China Slams Nokia for Standards Based “Pride and Prejudice”

I'm hardly a veteran "China Watcher" in the State Department sense of these words, but I have had a Google alert in place for three or four years to snag standards-related news emerging from this most powerful of emerging economies.  This has led me to read a great many articles from the Xinhua state news service over that period of time.  I've also read the English version of the Peoples Daily in paper form from front to back during five visits to speak at conferences in Beijing.  As a result, I've had a fair opportunity to get a feel for how the state press likes to present its news to the West, and how it makes its points, not only generally, but over the course of ongoing stories as they develop.  Every now and then I see an article that really wants to make a point, and today was one of those days.

Consistent with the new international image that China has cultivated over the last decade, these English text news stories have consciously avoided the kind of militant “capitalist running dogs” type prose that typified Chinese messaging during its Maoist past.  Instead, a gentler, less obvious approach is taken that is selective in deciding what stories to translate into English, but then often simply tells the news.  Indeed, any issue of the Peoples Daily takes care to include articles that are self-critical of a variety of domestic events in order to present a balanced overall impression.  Balanced or not, the Peoples Daily remains the only English-language newspaper permitted to be sold in China, except for the International Herald Tribune in a small number of international hotels.

Once used to reading this style of writing, it becomes more obvious when a specific message is embedded in a story, and very clear when a strong message is being delivered.  Often, the message will be delivered by means of quotes, with the persons quoted being of particular significance.  Sometimes the individuals are named, but in others, they appear to be non-existent, categorical proxies standing in for real people.

Only rarely have I read articles where the tone control has been set above “mildly critical.”  But today I read an article that was clearly intended to hit a major vendor squarely between the eyes with a message that couldn’t be missed, nor (presumably) safely ignored.  That vendor is global handset vendor Nokia, and the conduct at issue is Nokia’s apparent failure to support China’s homegrown 3G standard to the satisfaction of the state that controls the technology licensing of the largest single market for mobile devices on earth.

The factual flashpoint for the article is the recent filing for bankruptcy by a Chinese company called Kaiming Communication Co., Ltd., and the pointed title of the article is Nokia to Regret Ignoring China’s 3G Standard.  I guess you can’t get much more blunt than that in a “news” story.

According to the article, Kaiming is the first company fabbing chips intended to implement China’s home-grown TD-SCDMA 3G standard.  The Peoples Daily concludes that “Kaiming’s bankruptcy  will negatively impact the 3G industry’s future development.”   The article goes on to state that Nokia and Texas Instruments are the “chief stockholders” of Kaiming, and refers to their apparent failure to continue to economically support the Chinese chip developer as an “attack on Kaiming” (interestingly, Texas Instruments escapes any further mention).  The article continues in part as follows:

Professional experts point out that Nokia’s behavior reflects the company’s indifference toward China’s development of the 3G standard.  Employers in Kaiming point out that Nokia should be responsible for Kaiming as Nokia’s only TD research company. However, Nokia’s attitude not only dissatisfies Kaiming’s employers but also bitterly disappoints 3G industry-circles, as well as billions of Chinese consumers who are looking forward to the 3G standard.

Nokia’s indifference to China’s 3G standard is long standing. Last year, when China’s 3G standard was put on the agenda, both Chinese mobile phone companies and some foreign companies, such as Samsung, all expressed supportive attitudes. Nokia looked on as a bystander. At that time, Nokia’s indifferent attitude perturbed the Chinese people and aroused criticism. At the beginning of this year, Nokia refused to use chips produced by Kaiming. Currently, as companies are demonstrating their new line of 3G mobile phones, Nokia, as the leading mobile phone company, surprisingly has not made a similar move.

These are very strong words, compared to any past article that I have read, both substantively as well as sytlistically (e.g., stating that Nokia’s actions are offending “the Chinese people,” rather than simply being of commercial significance).

If accurate, this is bad news for the Chinese standard, which has already experienced a long and bumpy road, with less than satisfactory trials to date (the article delicately acknowledges that, “3G mobile phones have yet to be perfected”).  Moreover, there are several  foreign standards with which the China standard must compete, and those standards are supported by powerful vendors.

To date, my reading of the, well, tea leaves, in this long-running saga has been that the strategy of both China and these vendors has been to meet in the middle, with China granting licenses to some regions that would adopt the Chinese standard, and other licenses that would support the competing standards.  Due to the size of the market, the vendors would then find it worthwhile as necessary to develop and sell “multi-mode” handsets that would implement each of the standards, even if the Chinese standard is not as technically successful as the foreign competitors.  Apparently, China now feels that Nokia is no longer reading from the same script.

After beginning on the attack, the article takes a more advisory approach, attributing the following to an “anonymous expert in the area:”

…Nokia’s apathy toward China’s 3G standard is truly perplexing. As the largest mobile phone market in the world, China is undoubtedly Nokia’s largest global market. It goes without saying that the Chinese mobile phone market has prevented Nokia’s mobile phone department from being bought out. Consequently, Nokia should be responsible for the development of the 3G mobile phone industry based on the TD standard. The support for the 3G mobile phone industry in China should also be regarded as a future strategy for Nokia. As a leading mobile phone company in terms of research and development, Nokia should be more daring and resolute than Chinese mobile phone companies.

A “senior manager in a transnational communication company” is next quoted criticizing Nokia as follows:

…once a transnational company settles in China, it should integrate the development of the company with that of the country it settles in.  As an international standard dominated by Chinese technology, TD-SCDMA is closely related to the strategy of developing a capacity for independent innovation. Therefore, TD-SCDMA should be supported and respected by both domestic and foreign companies in China, as it is beneficial for the long-term development of foreign companies in China. Some people question if it is because Nokia has made a great profit in China that it may withdraw from Chinese market in the future.

Back on the attack, the article closed by reporting that “the CEO of a Chinese mobile phone company” [again anonymous, but obviously a fan of Jane Austen] is certain not only that China’s 3G standard will march on with or without Nokia, but that Nokia “will pay the price for its ‘pride and prejudice.'”

Having received the message, it will be interesting to see how Nokia responds.  China clearly has the ability to  cause Nokia to “regret” ignoring TD-SCDMA, and if the government decides to play hardball, tiny Finland is probably not the WTO member country best able to bring a successful complaint under the WTO’s Agreement on Technical Barriers to Trade against the more recently accessioned, but far more powerful China.

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