Editorial: China's retaliatory 'unreliable supplier' list will hit Windows, Android the ha...

Posted:
in iPhone edited May 31
China's Ministry of Commerce has floated a retaliation plan intended to punish companies complying with the Trump Administration's Entity List ban on doing business with Huawei. That could have a profound impact on two of the largest software platforms licensed in China: Android and Windows, as well as broadly-licensed silicon intellectual property from ARM and Qualcomm.

Huawei
China is backing Huawei against American restrictions

China retaliates with a strategy

After the Trump Administration imposed devastating restrictions on Huawei by adding it to the U.S. Entity List, Google, Microsoft, Intel, ARM, Qualcomm and many other technology companies were forced to announce the termination of their business supplying the Chinese networking company. Across the board, observers scrambled to write up hot takes on how this would be bad news for Apple, the only Western company doing massive business in China.

That included Zachary Karabell, a contributor for Wired and Bruce Einhorn of Bloomberg, as well as pundits from IDC and IHS Markit , analysts including JP Morgan, Corwen, and Citi and a variety of click bait headlines shoveled out by bloggers assuming that state reports of boycotts could be taken seriously after at least five years of perpetual reports of "Apple boycotts" in China that all turned out to be horseshit.

However, rather than targeting Apple--the company that employs vast numbers of Chinese workers at plants ranging from Foxconn to Pegatron, and which supports a huge network of Chinese supply chain companies, and which sells the leading share of premium phones in China, which contributes billions in domestic VAT to China on local sales of devices, the P.R.C. has outlined that its retaliation will not be ill-considered and self-destructive, but will instead target the very companies that Trump ordered to stop doing business with Huawei.

China strikes back at the Entity List

According to report by Bloomberg, China outlined plans to "list" foreign enterprises, organizations and individuals that 'do not obey market rules, violate contracts and block, cut off supply for non-commercial reasons or severely damage the legitimate interests of Chinese companies,' a description that would apply to the companies that were forced to terminate their relationships with Huawei to comply with the Entity List.

Because Huawei has already lost all cooperation with these companies, it's quite easy to retaliate against them. China has previously taken similar strategic steps in its tariff reprisals, targeting American farmers and other exporters to China in a bid to narrowly target the pain on Trump's core base of supporters.

The lost of support from Google's Android, Microsoft Windows, and chip IP from ARM and Qualcomm, are all devastating for Huawei. There is no easy way to compete in Western markets--including Europe, where Huawei was making strong gains--without offering compatibility with those platforms. But having lost their support entirely, Huawei and the P.R.C. can best retaliate by working to develop their own domestic technology.

That could include Huawei's own version of an Android-like mobile platform, and potentially a Linux-based replacement for Windows. Additionally, any efforts to develop workalike or competing processor designs that could stand in for licensed IP from Qualcomm and ARM could enable China to emerge stronger and more independent. Huawei already claims to have developed its own 5G silicon, and freed from having to work with Western IP, it could clean-room or even simply appropriate the IP that it has been licensing from Western partners.

Huawei's silicon subsidiary HiSilicon has already produced its own ARM-based processors, but the company continued to sell products using chips from Qualcomm and other suppliers. Without those resources, and without the continuing support from ARM or Qualcomm, HiSilicon could be emboldened to produce infringing IP that Western companies have a reduced ability to fight against, given that they now have no remaining leverage to suspend their normal business relationships.

Huawei's HiSilicon Kirin 980 is currently more than a year behind Apple's work, but China could go full rogue in selling existing ARM and Qualcomm infringing chips at a discount until it can produce its own designs, flooding the market and devastating Western markets for ARM and Qualcomm IP.

Huawei Kirin Apple A12 Bionic
Huawei's Kirin 980 isn't just behind Apple's A12 Bionic from last year, it's also struggling to keep up with the previous year's A11


In that scenario, China could not only support Huawei's development of independent technology, but could materially force the propagation of alternative OS and silicon platforms across various other domestic companies operating with the scale to establish new standards. The Entity Listing of Huawei has left China with few alternatives.

That could prove devastating for Google and Microsoft, as most of the phones and PCs outside of Apple and Samsung are now produced by Chinese companies. If China can produce its own alternative to Android, it could crush the aspirations of Google to ride its freely distributed Android OS as an advertising-supported services business.

Chinese companies already distribute their own forks of AOSP Android that are connected to domestic Chinese app stores, ad networks, and other services. If they began doing this in other regions including Africa, greater Asia, South America, and Europe, Google's own control over Android would fizzle out completely. That would force Google into greater reliance on iOS, where it already pays Apple billions to for the privilege of serving iPhone and iPad users with its search results.

