The government in China is slowly throttling competition much like it has done to other freedoms there. I have been following the threads of these new developments as news of them have been slowly leaked to the western press. I have also had the advantage to have worked in mainland China in the technology sector. And even back in the ’90s I viewed western companies gigantic investments in manufacturing and R&D sites there with trepidation, aware as I was of the Chinese total lack of respect – or cultural disregard of ownership – of intellectual property.

And now there is new hard evidence out to suggest yet another reason not to buy the mass produced goods coming from China. And it was in an article published by Reuters this morning entitled, ‘Exclusive: China drops leading technology brands for state purchases‘ that gave real numbers to how foreign manufacturing companies are now being excluded from the fruits of their capital investments concerning their own intellectual property, infrastructure know how, and proprietary technology.

Some of Intel’s products have been dropped from the list, as have all of Cisco System’s products, along with all of Apple’s products including their popular iPhones.

What does this all mean? In a nutshell it means that China has successfully reversed engineered – replaced – those products (aka stolen the designs) and no longer needs those foreign products (read competition) in their markets. Yup, it’s as simple as that.

Case in point, the world’s 3rd largest smartphone maker, Xiaomi is Chinese. So what does China now need the iPhone for? In fact Xiaomi are bringing their products to a market near you. They steal the technology and now want to sell it back to you. Why be the 3rd largest when you can be number 1?

Why is Cisco out the door? Simple. The Chinese are using the Eric Snowden revelations of NSA snooping as the argument to shut them out. But the reality is that all a router is (or an IP Softswitch) are computers running special software. It doesn’t take a whole lot of genius anymore to build a router, switch, load balancer, or firewall. It’s all in the software. Software is easy to copy, borrow, or steal.

So why hasn’t Intel been completely pushed out? Simple. The Chinese have a long way to go to master integrated circuit design, fabrication, test and assembly.

Cybertheft? That all started a long time ago. The NSA hacks other countries for information just like the Russians, Chinese, and Iran continue to compromise the information systems of the US.

Cyberwarfare? We could say that really went major league in 2009 with the brilliantly conceived and successfully launched worm/virus called Stuxnet.

Unbeknownst to a lot of people, something like a Stuxnet can destroy something physical, even something huge like a building sized electrical generator. And just as easily and effectively as if the air force dropped a precision guided 30,000 pound bunker buster on it.

How? Insert a malicious piece of code that jacks with the programmable logic controller (PLC) that controls the lubricating oil system. It’s true. It’s been tested and proven that within minutes the machine will literally shake itself to pieces.

Big picture, what does that really mean? It means that if that massively broken huge generator is sitting out in some remote desert, the facility boys can’t just duct tape it back together or waltz down to Walmart and pick up a new one. And hosing that one generator (or a string of them) that’s been supplying power to some critical piece of infrastructure –  that critical system goes down for the count: it could be days, weeks, or even months before it’s up again.

The US government has identified and classified all the critical public pieces of infrastructure: water (purification, storage, distribution), electrical (generation, transportation, distribution), chemical, refining; 16 in all. And in further study they have discovered that many of these critical systems – their control systems – are not air-gapped, meaning that they in one way (or more) touch the public internet. Scary.

More on that later.

 

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