China won't back down on a plan to force computer makers to adopt a new standard for encrypting wireless communications after Intel Corp said it will halt sales of its Centrino chip package in the nation.
Intel, the world's biggest chipmaker, will stop sales of the wireless communication device after balking at government demands for alterations before June 1. A quarter of all laptops sold in China last year used the chip, including those made by Legend Group Ltd, the country's largest personal computer maker.
"The government's position is unequivocal," said Wang Xilin, deputy director of the Standardization Administration of China, a unit of China's Cabinet, in a phone interview from Beijing. "June 1 is the deadline. That's not going to change."
Intel spent US$300 million promoting its Centrino chip package last year as the company tried to tap demand for laptops. The US government last week wrote a letter of complaint arguing China's December ruling is an unfair barrier to sales in the world's second-biggest personal computer.
Intel has been unable to produce a technical solution that uses the Chinese standards and works as well as the existing product, said Chuck Mulloy, a spokesman for the Santa Clara, California-based company.
Under the rule, overseas makers of computers and chips trying to sell devices in China that allow wireless communication must use a Chinese encryption software and make the products with designated mainland companies.
"There is a likelihood consumers will delay laptop computer purchases in China because top-of-the-line technology may not be available for a while," said Kitty Fok, a Hong Kong-based analyst at market researcher IDC.
In China, notebook computer sales will rise by half to 2.6 million units, or by 40 percent to US$3.5 billion this year, according to IDC. About 26 percent of all laptop computers sold in the country last year used the Centrino chip, IDC's Fok said.
Texas Instruments Inc, the largest maker of chips for cell phones, is also making chips that don't conform to the new Chinese standard and wants the rules changed, said Sharon Hampton, a spokeswoman for the Dallas, Texas-based company. The rule also affects imports of other devices including mobile phones personal digital assistants, scanners and network cards.
China is developing its own standards for video compression, digital television signals, and high-speed mobile-phone networks, as the government seeks to encourage domestic manufacturers to expand.
Consumers and businesses are choosing laptops over desktop PCs, and demand for notebooks with so-called wireless-fidelity, or Wi-Fi, Internet access is rising. Laptop sales will grow 25 percent this year compared with an estimated 6.5 percent growth in desktops, according to a January forecast by UBS.
Intel doesn't detail sales to China. The Asia-Pacific region accounted for 40 percent of the chipmaker's fourth-quarter revenue.
Intel will still be able to sell the main processor in the package, the Pentium M, Mulloy said. Intel is continuing talks with the Chinese authorities, he said.
"Intel will probably try to push harder for sale of Pentium M in China," Fok said.
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