Similarly, Microsoft's control over Windows could be blindsided by a cooperative segment of Chinese mass producers, including Huawei and the world's largest PC maker Lenovo, working with the Chinese state to produce PCs that don't have to license Windows anymore.

In parallel, China could mandate that its national producers develop their own silicon resources to produce alternative designs that don't require ARM or x86 licensing, creating a new schism that would be devastating for ARM, Intel, and Qualcomm. Those moves would shatter the global economies of scale that are funding the research and development advancing the state of the art in OS and silicon.

The company most isolated from this upheaval: Apple. It could continue to develop iOS and its own custom ARM processors without interference from American restrictions, and without retaliation from China's "unreliable supplier" listings. Such a move would immediately make Apple's platforms the world's largest, and the only ones supported by ongoing sales of more than $200 billion worth of annual global sales of mostly premium hardware.

There's mounting evidence that the supposed boycott of Apple in China is a total fabrication, and that the nation's affluent consumers are continuing to prefer to buy iPhones, Macs, and iPads. If that holds, Apple's weak remaining competition in the form of low-end devices will be dramatically weakened in and outside of China as Apple continues full speed ahead in developing the world's most advanced consumer technology.
bakedbananas
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Comments

  • Reply 1 of 64
    nyteskynytesky Posts: 18member
    If Chinese companies produce IP infringing chips or software, it would only be for the domestic market and emerging markets with weak IP protections. Those products would certainly be litigated and blocked in Europe, Japan and South Korea. The resulting bifurcation of the market would take a different path than what you describe in this piece. However, the conclusion that China does not have a strong interest or incentive to punish Apple is very true.
    racerhomie3muthuk_vanalingamlostkiwiwatto_cobrajony0
  • Reply 2 of 64
    gatorguygatorguy Posts: 20,729member
    nytesky said:
     However, the conclusion that China does not have a strong interest or incentive to punish Apple is very true.
    If we believe we have correctly understood the Chinese end game and their strategy for arriving there. We assume they would not be willing to accept some immediate loss of their own making  in order to gain a stronger eventual result. 
    edited May 31 badmonk
  • Reply 3 of 64
    mubailimubaili Posts: 390member
    It doesn’t make any sense. Then Trump would just add ZTE to the list as well. Both sides are stupid and both sides behave like a spoil kid throwing a tantrum.
    muthuk_vanalingam
  • Reply 4 of 64
    genovellegenovelle Posts: 967member
    nytesky said:
    If Chinese companies produce IP infringing chips or software, it would only be for the domestic market and emerging markets with weak IP protections. Those products would certainly be litigated and blocked in Europe, Japan and South Korea. The resulting bifurcation of the market would take a different path than what you describe in this piece. However, the conclusion that China does not have a strong interest or incentive to punish Apple is very true.
    Considering they have the largest market in the world. They have far more potential to grow while in many markets we are at or approaching saturation. 

    badmonktoysandme
  • Reply 5 of 64
    GeorgeBMacGeorgeBMac Posts: 4,674member
    mubaili said:
    It doesn’t make any sense. Then Trump would just add ZTE to the list as well. Both sides are stupid and both sides behave like a spoil kid throwing a tantrum.
    Both sides?   That's a false equivalency.   This is all Trump antagonizing and China finally responding.
    macplusplusbigpicsbakedbananastoysandmejony0
  • Reply 6 of 64
    avon b7avon b7 Posts: 3,914member
    "Huawei's HiSilicon Kirin 980 is currently more than a year behind Apple's work, but China could go full rogue in selling existing ARM and Qualcomm infringing chips at a discount until it can produce its own designs, flooding the market and devastating Western markets for ARM and Qualcomm IP."

    Rubbish.

    It is built off the same process technology as the A12. It includes an on SoC modem. That modem is faster than any Apple modem. The SoC is compatible with Balong 5000. It had the world's fastest mobile wi-fi chipset. It's DSP/ISPs are state of the art. As are its NPUs.

    The modems and WiFi chipset are homegrown.

    That's the SoC.

    You are beam focussing narrowly on one basic and largely irrelevant metric.

    On the other hand, Apple lacks dual frequency GPS, it's battery technology has lacked for years, its shell designs are dated, its antenna designs have nowhere near the ability of Huawei's in troublesome areas, its camera designs have nowhere near the versatility of Huawei's, its charging tech (reverse wireless or cabled, or wireless) is behind etc.

    Huawei could not 'go rogue'. If it did, its phones would be banned from sale everywhere outside China!

    It can infringe alright but the products would literally be banned eveywhere they wanted to sell them.
    edited May 31 muthuk_vanalingambakedbananastoysandme
  • Reply 7 of 64
    GeorgeBMacGeorgeBMac Posts: 4,674member
    This has shades of 2001 where the U.S. created a pre-emptive war based on lies and rhetoric -- which went unchallenged despite a wealth of evidence to the contrary.

