Intel won't support China's Wi-Fi rules

Intel Corp., the world's largest chip maker, said on Wednesday it will not develop applications based on Chinese encryption standards for wireless computing, taking a hard line in an ongoing dispute between U.S. technology companies and China.

"We have been unable to find an appropriate solution that meets Intel's product quality standards that follows the PRC's (People's Republic of China) requirements," Intel spokeswoman Colleen Rubart told Reuters in Hong Kong.

U.S. electronics and chip companies have complained since late last year about a Beijing requirement that all Wi-Fi, or wireless computing, gear sold in China incorporate a locally designed data encryption technology to which only 24 Chinese companies have access.

They argue that the rules could block hundreds of millions of dollars in sales to China.

"Based on what we understand now, we would not be able to meet customer expectations for using wireless LAN (local area network) in China," Rubart said.

China is Intel's biggest market after the United States, and the company is investing nearly $1 billion in two Chinese chip plants to demonstrate its commitment to the market.

Intel wants to find a solution to the dispute so that it can develop wireless computing products for China, Rubart said.

"We're continuing to monitor the situation, working with authorities in the PRC to understand the situation," she said.

Intel is a keen advocate for wireless computing based on the Wi-Fi standard, and developed its Centrino chip specifically for notebook PCs to use without a fixed network connection.

Rubart said Intel's concerns with the Chinese requirement included questions about interoperability and performance.

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As a big proponent of Wi-Fi, Intel has come under pressure to join ranks with other western firms opposed to the China-only standard.

U.S. chip makers including Broadcom Corp. have complained that China's rules could force them to share proprietary and sensitive materials with Chinese firms, imperiling their intellectual property.

They also complain that they would have to develop one set of products for China and another set for everywhere else.

Intel's determination that it cannot work with the Chinese standard in its present form is the company's first public stance on the subject.

Last month, the United States said it would not bring a trade complaint against China over the issue, but an official told Reuters in Washington at the time that a World Trade Organization complaint against Beijing had not been completely ruled out if the dispute could not be resolved through negotiations.

Booming China recently surpassed Japan as the world's number-two PC market after the United States.