Economic espionage in the electronics industry is really the issue?
The U.S. is once again raising the flag against China for economic espionage in the electronics industry.
Several blips appeared on the radar last week. First, there is the case against six Chinese citizens on a charge by the U.S. Department of Justice that they stole trade secrets from U.S. companies Avago Technologies and Skyworks Solutions. In addition, the U.S. Navy has said it aims to replace IBM servers that are made by China’s Lenovo.
Concerns are growing within the U.S. government that China aims to grab American technology, yet Washington appears at times to be working at cross purposes.
While China assembles a huge portion of the world’s electronic devices, it still must import most of the high-value added components and semiconductors that go into the equipment. The Chinese government aims to help domestic companies get a bigger piece of the chip business.
Yet the global marketplace may become more fragmented due to increased resistance by the U.S. and China to importing electronic systems and components for sensitive applications because of spying concerns on both sides. As a result, the two nations are more inclined to source equipment from local vendors.
These developments seem a bit curious when set against the security issues surrounding IBM’s transfer of PC and server manufacturing to Lenovo going back to 2005.
Add to this the news last week that Hewlett-Packard will combine into a joint venture its China server, networking and storage businesses with that of Hangzhou, China-based H3C Technologies. Tsinghua Holdings subsidiary Unisplendour Corp. will purchase a 51% stake in the joint venture for $2.3 billion.
If the security issues are so serious, it seems odd that IBM and HP would get regulatory approval to proceed with these ownership transfers. China, through its acquisition of the operations of IBM and HP, appears likely to dominate the global server business in the future.
U.S. policy appears at times to favor and disfavor commerce and technology exchanges with China as seen in last year’s ban on Intel’s sales of microprocessors to be used in China’s Tianhe-2, the world’s fastest supercomputer: Yet, U.S.-based Intel appears unconcerned about possible threats from China as it has opened a fab in the northeast coastal city of Dalian.
Both the U.S. and China have reasons to guard against espionage. In the electronics industry, it’s a thorny issue that ranges from semiconductors to systems. However, one guiding principle behind business competition should be to let the invisible hand of an unrestricted marketplace choose the winners and losers.
Just as the trend toward globalization of the electronics industry is likely to continue, it’s foreseeable that economic espionage and intervention by Beijing and Washington will persist.
It’s difficult to say how these issues will be resolved. For their part, neither Avago nor Skyworks posted any information regarding the Department of Justice case on their websites.
Wouldn’t the best policy be to keep politics out of the electronics industry? Or is that expecting too much?
—Alan Patterson covers the semiconductor industry for EE Times. He is based in Taiwan.