17 September 2019
Microsoft says its total revenue in China, with a population of 1.3 billion, is less than what it gets in the Netherlands, a country of fewer than 17 million. Photo: Bloomberg
Microsoft says its total revenue in China, with a population of 1.3 billion, is less than what it gets in the Netherlands, a country of fewer than 17 million. Photo: Bloomberg

China raids Microsoft offices

The Chinese government raided four Microsoft offices located in China on Monday, in what looks like an antitrust probe.

Microsoft, an American multinational corporation best known for its operating systems, office suite and the Internet Explorer web browser, is the world’s largest software maker.

In recent months, the company has been under fire from state media for its perceived role in helping the US government conduct cyberhacking against China. Windows 8, Microsoft’s latest operating system, was banned for use on government computers in May. Microsoft’s OneDrive cloud storage service was disrupted earlier this month.

Agents from China’s State Administration for Industry and Commerce made unannounced visits to Microsoft offices in Beijing, Shanghai, Guangzhou and Chengdu, according to local media reports. SAIC is responsible for handling antimonopoly and unfair competition issues, but also plays roles in consumer protection and trademarks.

The Chinese government agency declined to comment on the visits, said Reuters.

Microsoft said in a statement: “We will actively cooperate with the government department’s investigation and answer related questions.”

Microsoft has long struggled in China, losing money and IP since, well, forever.

Former CEO Steve Ballmer in his address to employees at the company’s then new Beijing offices in 2011 said that Microsoft’s total revenue in China, with a population of 1.3 billion, is less than what it gets in the Netherlands, a country of fewer than 17 million.

Ballmer also said that rampant piracy means revenue in China (in 2011) will only be about 5 percent of what it gets in the US, even though personal-computer sales in the two countries are almost equal, wrote the Wall Street Journal.

Beijing’s increasing use of its six-year-old anti-monopoly law and price competition rules has riled US companies and strained U.S.-China business relations, said Reuters, with the US Chamber of Commerce noting that “concerns among US companies are intensifying”.

The way that China has been applying its new law has drawn criticism from some US officials, said the Washington Post. Last year, Federal Trade Commission commissioner Maureen Ohlhausen gave a speech in Beijing, encouraging antitrust regulators there to provide clear, advance notice to companies under investigation.

Like Apple, Google, Facebook and Yahoo, Microsoft has also been under scrutiny for allegations it helps the US spy and conduct cyber-attacks in China, with state media characterizing the companies as “pawns” of the National Security Agency, a US intelligence service. Xinhua even demanded “severe punishment” against American technology companies that help the US government to steal secrets and monitor China.

NSA leaker Edward Snowden’s revelations about the tech industry’s role in US spying overseas have directly led to lower sales in China for many US tech firms, such as Cisco and IBM, noted the Washington Post.

While I’m not sure it impacted sales, CCTV called Apple’s iPhone a threat to national security earlier this month, saying that the smartphone’s “Frequent Locations” function that can track and time-stamp the user’s location. Separately, the Global Times urged party, government and military officials to stop using Apple cellphones.

Microsoft’s antitrust problems comes days after China’s National Development and Reform Commission, another agency with antimonopoly responsibilities, determined that Qualcomm had used monopoly power in setting its licensing fees on its mobile chips.

Whether or not the charges are accurate, Qualcomm estimates that this year it is not collecting licensing fees on 170 million to 260 million handsets in China, said Forbes. The NDRC is reportedly now calculating a fine, which could amount to up to US$1.2 billion, or 10 percent of the company’s 2013 revenues in China.

Some US tech executives claim privately that the recent moves in China are part of a concerted attempt to favor local technology suppliers at the expense of American companies that dominate large parts of the sector, said the Financial Times.

That makes sense to me.

The writer is a China commentator. He writes on China for Forbes.

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A strategist and marketing consultant on China business