China’s software revolution – fact or fiction?
Posted: December 10, 2012 Filed under: Uncategorized | Tags: china, china daily, exports, imports, software, trade deficit, trade surplus, US china relations Leave a comment
I’m not one to believe everything I read in the papers, especially if that paper happens to be one of China’s state run media outlets, but an interesting stat caught my eye in a recent article in China Daily.
The piece detailed how China – infamously a country which has a huge trade imbalance with the rest of the world, flogging it cheap exports – is actually importing more technology products than it exports.
The tech trade deficit apparently stands at $10bn – imports at $32bn and exports $21bn – which is a far cry from its huge overall trade surplus with the US which stood at around $300bn in 2011.
It is an interesting one because with China becoming an increasingly affluent and sizeable market in its own right it’s likely that more and more goods made in the country will not be exported but sold to its own consumers, so it’s hard to see how the government is going to be able to close this gap.
That aside though, the article pointed out that 89 per cent of China’s exports were in the sphere of “computer software”.
Really? The country famous for being the technology manufacturing centre of the world? Where the huge Taiwanese ODM/OEMs have plants the size of small towns, building everything from iPhones to children’s toys?
Yes, China has its successful web companies like Baidu, Tencent and Alibaba, but could its computer software industry really be that successful on the world stage?
Well, no is the short answer.
Gartner’s Matthew Cheung explained to me the likely reason for the unusually high figure is that they have counted revenue from a certain type of outsourced service in that figure.
Companies such as HiSoft, Beyondsoft and VanceInfo offer a raft of services to big name foreign companies looking to localise their own software products in China.
These services, Cheung said, have effectively been calculated as exports, as they are carried out on behalf of foreign companies, even though, aside from some work for the Japanese and Korean market, they are basically China-centric.
I have to say it’s a market I never knew existed but will be an interesting one to follow, because while China may not be the software centre of the world yet, it’s certainly an area where it could end up dominating if it decides to devote the full weight of its resources.
These companies are by no means minor players; some are NASDAQ listed, $10-$100m businesses and they’re already acquiring foreign rivals, said Cheung.
This could yet be the first stirrings of a Chinese software revolution to match that which propelled the country to become the pre-eminent tech manufacturing hub.
Bruce Schneier: the internet is not doomed, but it is fragmenting
Posted: November 21, 2012 Filed under: Uncategorized | Tags: balkanisation, bruce schneier, BT, censorship, chief security technology officer, china, cryptography, great firewall, infosecurity, music industry, piracy Leave a comment
I had the pleasure of en evening with Bruce Schneier last night. Let me re-phrase that: I attended a BT event yesterday entitled “A Private Dinner with Bruce Schneier”.
Schneier, if you haven’t come across him, is BT’s chief security technology officer, author, cryptographer extraordinaire and philosopher-cum-infosecurity out-of-the-box-thinker.
Basically, what he says in info-security circles is usually listened to, although his propensity to tackle the subject more from a socio- or even biological perspective than a mere discussion of bits and bytes can make quotable extracts from a conversation with him pretty thin on the ground.
That said, Schneier was on form last night, focusing on the topic of trust and the notion that all systems, be they sociological, biological and so on, need co-operation to work. These systems also feature, inevitably, ‘defectors’, who don’t obey the rules and require security to keep their activities to manageable levels.
All fine and dandy, but what about the future? Does Schneier think we’re all doomed?
Well he certainly believes that the gap between the bad guys profiting from new technologies and the good guys catching up is greater than at any point in the past thanks to the sheer volume of new tech and the huge social change it is spurring, which is somewhat worrying.
However, there is hope that all is not lost. For one, he declared the bad stuff that happens online still a “tiny percentage” of the whole.
“I’m a short term pessimist but a long-term optimist,” he added.
As the older generation dies out things will gradually change too, he explained, as new norms around things like privacy come into play, and even the music industry is eventually be forced to change.
“The internet is the greatest generational gap since rock n roll,” he declared.
“People stealing music now are doing what will be normal in ten years’ time, they just figured it out first. The business model of scarcity doesn’t work.”
In less reassuring news, he argued that the balkanisation of the internet is likely to continue as national governments seek to establish their own controls – particularly appropriate given we were sitting in the Conrad Hong Kong, just a few miles from mainland China and the Great Firewall.
