China Blinks on Wi-Fi Standoff

Winding down a trade dispute that has rattled Silicon Valley over the past few months, a top Chinese official said the country has backed off its decision to promote a China-only semiconductor standard.

The decision comes as a relief to U.S. chipmakers, which had worried that the dispute might augur increasing protectionism in the strategically vital Chinese market. China now ranks as the largest cell-phone market in the world and the second biggest computer market, after the U.S.

The trade argument centered around China's announcement late last year that U.S. and other foreign chipmakers must link up with Chinese companies by June 1, in order to be able to sell into the country's fast-growing market for so-called Wi-Fi chips. American companies complained that doing so would force them to share valuable intellectual property.

Onlookers had hoped -- correctly, as it turns out -- that high-level trade talks this week might help resolve the matter.

Late Wednesday, China said it will shelve the plan to push its own Wi-Fi standard, effectively agreeing to continue the sale of chips that meet the prevailing standard used in the U.S. and elsewhere around the world. The announcement was made at a press conference attended by U.S. Commerce Secretary Don Evans, U.S. Trade Representative Robert Zoellick, and Chinese Vice Premier Wu Yi.

Tech leaders in Silicon Valley hailed the decision. "Today's decision by the government of the People's Republic of China to work through the international standards process to evolve the WAPI standard demonstrates its comment to leadership in the IT industry," said Intel (INTC) spokesman Chuck Mulloy, reading from a prepared statement. WAPI (which stands for wired authentication and privacy infrastructure) is the name of the Chinese standard for Wi-Fi.

"This is a very important market for us," said Mulloy.