Intel's Centrino Chipset to Be Blocked from China?

Intel last week informed many of its customers in China that they might have to find an alternate supplier of microprocessors. If China continues to insist that Intel's Centrino chipset must comply with the Chinese WAPI encryption standard for Wi-Fi by June 1, then Intel will simply pull its mobile processors from the Chinese market.

Intel insists that the Chinese short-range encryption standard, known as WAPI, that China is insisting all Wi-Fi products must comply with by June 1, 2004 is an unfair and almost impossibledeadline to meet.Intel spokesman Chuck Molloy said,"we won't be able to build a part that meets our requirements for quality," Molloy also saidthat Intel's problems with the Chinese standard were "philosophical" as well as technical.

It was last May whenBeijing told foreign makers of computers and microprocessors that want to sell Wi-Fi systems in China that they would have to use a different standard for encrypting the signals and work closely with Chinese computer makers to produce goods for the Chinese market. Chinese officials had originally set Dec. 1 as the deadline, but late last year extended it to June 1.

American chip makers and PC manufacturers, along with many other computer makers around the world, say that the Chinese plan is an unfair trade barrier by requiring companies to comply with two vastly different standards. Foreign and American companies are also concerned about the potential loss of intellectual property rights if they are forced to work with Chinese PC companies that might become competitors in the Wi-Fi marketplace.

This dispute between China and Intel has now bubbled all the way up to the White House. Officials from the Bush administrationsent a letter to China's deputy prime ministers last weekasking them to back off their Wi-Fi encryption standards plan. This letter was signed by such people asSecretary of State Colin L. Powell, Commerce Secretary Donald L. Evans, and Robert P. Zoellick, the United States trade representative.

China is currently the second-largest market for PC's behind the United States, purchasing more than 13 million PC's last year, Intel and many other companies have a lot to lose by pulling products off of the Chinese market. It will be interesting to see how this dispute unfolds and whether American businesses or the Chinese government will flinch first in this standoff.