What a pity… WAPI seems to be back. A proposal to make mandatory the expansion of WAPI (Wireless Authentication and Privacy Infrastructure), China’s domestically-developed WLAN standard, was submitted to the National People’s Congress this week. 

For sure, China’s domestic market is largely dominated by foreign-developed WLAN products. But the argument that reliance on them is harmful to state security is completely flawed - encryption software being one solution. The second argument, that without government intervention it will be impossible for WAPI to become the national standard, doesn’t either justify such a measure - in the end standards have to make economic sense.

The signs seem to be clear: Previous attempts to impose WAPI already caused severe trade frictions between China and the USA. ISO rejected China’s WAPI as an international WLAN standard in 2006, edaling a blow to China’s techno-nationalism. Even Chinese operators are starting WiFi projects across the country based on 802.11.

Beijing may have to realise that not all standards should be Chinese. Imposing standards will not only hurt the Chinese economy but also damage its image abroad.

Ever wondered why Korean and Japanese mobile phones made it all the way to Europe and the US but not Chinese phones?

Until recently, the explanation was rather straightforward: Chinese phone manufacturers were not competitive in their domestic market; the market was mostly dominated by a few foreign companies like Nokia, Samsung or Motorola. Chinese companies (Bird or TCL) had a hard time capturing sizeable market shares. Fiercer criticics argued that Chinese manufacturers did not master core mobile phone technologies which resulted in a difficulty to reduce production costs.

This may be about to change! With the commoditization of multimedia features, foreign manufacturers struggle to remain competitive when compared to local vendors. The latter seem also to be more pro-active on the localization aspect (like dual SIM handsets). Competition from local firms (like Huawei or Amoi) even seems to increase in the smartphone and PDA market. For the time being Nokia appears to succesfully fight back whereas Motorola and SonyEricsson are in a more delicate situation.

So, the day when Chinese handset manufacturers have become competitive enough in all segments of their domestic market is nearing. From then on it won’t be too difficult to start attacking US and European markets with cheap and good-quality phones.

P.S.: Chinese telecom equipment supplier ZTE Corp has joined the rank of the world’s top 10 mobile phone makers in 2007, becoming the first Chinese handset marker to attain the honor

While MIT’s Negroponte and Intel’s Otellini wage their battle for a USD 100 laptop (aka XO vs. Classmate) a Chinese company has announced plans to market PCs costing less than USD 200 in the Philippines. Lenovo - the leading Chinese PC manufacturer - is hoping to establish a foothold in the market with low-cost, entry-level PCs before pushing its full line of products there.

Even if the success is not assured, Lenovo’s PC could prove a serious rival to the laptops. Because of insufficient demand, the XO currently sells for USD 188 and the Classmate for USD 350 (with an installed version of Microsoft Office). Moreover a number of countries have always been very critical of the USD 100 computer from the outset. India even unveiled plans 3 years ago to develop its own low-cost desktop (Mobilis).

P.S.: Lenovo also unveiled a USD 260 PC for Chinese farmers. It doesn’t come with a mouse or a keyboard. Instead, the box comes with a handwriting recognition pad

Forget about IBM Thinkpad! When 联想 (Lenovo) agreed in 2005 to purchase the computer-manufacturing division of IBM, the contract stipulated that it could use the IBM brand on its notebook-computer products for three years. With the end of that period approaching, Lenovo is preparing its strategy to launch its own-brand line of consumer-electronics products in North America and Europe in early 2008.

By now, China-produced goods have more or less conquered the world. Moreover, Chinese investment abroad (FDI) is growing rapidly - USD 20 billion in 2006. But can you name 3 Chinese technology brands which are global?

For a starter, China Mobile, the world’s largest mobile operator, with more than 340 million subscribers, a 75% share of the mainland cellular market… and 5 million new customers every month! The company is making forays into a number of “neighbour” markets (e.g. Pakistan) and has had a partnership with Vodafone for a number of years. In the equipment industry, keep an eye on ZTE (Zhongxin Telecom Equipment) and Huawei (who just bought 3Com). Both companies have been growing their international sales at an amazing pace. And, in addition to numerous deals in less mature markets, they have managed to convinced the BTs of this world too. Finally, remember Sina, one of the most influential Internet operator, with more than 230 million registered uses worldwide and over 700 million daily page views.

