China orders state offices to replace foreign computers, software: report

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Beijing has ordered the offices for all government agencies and public institutions to remove foreign computer equipment and software from their offices within three years, the Financial Times reported.

Why it matters: The government directive, which comes as Washington attempts to limit the use of Chinese technology and is cracking down on some of China’s biggest tech companies including telecommunications equipment maker Huawei and artificial intelligence firm SenseTime, is likely to be a blow to US tech firms such as HP, Dell, and Microsoft.

  • The move is a part of broader efforts from Beijing to push for reliance on homegrown technologies and mobilize public and private sectors to support domestic tech companies.
  • The US has also been trying to exclude Chinese players, including Huawei and its rival ZTE, from the country’s telecommunications market citing national security risks.

Details: It is estimated that 20 million to 30 million pieces of foreign-made hardware will need to be replaced, and that the process will begin next year, said the Financial Times report, citing unnamed analysts at state-backed broker China Securities.

  • The analysts said that around 30% of the hardware will be substituted with Chinese-made products in 2020, 50% in 2021, and 20% the year after.
  • The order came from the ruling Chinese Communist Party’s Central Office earlier this year, said the analysts.
  • Analysts are also skeptical about whether China can find appropriate alternatives to software and operating systems such as Microsoft’s Windows and Apple’s macOS.
  • China’s homegrown desktop operating systems, such as the Kylin OS, has a limited ecosystem of developers producing compatible software, said the report.
  • It is also challenging to define “domestically made” hardware and software, the report said, citing as an example products made by Chinese-owned personal computer manufacturer Lenovo, which use processor chips by Intel and hard drives made by South Korea’s Samsung.

Context: Smartphone and laptop maker Huawei announced its in-house operating system, the HarmonyOS, in August in August as a response to the US government’s blacklisting of the company.

  • The company hasn’t decided to run the system on its handsets because of the lack of a mobile application ecosystem.