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Lenovo smear is grossly unfair

Endpoint Technologies president Roger L. Kay says xenophobia is factor in accusations against Chinese-founded PC maker.

The assertion by U.S. Rep. Donald Manzullo that Lenovo doesn't have to compete because it's owned by the Chinese government comes from somewhere between left field and the lunatic fringe.

And his request that the State Department investigate its decision to buy 16,000 Lenovo-made PCs is downright xenophobic, not to mention a blatant disregard of the facts. One might wonder whether Lenovo's competitors put him up to it, but there are precious few PC hardware manufacturers in his Illinois district.

The original Lenovo was founded by scientists and engineers from the Chinese Academy of Sciences, a government arm, and the Chinese government retains a 27 percent interest in the company. But that's about as far as the official thumb goes.

The new Lenovo, a profit-making entity, is a joint venture with IBM's former Personal Computing Division. IBM retains an 18 percent interest in the new company, and it would be big news to Big Blue if it were to learn that its investment isn't supposed to pay off. Meanwhile, Lenovo's headquarters recently moved from Purchase, N.Y., to Raleigh, N.C., both locations resting firmly on American soil.

And of Lenovo's more than 20,000 employees, 10 percent work in the United States (and pay taxes there,) 65 percent work in China, and 25 percent work in 62 other countries around the world. The high proportion of Chinese employees reflects the location of its manufacturing, but Lenovo is a truly international company, illustrated by the fact that the majority of the company's revenue comes from outside China.

But beyond all that, the congressman's accusations are grossly unfair on a number of levels.

• Almost any PC you can name has Chinese content. Intel, which supplies the brains for most personal computers, has factories in China. Seagate, the largest hard drive supplier, produces in China. Dell, the largest PC hardware OEM (original equipment manufacturer), builds in China. Of Hewlett-Packard's notebooks, 98 percent are made in China.

Interlinking countries through business dependencies is a good way to build mutual interests and therefore reduce the potential for hostilities.
Of all the world's notebooks, 80 percent are actually manufactured in China, whether they're partially assembled, as in Dell's case, made by a contract manufacturer like Quanta and sold under a brand like Gateway, or produced in company-owned plants, as in Lenovo's case. In fact, Chinese manufacturing is so efficient these days that even most Japanese notebook vendors now make their products in China.

• Clients--the desktops and notebooks that Lenovo sells--are not sensitive in the same way servers might be. A client is a client is a client in the computer world. They are largely a commodity. In fact, the vendors strive to differentiate their products on the basis of such factors as weight, color, surface texture and case design precisely because they are all so similar.

• That similarity is the result of the fact that the intellectual property in PC clients is largely owned by a small group of companies. Most of the important inner workings of a PC comes from either Microsoft, which supplies the operating system, or one of two silicon vendors, Intel and Advanced Micro Devices, which supply the microprocessor, core logic and some of the other chips that run the machines. Most of the companies that make PC guts--Intel, Microsoft, AMD, Nvidia, Seagate, to name a few--are American, but it should be noted that those that produce physical products (as opposed to software) manufacture a large percentage of their content in--you guessed it--China.

The good congressman should know that interlinking countries through business dependencies is a good way to build mutual interests and therefore reduce the potential for hostilities. Calling into question the motives of a business partner sows mutual distrust--not a good way to build long-term relations. In case Manzullo hasn't figured it out yet, China is here to stay. Promoting policies that help nurture this relationship is a better use of energy than backing those that expose his ignorance of marketplace realities by bashing a worthy international company with substantial U.S. assets, not to mention U.S. payroll.

The best argument that critics have been able to come up with for not letting Lenovo supply the State Department is that it would be easier for Lenovo than for an "American" company to insert a keystroke logger--a program that records keystrokes--if the vendor knew that the final buyer is involved in intelligence activities. But as should be clear by now, so many computers are made in China that it would be hard to distinguish one from the other.