“It turns out the internet does have boundaries,” Schneier concluded. “Governments are enforcing their rules more and more and it makes for a less stable internet but it is the geopolitical future.”
Chinese OEMs still not auditing for labour rights abuses
Posted: November 9, 2012 Filed under: Uncategorized | Tags: apple, china, china labor watch, factory, foxconn, HEG electronics, IHS iSuppli, iPhone 5, labour abuses, labour right, ODM, OEM, samsung, technology, Vtech Leave a comment
China watchers will be well aware of the story by now. Most of the shiny tech kit we buy in the western world is produced in conditions ranging from ‘challenging’ to downright miserable. Apple provider Foxconn is often highlighted as a prime offender but the depressing truth is that it is one of the better employers. As long as labour rights abuses continue, though, they should continue to be reported.
The below is a piece I wrote up from my chat with IHS analyst Tom Dinges:
Half of China-based OEMs still don’t require third party audits of their manufacturing providers despite many high profile cases emerging this year involving serious breaches of labour laws and widespread strikes, according to market watcher IHS iSuppli.
The supply chain analyst revealed the news as part of a wider survey of the global technology industry.
Over the past year incidents at factories belonging to Apple supplier Foxconn, as well as plants run by contract manufacturer VTech and Samsung provider HEG Electronics, among others, have highlighted the poor level of compliance with local laws at many plants.
Although China has strict labour laws which prevent children under the age of 16 working, keep working hours and overtime to manageable levels and prohibit discrimination, they are poorly enforced.
Not-for-profit groups including China Labour Watch and Hong Kong-based SACOM have time and again uncovered incidents alleging such rules have been broken, with reports claiming physical violence, bullying and filthy living conditions are the norm in many factories.
Staff dissatisfaction comes to a boil periodically in the form of strikes or bouts of violence. In October it was claimed that thousands staged a walk out at Foxconn’s Zhengzhou factory where the iPhone 5 was being made, while a month earlier, scores of workers were hospitalised after a mass brawl at a managed dorm near Foxconn’s Taiyuan plant.
“There are aspects of the labour laws many firms turn a blind eye to for the sake of satisfying their customers and getting products out of the door,” IHS analyst Tom Dinges told me.
“Considering how much of the supply chain is embedded in China it’s too costly to move to another region so the issue is ‘what do we do to ensure our suppliers adhere to the local labour laws they’re supposed to?’.”
Dinges added that the ‘headline risk’ of bad publicity, especially as it filters down to middle America through regional media outlets, should be forcing change on this front.
Foxconn is one notable supplier which seems to be taking a lead on this, having agreed with Apple to on-going audits by the Fair Labor Association, although worrying cases of rights abuses continue to emerge at some of its plants.
China Labor Watch also claimed at a Congressional hearing in the summer that the audit process is flawed in many cases, with widespread bribery and collusion on the part of suppliers and auditing companies.
Dinges said that as the industry matures this situation should improve, with auditors taking their cue from financial investigators.
“These organisations will have to meet a certain expected level of authenticity, vigour and independence,” he added.
“We’re past the stage of hyper growth. Now a lot of what is produced there ends up staying in China. If that’s the case then the factory employee is also a customer and you want to be sure to treat your customers well.”
Chinese firm builds prototype Android e-ink smartphone
Posted: October 26, 2012 Filed under: Uncategorized | Tags: android, china, developer, display, e-ink, LCD, onyx international, smartphone Leave a commentHave been doing a bit of digging on an interesting new handset from Chinese e-reader firm Onyx International – what could be the world’s first Android-based smartphone with an e-ink display.
Frustratingly the only source we have for this is a brief demo of the prototype device on geek site armdevices.net.
What we can see, however, is it’s a pretty fully functioning smartphone, albeit running a slightly old version of Android, with web and email capabilities, a capacitive touchscreen and ARM Cortex-A5 processor.
The benefit of e-ink of course is that the screen is not made of glass and so is thinner and lighter, and not prone to cracking. It also makes the phone really easy to see in direct sunlight – something LCD displays singularly fail to do, especially under the glare of the summer Hong Kong sun.
It also slurps less battery, and so could apparently last on a single charge for around a week, and the lack of a glass display means it can really lighten the whole device – this one is said to be under 100g.
