A weekly series by UPI examining emerging wireless telecommunications technologies.
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CHICAGO, May 7 (UPI) -- Mao Tse-Tung tried to remake China with his Cultural Revolution decades ago, but a real revolution is coming to Chinese culture today, thanks to wireless technology.
"The world's largest wireless market is China, not the U.S.A.," said Henry Wong, a senior partner in the Silicon Valley venture capital firm of Crystal Ventures LP. "They are adding 1 million new users a day."
Chinese families are close knit and in many areas, several generations of the clan live together.
"There can be 15 people in one house -- mom, dad, grandma, grandpa, auntie, uncle and the kids," Wong told United Press International. "There's no two car garage. There's not enough space for a home PC. There's no study. So people don't want to hang out at home. Wireless subscribers will spend the better part of their income to have wireless access, and be out and about. You would never see something comparable to that in the United States."
Wireless telecommunications in China already is bigger than U.S. and Canadian markets combined and, with $47 billion a year in new technology investment in China, growth is expected to be phenomenal, experts told UPI.
Wireless telephony and wireless fidelity both are surging as the Chinese attempt to create their own version of WiFi -- by government fiat. The proposed technology was called the Wireless Authentication and Privacy Standard, or WAPI.
Chinese technologists -- the country has a burgeoning class of new doctorate holders in the sciences, outpacing the growth of scientists in the United States -- were concerned, they stated publicly, about the security flaws inherent in WiFi.
"China believed that they could set their own standard for WiFi," said Greg Franceschi, managing director of Standard & Poor's technology practice consulting group in Palo Alto, Calif. "And, de facto, for all of the Asia-Pacific region."
Privately, many American technology developers have thought the proposed Chinese WiFi standard was a form of protectionism -- trying to keep some U.S. and European companies out of the new market.
"Take a look at history," Wong said. "From Brazil to Japan, emerging economies like to put up barriers to entry. The governor's son in some province has a proprietary technology and they wanted to collect money on that standard."
Some smaller technology companies, such as Netgear Inc. in Santa Clara, Calif., were ready to beat the deadline and ship a WAPI-compliant wireless product to China, impress the government and land new, major clients there.
"We put some R&D effort in to that," Patrick Lo, Netgear's chairman and chief executive officer, told UPI.
Larger companies, such as Intel and Broadcomm, have refused to budge, arguing in the long-term, the balkanization of WiFi standards could stall growth of the technology.
"The last thing in the world they want to do is have a U.S.-based WiFi and an Asia-Pacific WiFi," Franceschi told UPI. "Look at the benefit that cellular companies have already gained by moving toward a global, wireless platform."
So executives worked their personal networks while the U.S. State Department and diplomats from the European Union attempted to apply pressure on the Chinese government.
"With the deadline approaching, it has become urgent for Intel, Nokia, and Motorola," Tom Manning, a partner at Bain & Company Inc. of Palo Alto, told UPI. "They raised the issue of whether it was possible to comply with the proposed standard in such a short time."
Subtle hints the distribution channels in the United States and Europe would not be receptive to growing export products -- such as Chinese PCs -- also were dropped, Wong said.
That caused the plan, in the works for more than a year, to be withdrawn a few weeks ago, as the June deadline for implementing the new rules was approaching.
China has now agreed to work through international technology standards-setting organizations, such as the International Standards Organization, to implement its suggested standard in the future.
The fascinating thing about this behind-the-scenes technology trade war is it mostly has been about ideas for the future of WiFi, not over a single product, experts said.
U.S. and European companies have learned a lesson from the imbroglio.
"The message to foreign companies from China is 'elevate your game as soon as possible,'" said Manning. "The Chinese technology apparatus is coming of age and establishing itself as a player on the global stage."
Though not well-known to the public -- or even many business and technology elites -- the majority of manufacturing of WiFi equipment already takes place in low-cost factories in China, operated by Taiwanese companies, said Paul Callahan, founder of Propagate Networks, a WiFi technology developer in Acton, Mass.
"Eighty percent of the products we work with come out of Taiwan and China," Callahan told UPI.
The factories are located in greater Beijing and suburban Shanghai.
"The intellectual property starts here in the United States, goes to Taiwan, is embedded into designs, and gets manufactured in China," he said.
Last year, China was a $24 million market for WiFi, Franceschi said. Worldwide last year, the WiFi market was about $600 million. It is projected to grow to $1 billion by 2007.
In the future, some WiFi applications development may be outsourced to Chinese specialists, due to the growing talent pool of science graduates there, willing to work very cheaply.
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Gene Koprowski covers telecommunications for UPI Science News. E-mail [email protected]
