IBM, China, and technology

A US group has published a report claiming IBM has sold sensitive technology to China. Like many western companies, IBM has been motivated by a desire to gain wider access to the growing market in China.

The analysis by Defense Group Inc. says:

Over the past two years, IBM has engaged in a series of transactions with Chinese companies (including those with deep ties to the Chinese government and military) to support domestic Chinese development of high performance computing components, among other technologies. Now that Chinese companies
have the blueprints to various IBM technologies, IBM is working with Chinese firms to implement and commercialize solutions, enabling them to build upon and develop new products that close the technological gap with the United States.
By providing the Chinese with the means to perfect and innovate these sensitive, high-level technologies that enhance Chinese military capabilities and monitor Chinese citizens, IBM is endangering the national and economic security of the United States, risking the cybersecurity of their customers globally, and
undermining decades of U.S. non-proliferation policies regarding high-performance computing.

China cyberespionage charges: more chilling effects

A story from China Daily details Lenovo’s worries that the Committee on Foreign Investment in the US is going to block its proposed $2.3 billion buyout of IBM’s x86 server unit. This is driven by the recent frostiness in the US-China relationship resulting from the US indictments of the five PLA hackers.

Senior vice-president Chen Xudong believes “worsening Sino-US cybersecurity trust issues may derail the deal with IBM,” according to China Daily.

“It is not inconceivable that someone could use (national security concerns) to make a fuss about the deal,” Chen said.

As Mike Wheatley at US-based SiliconANGLE writes “extra-close scrutiny of this deal was always on the cards.”

“That’s because several US government agencies, including the FBI and the Department of Defense, use IBM’s x86 servers. Telecommunications firms like AT&T and Verizon are also big customers, reports Bloomberg.”

The kind of distrust stemming from the hacking issue may indeed prevent this kind of deal going through. Over time tech businesses won’t expect to be to sell their businesses so easily to China. So over time a natural barrier emerges. At the same time, more effective defense of US commercial trade data, though better corporate-government coordination, will begin to alter the playing field with China. Clearly, China is off and running with its own technology – but if the global industry is essentially split into, expect an element of national competition to creep into the business.

For historical perspective, recall that Lenovo itself is the home of what used to be IBM’s laptop business.