On the minus side, e-ink currently only really works in greyscale and screen refreshes take a lot longer than LCD displays – video is impossible and even basic tasks can take an age compared to what impatient smartphone fans are used to.
So what’s the ideal use case for this kind of smartphone? Well, the elderly perhaps, or emerging markets.
The problem E-ink, and indeed Onyx will have will be the budget Android smartphones from the likes of ZTE, Lenovo and others and indeed scores of lesser-known Chinese handset makers.
These vendors are increasingly targeting that sub-1000 yuan end of the market with LCD display devices which may be unreadable in direct light, but are a hell of a lot more responsive and, unlike e-ink, are the type of device Android is actually designed to work with.
One potential solution would be in re-architecting Android to largely deal with e-ink’s limitations – ie on-screen refreshes – but there is still the colour problem.
I’ve been so far frustrated in my attempts to find out exactly what kind of developer magic this would entail – and if it’s even feasible at all – but will update if I hear back.
My hunch is that it’s still at a very nascent stage development-wise and there’s only a limited amount of people working on it. For now at least, the best chance for e-ink to get onto a smartphone is for secondary displays on the rear of devices.
The Communist Party’s everywhere in China, even in foreign multinationals
Posted: October 12, 2012 Filed under: Uncategorized | Tags: china, communist party, Congress, house of representatives, huawe, ibm, intelligence committee, nokia siemens networks, standard chartered, zte 2 Comments
Today an interesting tale of ideology, back door deal making and hypocrisy as the worlds of government and hi-technology collide.
You’ve presumably all been made aware by now of the US lawmakers’ report into Huawei and ZTE which basically warns off all American firms and government bodies from purchasing their telecoms kit because of the national security risk they pose.
The key point is that the Chinese tech giants were unable to allay investigators’ concerns about the role of Communist Party committees within their firms.
The report has the following:
In essence, these Committees provide a shadow source of power and influence directing, even in subtle ways, the direction and movement of economic resources in China.
It is therefore suspicious that Huawei refuses to discuss or describe that Party Committee’s membership. Huawei similarly refuses to explain what decisions of the company are reviewed by the Party Committee, and how individuals are chosen to serve on the Party Committee.
All of which is fair enough, although virtually all Chinese companies are required to have a Communist Party committee on board, as Huawei argued to the lawmakers.
However, it has been mentioned since then that may foreign companies, including US ones, with outposts in China also have these committees. If true, it would seem to add weight to Huawei’s argument that the report reached a “pre-determined outcome”, and that its authors were unfairly harsh on the Chinese duo, even hypocritical given Party involvement in US firms in China.
Tea Leaf Nation, for example, pointed to articles claiming IBM, Nokia Siemens Networks, Standard Chartered and others all had communist bodies within them.
Now, I’ve heard back from NSN and IBM who both claimed their Chinese businesses don’t have Communist Party committees but that individual members of staff are free to join the Party if they wish.
However, I’ve yet to hear back from IBM on what this picture and article refers to, as it seems to indicate a party branch of IBM China members.
Most likely at play here is semantics. These firms are denying having an organised party committee within their organisation, but it seems (at least in IBM’s case) they do have self-organised groups of Party members therein.
Whether this amounts to the same thing is difficult to tell, because if it’s one thing the Party is pretty good at it’s secrecy.
It has become adept over the past several decades at hiding the orchestrating role it plays at all levels of Chinese society – a role so key that it is pretty obvious if a large MNC wants doors to open for it then it needs to acknowledge and engage with the Party.
Meet Huawei, the not so hidden dragon
Posted: September 22, 2012 Filed under: Uncategorized | Tags: BT, china, Congress, cyber espionage, huawei, shenzhen, smartphones, spying, telecoms, US Leave a comment
I’ve just spent a fascinating two days with Huawei in Shenzhen. If you haven’t heard of the firm you will soon – it’s the world’s number two manufacturer of telecoms kit, powering all the UK mobile operators and BT, Talk Talk and Virgin Media’s fixed line operations.
It’s also number six in the mobile devices market globally, with its eyes on a higher position, and has entered the enterprise IT space where it sees big growth potential.
