A lot of media reports have been flying around this past week or two predicting that US tech firms will find life increasingly difficult for them in China following the various revelations leaked by Edward Snowden.
It’s a compelling narrative and on one level makes quite a bit of sense.
If, as the PRISM whistle-blower has claimed, the NSA really is spying on foreign targets including China and Hong Kong and even allies like the EU, then the logical next step would be to assume it could be doing so with the acquiescence of US technology providers who have managed to establish a firm foothold in the country.
After all, wasn’t it US lawmakers who branded Huawei and ZTE a national security threat due to the perceived risk of the firms being forced by Beijing to modify systems to enable state-sponsored eavesdropping?
No wonder then that Chinese state-run media including the English language Global Times have called for US companies including Cisco to be replaced by domestic providers. China Daily even sourced an anonymous “industry insider” who claimed: “There is a terrible security threat in China from US-based technology companies including Cisco, Apple and Microsoft.”
There’s good reason to believe that Cisco et al won’t be overly concerned about such claims, however.
For one thing, although its kit is all over China’s network infrastructure, the market there accounts for less than 5 per cent of turnover.
Huawei is probably Cisco’s biggest Chinese competitor, especially in the telco edge router market, and has certainly been taking market share from the venerable US giant, but a rip-and-replace policy of the sort advocated in the Chinese media is simply not practical.
“I would say a few vendor replacements had considerations beyond the offerings themselves, for example for certain clients with high security sensitivity,” Gartner analyst Tina Tian told me. “But much more of it would be purely a market decision.”
As for the other US technology providers, the likes of Google Android, Microsoft and Apple between them control just about the entire mobile and desktop operating system market in China.
For that reason and the lack of strong domestic alternatives (for the time being) we’re just not going to see wholesale changes here, which could even work in Cisco’s favour, according to Tian.
“Even if China could replace all the networking equipment from foreign vendors, their data would still need to be handled by IBM, Oracle, HP, EMC, Intel and also Microsoft,” she said.