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US chip biz tells China to ditch local WLAN standard

WAPI not a barrier to trade - but bias towards local firms is

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The smart choice: opportunity from uncertainty

The Semiconductor Industry Association (SIA) has demanded that the Chinese government abandon plans to impose a proprietary WLAN security standard on 1 June.

The standard, called Wired Authentication and Privacy Infrastructure (WAPI), was published last May in a bid to address the Chinese government's concerns that existing WLAN security standards were insufficiently strong. WAPI was to have become effective on 1 December 2003. However, lobbying on the part of the US government persuaded the Chinese to put back the deadline to June this year.

While overseas firms have had relatively little access to the WAPI specifications, the real trouble with the Chinese standard is that it's incompatible with those ratified by the IEEE and which the rest of the world has decided to follow, the SIA says.

"A unique Chinese national standard will slow the development of China's information technology industries because it will hamper the ability of Chinese firms to access the innovations emerging from thousands of companies around the world," warned the SIA's president, George Scalise.

What Scalise really means, of course, is that the move will make it harder - ie. more expensive - for non-Chinese manufacturers, in particular the US chip makers his organisation represents, to sell WLAN kit to the Chinese. While we're all in favour of international standards, it has to be said that local standards tend to cause manufacturers more far difficulty than they do the consumers those manufacturers serve. There are numerous examples in IT and elsewhere of multiple standards existing happily side by side, territory by territory. GSM and CDMA, for instance, and even right- and left-hand drive automobiles.

The issue for manufacturers is simply financial: the cost of developing different products for different markets. But since they're more than happy to come up with proprietary, incompatible standards of their own when they see an opportunity - think back to the pre-802.11g days and the variety of 802.11b speed booster technologies on the market, not to mention today's 'bigger range, faster throughput' 802.11g extensions - they can't really complain when someone else has a go.

China is also pursuing other local, unique standards: it is creating its own high-definition DVD specification, for instance.

Local regulations and standards are stones on the path to market, they are not barriers to trade. Beating competitors at their own game is, in any case, what makes capitalism fun.

But while China has arguably every right to impose its own standards on its own market, it shouldn't restrict those firms who are willing to abide by the terms of entry into that arena. So we share the SIA's concerns over claims that the Chinese government will demand that foreign firms to partner with a pre-selected list of 24 local manufacturers in order to obtain the import permits they will need to sell WLAN kit in China.

That is a barrier to trade, and not only that, it potentially exposes importers' intellectual property to their Chinese competitors - rivals who also have the final say as to whether imported kit is WAPI-compliant or not.

The SIA is already lobbying for action to be taken by the World Trade Organisation (WTO) against China over the country's decision to offer local chip makers a 14 per cent rebate on the 17 per cent tax the government levies on semiconductor sales while denying importers the same tax break. That rebate, introduced in 2000, is tantamount to illegal state aid, the SIA believes, and is distorting the market against overseas suppliers keen to operate in what is the world's third biggest chip market. ®

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