The trip was a chance to see and be impressed by Huawei HQ, a sprawling campus in a suburb of Shenzhen in the south of China next door to Hong Kong, rather than have an opportunity to quiz senior execs on the firm’s roadmap.
The firm has been spending rather a lot of money to show rather a lot of journalists the same thing – well, it can afford to, having made around $32bn last year.
The reason is that despite its best efforts it’s still not winning a huge amount of enterprise custom, its devices don’t have great brand recognition and, most irritatingly for the firm, it’s the subject of a high profile US Congressional investigation into links with the Chinese government.
The US has regarded Huawei with great suspicion and reckons it may have links to the PLA and the Communist Party (via its founder Ren Zhengfei) which make the firm’s products a potential risk to national security.
Needless to say, Huawei’s PR team were more keen to focus on the less contentious part of its story. And it is a very impressive story. Ren apparently founded the firm with a few thousand pounds and today, 25 years later, it has 140,000 employees, makes billions, operates in 150 countries and the average age of employees is just 29.
Yup, not really the impression many might have of the company. Due to its unique corporate structure which makes it wholly employee-owned, staff can retire at 45 if they’ve spent more than eight years with the firm with their share dividends providing a handsome retirement fund.
The analysts are in agreement that it has great technology, bags of patents and huge potential, so is the US just being protectionist?
Well, yes and no. Huawei may open up some of the source code of its products for investigators to scrutinise but apparently the big sticking point is info on how the firm is run, and past a certain point Huawei will not divulge that, so it may be deadlock for some time yet.
Ren is still a member of the Communist Party and for anyone who’s read the book The Party by Richard McGregor, this will be a cause of concern to some foreign governments – although it must be said not to the UK, which has welcomed the firm’s investment with open arms.
Now, I’m not saying I fully agree with all of the book but McGregor speaks very convincingly of the Party as acting “like a large magnet that makes iron filings suddenly cling together as it moves into position above them”, making them “stand to attention when it focuses its attention on them”.
In the end, both the West and Huawei are learning to cope with one another. We’re just starting to understand the firm a bit better and it is beginning to understand the greater level of media scrutiny, demands for more transparency and need for a more media friendly executive board – all of which are pretty alien to Chinese companies.
Intel marching on in China
Posted: August 31, 2012 Filed under: Uncategorized | Tags: china, chips, cloud computing, datacentre, emc, great firewall, intel, internet, networks Leave a comment
Was in Bangkok with Intel this week to get an update on the firm’s cloud and datacentre plans – well, the two are inextricably linked I suppose.
No news as such but key themes from that part of the business included Big Data; stellar growth in China thanks to the datacentre needs of the large internet firms over there like Tencent and Alibaba; and continued security risks as pointed out by a McAfee representative.
Jason Fedder, Intel’s Asia Pacific datacentre group GM, agreed with the view of EMC and others that China is where some of the most exciting cloud projects are taking place today thanks in part to the lack of legacy infrastructure in organisations there.
But he went further to say that the PRC is really turning itself from being a technology follower to innovator – pointing to Tencent and Alibaba’s efforts to craft their own compute standards under the Project Scorpio banner, and of the state-run telcos ripping out their IBM boxes to replace them with spanking new Xeon kit.
Intel’s been in China for some time and is about as well-supported over there as any foreign company can be given the sometimes harsh business climate afforded non-local companies.
As an example of its growing influence in the country, Fedder explained how Intel is trying to broker a deal to ensure the closed Chinese crypto-standard Trusted Cryptography Module (TCM) is made interoperable with the Trusted Platform Module (TPM) hardware authentication standard its TXT technology is built on.
However, there are some aspects of doing business in China which even Intel can’t get around fully, as IT manager Liam Keating told me. The network infrastructure is still pretty bad outside the Tier 1 and 2 cities in the PRC, a fact made worse by the Great Firewall and meaning challenges in the firm’s smaller field offices and complaints from staff, he said.
To get around this Keating and his team have been forced to look at other ways to improve traffic flow, such as “in-country cacheing” using outsourced cacheing providers, and by modifying app design to reduce the amount of dynamic content.
It’s reassuring to know that even Intel has the same problems experienced by many when it comes to China’s infernal internet infrastructure.
