Huawei's conundrum

June 04, 2019 10:25
Chinese tech companies find it hard to develop products outside the structures set by Intel and Windows. Photo: Reuters

When the US-China trade war broke out last year, Liang Ning, a tech veteran from Beijing's Zhongguancun technology hub, wrote an inspiring article about China’s first indigenous microchip and operating system.

Liang had participated in a project to build China's first central processing unit (CPU) called “Fangzhou”. She was also involved in the creation of Yongzhong Office and Linux OS between 2000 and 2002.

Fangzhou 1, China's first 32-bit CPU, was born in 2001. Media reports about it were mostly exultant, describing it as a major breakthrough, for China finally had a homegrown CPU.

The reality, however, is that Intel already holds a wide range of core CPU patents, covering almost the entire x86 series.

The US chip giant has also hired an army of lawyers to deal with any legal dispute.

As a result, the Chinese development team was forced to use the open-source instruction set architecture RISC to circumvent the x86 system and get around the Windows and Intel dominance.

The problem is, Windows and Intel do not only create products; more importantly, they set the industry standards.

The Chinese team talked with the chief engineer of every big company in China to convince them to adopt the homegrown system, but the conversations led nowhere.

These companies refused to use the domestic CPU simply because they don’t have the capacity to develop products based on Intel structures.

Meanwhile, the Linux Office developed by the team is incompatible with Windows’ Word.

Users complained and eventually switched back to Wintel products, or those using Intel microprocessor with Windows operating system.

The situation remains largely unchanged over the past decade.

For the same reason, Chinese telecom giant Huawei is in a difficult position. How could it survive without using Android?

This being the case, investors might want to steer clear of Chinese telecom equipment and smartphone plays for the time being.

However, given the success of e-commerce platforms and products like WeChat and e-wallets, tech firms specializing in applications and targeting mainly the domestic market may continue to do well.

This article appeared in the Hong Kong Economic Journal on May 31

Translation by Julie Zhu

[Chinese version 中文版]

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Columnist at the Hong Kong Economic Journal