China's software filter bites PC majors

Large Western computer makers face a dilemma similar to that faced by Internet giants Google and Yahoo in recent years when each bowed to pressure from Chinese authorities in matters involving Internet privacy.

The latest row began this week when Beijing decreed all PC makers must install software that filters Internet content from July 1. “These rules will not be good for Western brands like HP and Dell, as they’ll possibly have to face lots of criticism back home,” said Vincent Chen, an analyst. “The real action is to see what brands like Acer and Lenovo do now, as sentiment favours them. But for HP and Dell, it’s best they lay low for a while and hope everything blows over soon.”

Billions of dollars at risk

If the PC makers abide by the order, which some worry is a form of censorship, they risk the same negative backlash that Yahoo and Google faced in their core US and EU markets. But they also could put at risk billions of dollars in sales and their huge investments in China, the world’s No 2 PC market, if they refuse to toe the line, giving ground to homegrown brands such as Lenovo and Founder. In a nod to the situation’s sensitivity, HP would not say whether it plans to follow the Chinese order. HP and Dell are now the second- and third-largest PC brands in China, respectively, according to research firm IDC.Any stumble could play into the hands of Asian brands such as Toshiba and Acer, which could step in and pick up some of the slack, as they are less likely to face such a heavy backlash.

A more likely course, analysts say, is that PC vendors could band together to form a united front to enter into negotiations with the Chinese government to possibly soften the rules or do away with them altogether.

This approach would be similar to a move by Intel in 2004, when it refused to support a home-grown wireless standard that Beijing was forcing all companies to use in China over the globally accepted Wi-Fi one. China later backed off, one of the few instances it did so in response to external pressure.