Despite shelving WAPI, China stands firm on chip tax

IDG News Service |  Mobile & Wireless

Lenovo Group Ltd., China's largest PC maker and one of the companies granted the rights to license WAPI, had also hedged its bets against the implementation of the Chinese WLAN standard with the development of a prototype laptop, called Vela, that is based on Intel Corp.'s next generation Centrino platform, code named Sonoma.

While publicly supportive of China's plans to implement the Chinese WLAN standard, Lenovo -- formerly known as Legend Group Ltd. -- was quietly prepared to consider production of the Vela prototype if the Chinese government decided to permit the sale of 802.11-based WLAN equipment in China, a company source indicated ahead of Wednesday's trade talks.

The decision to postpone indefinitely the mandatory implementation of WAPI was welcomed by U.S. companies and analysts.

China's decision on WAPI "demonstrates its commitment to leadership in the IT industry," said Chuck Mulloy, a spokesman for Intel, which had announced in March it would not support the technology.

"This is good news for consumers globally, not just in the U.S.," said Chris Kozup, an analyst at Meta Group Inc., in Cambridge, Massachusetts. Having more than one standard would have dampened the effects of economies of scale and slowed price declines for WLAN equipment, he said.

One immediate result of the Chinese announcement to suspend the implementation of WAPI will be increased sales of WLAN equipment in China, said Karl Feilder, the chief executive officer (CEO) of U.K.-based Red-M Communications Ltd., a provider of network intrusion detection systems.

Uncertainty over the implementation of WAPI had led many Chinese users to put off purchases of WLAN equipment, Feilder said, noting that Red-M sales in China had slowed to "a trickle" in recent months. With the implementation of WAPI now suspended, Red-M is already seeing a surge in interest from potential Chinese customers, he said.

However, while the Chinese government will no longer require vendors to support WAPI or ban the import of 802.11-based WLAN equipment after June 1, WAPI is unlikely to go away completely, Feilder said. Red-M has licensed WAPI through a coproduction agreement with a Chinese partner and intends to continue development of WAPI-based products.

Looking ahead, Feilder expects to see demand for WAPI, or derivatives of the technology, emerge in certain vertical markets within China, such as in government. Suspicion of foreign encryption technology will create demand for WAPI or derivatives in areas where security is considered particularly important, he said.

That market, if it does emerge, would be very small compared to the overall market for WLAN equipment, Clark said. He does not see much of a future for WAPI, noting that Chinese end users prefer to purchase products based on international standards whenever possible.

"Bad standards never die, they just fade away," he said.

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