    Bush/Cheney:   "We KNOW the WMDs are there"

    Powell at the UN:   We have surveillance photos showing that WMDs are in THIS building
    UN Inspectors:  We've been in that building.  Inside with a trained inspection crew.  There's nothing there.
    BushCheney:   Why should we believe YOU?

    And so, here we go again:  Without a shred of supporting evidence, just lies and rhetoric bolstered by fear mongering, we are starting another war -- where BOTH sides are bound to lose.

    The first time, our western allies grudgingly and hesitatingly supported us (most of them -- remember "Freedom Fries"?).  This time that is not so likely to happen:   They have already called Trump's bluff on Huawei and Trump & gang responded by threatening them. 

    This is unlikely to end well -- except for Trump.   Trump will be able to use these new wars as a distraction from his upcoming impeachment, play the victim,  and rally his base around him.  Then, he'll retire to his gold plated estate richer than ever.   But the U.S. will be left trying to restore its reputation (again) with the rest of the world.
    cincymacmuthuk_vanalingambigpicstoysandmeFileMakerFellerjony0
  • Reply 8 of 64
    tzeshantzeshan Posts: 1,980member
    nytesky said:
    If Chinese companies produce IP infringing chips or software, it would only be for the domestic market and emerging markets with weak IP protections. Those products would certainly be litigated and blocked in Europe, Japan and South Korea. The resulting bifurcation of the market would take a different path than what you describe in this piece. However, the conclusion that China does not have a strong interest or incentive to punish Apple is very true.
    Huawei CEO is personally against retaliation Apple. He said Apple is teacher of Huawei. Student should not retaliate teacher. This is in accordance with Chinese culture of respecting teacher. 
    GeorgeBMacmacplusplusbakedbananastoysandme
  • Reply 9 of 64
    tzeshantzeshan Posts: 1,980member

    BushCheney:   Why should we believe YOU?

    This is western culture. Discredit messengers as argument against truths. 
    GeorgeBMacmuthuk_vanalingam
  • Reply 10 of 64
    gatorguygatorguy Posts: 20,729member
    tzeshan said:

    BushCheney:   Why should we believe YOU?

    This is western culture. Discredit messengers as argument against truths. 
    +100...  ;)
    Shoot the messenger is a time-honored tradition both in person and on-line
    edited May 31 GeorgeBMacmuthuk_vanalingamtoysandme
  • Reply 11 of 64
    genovellegenovelle Posts: 967member
    mubaili said:
    It doesn’t make any sense. Then Trump would just add ZTE to the list as well. Both sides are stupid and both sides behave like a spoil kid throwing a tantrum.
    Just our side. It seems that the person making these decisions who has presided over one bankruptcy after another fails to recognize how we were already winning in the global trade market. China was willingly accepting their role as the manufacturing hub. A position much less profitable than the creator of the technology. All the companies listed as unreliable make massive profits off China but contribute very little to their economy. So, by banning them from China the do tremendous harm to these companies. These are also companies whose product could be considered a national threat by China, because of their data collection policies and servers being located on American soil. 
    GeorgeBMacbigpicsbakedbananas
  • Reply 12 of 64
    SpamSandwichSpamSandwich Posts: 31,185member
    I wonder what would happen if Google disabled all access to Android in China? Would there be a new revolution and overthrow of their government?
  • Reply 13 of 64
    tmaytmay Posts: 3,813member
    tzeshan said:

    BushCheney:   Why should we believe YOU?

    This is western culture. Discredit messengers as argument against truths. 
    N. Korea; execute messengers...
  • Reply 14 of 64
    lkrupplkrupp Posts: 7,154member
    This has shades of 2001 where the U.S. created a pre-emptive war based on lies and rhetoric -- which went unchallenged despite a wealth of evidence to the contrary.

    Bush/Cheney:   "We KNOW the WMDs are there"

    Powell at the UN:   We have surveillance photos showing that WMDs are in THIS building
    UN Inspectors:  We've been in that building.  Inside with a trained inspection crew.  There's nothing there.
    BushCheney:   Why should we believe YOU?

    And so, here we go again:  Without a shred of supporting evidence, just lies and rhetoric bolstered by fear mongering, we are starting another war -- where BOTH sides are bound to lose.

    The first time, our western allies grudgingly and hesitatingly supported us (most of them -- remember "Freedom Fries"?).  This time that is not so likely to happen:   They have already called Trump's bluff on Huawei and Trump & gang responded by threatening them. 

