sarcasm)

Let them cope with it themselves.

[adam_az]

"China didn't sign the part of WTO that keeps them from putting barriers to outside companies. This chip "design standard" isn't for spying, it is a way to keep out foreign cpu, memory and other chips now that China wants to dominate its home market with domestic production."

FUD. I'm no fan of the Chinese, but this is for an alterative crypto standard to WEP. This ONLY applies to wireless devices. I don't blame them, WEP is total garbage. However, since China hasn't published their crypto algorith, it's likely crap, too.

[GalaxieFiveHundred]

Not!

[adam_az]

Not the first time IBM pulled a stunt like this. Try WW2 when IBM supplied Adolf Hitler and the Nazis a list of Jews to be assassinated.

That is an utter lie.

During WWII, the Nazis nationalized IBM's German affiliate, and used it to their own ends.