But what about the global identity of Chinese multinationals? Many companies are hoping to emerge as truly global players. Some of them are getting a hand from the government to become national champions. if one was to draw a key factor from successful global MNCs, the ability to think global and act local. Are the emerging Chinese multinationals up to the task?

As you can guess, the iPhone is manufactured in China. But in fact, it is made by everybody else but Chinese companies…

About 17 Taiwanese companies - none a household name - provide parts ranging from the camera lens to the battery charger. Japanese companies are responsible for printed circuit boards and the lithium ion battery. Then, there îs the German touch screen, worth around USD 35, the Korean microprocessor chip - itself based on a British technology… In other words, while most components are produced in China, no wholly-owned Chinese company appears in the iPhone food chain. As a result, of the $280 manufacturing cost of each iPhone unit, less than 5% actually stays in China.

In fact, during the first 6 months of 2007, Chinese exports from solely foreign-funded and joint-ventures amounted to 84% of total IT exports… or close to USD 200 billion. And don’t forget that electronic information products account for 36% of China’s total exports of all products.

No surprise then that, in order to counter the supremacy of foreign multinationals, the government has designated integrated circuit, software and new type of electronic components as “the fundamental core sectors”, and new-generation telecommunication and high-performance computers as the “strategic growth sectors” for the 2006-2010 period!

If history repeats itself, www.sex.asia should be the most popular domain name requested at the launch of the .asia regional domain name. At least, that’s what happened with the .eu extension when it was launched last year.

Following the European Union (.eu), a regional domain name for Asia (.asia) is, as of this week and after 6 years of deliberation with ICANN, available for government and companies. The public will have to wait till February 2008.

For the time being, domains will be offered using the Latin alphabet and there is no hint about when addresses will be available in local alphabets. This is unfortunate. Some countries, notably China, have already set up a system that makes it possible to use net domains written in Chinese characters - the government was tired of having to wait for ICANN to officially approve non-Roman alphavets in domain names.

Is there a need for .asia? The 20 or so sponsor members running country code domains who signed up to back the .asia registry run by DotAsia seem to think so. And there is room to grow: the geographical reach of the .asia domain extends from Australia to the Middle East, that’s about 49 countries. Looking westwards, the .eu regional domain name has currently close to 2.6 million .eu registered domain names - not bad after one year but still only a third of the 7.5 million .de domain names!

Actually, .asia will really become interesting next year with the introduction of an auction system for domain names having received more than one qualified application!

Redberry, Red Flag Linux… These are just a few Chinese technology companies operating under the radar. Most of them limit their operations to the domestic market. When they venture abroad, they do so via direct sales or subsidiaries. Seldom do they go on merger and acquisitions (M&A) buying sprees, for when they do so in the USA or in Europe, it usually raises (red) flags in the capitals.

In fact, it looks like there is a red line that Chinese technology companies are not allowed to cross. Latest in case is Huawei’s attempt to buy 3Com, a struggling US company, because of fears that «China» will find it easier to spy on other countries while better encrypting its own communications! Despite having the US government as a customer, 3Com’s products fall within the infra-technology category: they are neither high-tech military stuff nor low-tech for that matter (3Com supplies the Pentagon with intrusion prevention technologies). To be fair, Chinese companies are not alone: recent deals involving the transfer of network technology to non-US entities, including Alcatel and Nokia, raised scrutiny.

While the 3Com case reminds us of the ridiculous accusations leveled against a couple exporting x386-based computers to China on the ground that the processor could be used to power a missile, it should not distract us from the core question: when does a Chinese company’s strategic technology investment become a national security risk?

Ironically, the question will probably be solved by the market. What will happen when private equity firms, backed by Chinese funds start to acquire US technology companies?