    This is unlikely to end well -- except for Trump.   Trump will be able to use these new wars as a distraction from his upcoming impeachment, play the victim,  and rally his base around him.  Then, he'll retire to his gold plated estate richer than ever.   But the U.S. will be left trying to restore its reputation (again) with the rest of the world.
    Man, you are going to wind up in the loony bin when Trump is reelected to a second term. Get a grip. Impeachment? Go right ahead but remember you need 67 votes in the Senate to convict. There are 47 Democrats so you would need 20 Republicans to defect. That ain’t gonna happen and Pelosi knows it. Sorry but you need to know.
    anantksundarambigtdslostkiwitoysandmewatto_cobra
  • Reply 15 of 64
    gatorguygatorguy Posts: 20,729member
    I wonder what would happen if Google disabled all access to Android in China? Would there be a new revolution and overthrow of their government?
    They can't since they don't control "all access to Android" being that it's open-sourced. When used within China the homegrown companies are using their own forked versions anyway and not official Google Android. 
    JWSCcolor
  • Reply 16 of 64
    gatorguygatorguy Posts: 20,729member
    tmay said:
    tzeshan said:

    BushCheney:   Why should we believe YOU?

    This is western culture. Discredit messengers as argument against truths. 
    N. Korea; execute messengers...
    OMG... saw a list of the recent executions this morning. Everyone from trade reps who didn't succeed, peace negotiators who made the mistake of sounding possible acceptance for any US positions, to a translator who made a mistake. Accompanying Kim on any missions seems somewhat likely to result in a death sentence when they get back home. 
    JWSCbigpics
  • Reply 17 of 64
    tzeshantzeshan Posts: 1,980member
    gatorguy said:
    tmay said:
    tzeshan said:

    BushCheney:   Why should we believe YOU?

    This is western culture. Discredit messengers as argument against truths. 
    N. Korea; execute messengers...
    OMG... saw a list of the recent executions this morning. Everyone from trade reps who didn't succeed, peace negotiators who made the mistake of sounding possible acceptance for any US positions, to a translator who made a mistake. Accompanying Kim on any missions seems somewhat likely to result in a death sentence when they get back home. 
    Fake messenger? Many south Korea news turn out to be untrue. US was led to invade Iraq by an Iraqi minionaire dissident. 
    GeorgeBMacbakedbananas
  • Reply 18 of 64
    avon b7avon b7 Posts: 3,914member
    Perhaps off topic but I just stumbled across this. I never went into the documents of the original case but if this report is factually accurate, it is a real eye opener:

    https://www.counterpunch.org/2019/05/31/chinese-intellectual-property-theft-the-indictment-of-huawei-is-an-embarrassment/
    cincymacFileMakerFeller
  • Reply 19 of 64
    gatorguygatorguy Posts: 20,729member
    tzeshan said:
    gatorguy said:
    tmay said:
    tzeshan said:

    BushCheney:   Why should we believe YOU?

    This is western culture. Discredit messengers as argument against truths. 
    N. Korea; execute messengers...
    OMG... saw a list of the recent executions this morning. Everyone from trade reps who didn't succeed, peace negotiators who made the mistake of sounding possible acceptance for any US positions, to a translator who made a mistake. Accompanying Kim on any missions seems somewhat likely to result in a death sentence when they get back home. 
    Fake messenger? Many south Korea news turn out to be untrue. US was led to invade Iraq by an Iraqi minionaire dissident. 
    Good mention as sometimes these "dead officials" show up breathing a few weeks later. And sometimes never. Just becuase some "source" said it's true does not prove it is. 

    Of some note tho "the state's official Rodong Sinmun newspaper called out unspecified "betrayers" and "turncoats" in an editorial earlier this week. It said that those who "committed anti-party" and "anti-revolutionary actions" would come under the "stern judgement of the revolution".
  • Reply 20 of 64
    gatorguygatorguy Posts: 20,729member
    tzeshan said:
    gatorguy said:
    tmay said:
    tzeshan said:

    BushCheney:   Why should we believe YOU?

    This is western culture. Discredit messengers as argument against truths. 
    N. Korea; execute messengers...
    OMG... saw a list of the recent executions this morning. Everyone from trade reps who didn't succeed, peace negotiators who made the mistake of sounding possible acceptance for any US positions, to a translator who made a mistake. Accompanying Kim on any missions seems somewhat likely to result in a death sentence when they get back home. 
    Fake messenger? Many south Korea news turn out to be untrue. US was led to invade Iraq by an Iraqi minionaire dissident. 
    Good mention as sometimes these "dead officials" show up breathing a few weeks later. And sometimes never. Just because some "source" said it's true does not prove it is. 

    Of some note tho "the state's official Rodong Sinmun newspaper called out unspecified "betrayers" and "turncoats" in an editorial earlier this week. It said that those who "committed anti-party" and "anti-revolutionary actions" would come under the "stern judgement of the revolution".
    edited May 31
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