Samsung latest to be hit by supplier labour abuse scandal
Posted: August 8, 2012 Filed under: Uncategorized | Tags: apple, china, china labor watch, foxconn, HEG electronics, labour abuses, labour rights, samsung, smartphones, supply chain, Vtech 1 Comment
Another week, another woeful tale of big tech brands taking advantage of weakly enforced labour laws and immoral supply chain manufacturers.
This time it was Samsung that had its supplier factories investigated, and what was revealed, as always, was not pretty.
HEG Electronics’ plant in Guangdong – which apparently makes phones, MP3 players and other electrical kit for the Korean giant – was infiltrated by spies from not-for-profit China Labor Watch, yup, the same group that warned of severe irregularities in the auditing system of the tech supply chain.
The same old problems came to light as at Foxconn and VTech, of low pay, staff bullying and physical abuse, dangerous working conditions and forced and excessive overtime.
However, HEG was also accused of employing kids as young as 14 year’s old – illegal even in China –and paying them, and the huge intake of student interns it uses to man its factory, just 70 per cent of their rightful salary.
To its credit, Samsung did respond with a little more than we got from VTech and its customers:
Samsung Electronics has conducted two separate on-site inspections on HEG’s working conditions this year but found no irregularities on those occasions.
Given the report, we will conduct another field survey at the earliest possible time to ensure our previous inspections have been based on full information and to take appropriate measures to correct any problems that may surface.
Samsung Electronics is a company held to the highest standards of working conditions and we try to maintain that at our facilities and the facilities of partner companies around the world.
The issue here again goes back to the validity of the inspections. Unless they are independent – conducted for example by not-for-profits like China Labor Watch – and unannounced then they are virtually useless.
Samsung, if you remember, was highlighted as a client of Intertek, the professional auditing company that has in the past been found guilty of accepting bribes from clients in return for passing a clean bill of health.
There’s no suggestion that happened at its HEG audits, but it’s clear that the audit card should no longer be accepted as a reasonable explanation of such irregularities.
More trouble at’ mill (or Chinese sweatshop)
Posted: August 2, 2012 Filed under: Uncategorized | Tags: apple, audit, china, china labor watch, Dell, HP, intertek, ngo, samsung, sweatshop, Vtech Leave a comment
More news on the continuing plight of Chinese workers in tech manufacturing plants, and the apparent blind eye the major multinationals are paying to their condition, emerged this week.
Li Qiang, founder of NGO China Labor Watch, claimed to the Congressional-Executive Commission on China on Tuesday that the audits which most MNCs commission aren’t worth the paper they’re written on.
He pointed to widespread bribery of auditing firms by the big name companies – basically, they bung a few thousand dollars and the auditors agree not to expose any problems in the factories which might require lots of money to fix.
Although Li didn’t accuse any outright of corruption, Dell, HP, Samsung and Apple were all said to have “severely flawed” auditing systems. He also exposed auditing firm Intertek as having been caugt in the past for accepting bribes.
Said firm has Samsung and Siemens as clients and a lot more tech companies besides.
Now the CECC is most definitely sympathetic to the aims of Li and his counterparts in other NGOs, and one can’t help thinking the reason they’re so keen to expose malpractice in China isn’t to get the workers a better deal but to force such a public outcry that US firms decide to bring jobs back to their homeland.
In fact, it was certainly mentioned several times at the hearing that US workers couldn’t hope to compete against factories where staff are paid a pittance and over-worked to the point of exhauston.
Whatever the motives, though, this needs stuff exposing – factory audits are commonly used by tech companies whose plants are found wanting, as a handy cure-all to keep the media and customers happy.
If they fail, there is literally no point – but we kind of knew that anyway. The only way to change things long term is consumer pressure on companies to improve working conditions followed up by independent and random inspections from NGOs.
Needless to say none of the tech companies above have come back to me.
The lack of response is not just typical of local PR failure – I’ll bite my tongue on that one for the time being – but endemic of the lack of transparency at these big tech brands. If they’re really confident in the conditions at the factories – dismiss such accusations out of hand, invite random inspections etc
Hopefully, as consumers and politicians get more savvy to what’s going on and start to ask more searching questions, these multi-nationals will find it harder to fob them off with the old audit card.
There’s a long way to go yet.
(More entries on this subject can be found here, here and here.)
phil muncaster 