We’ve been covering the NSA and other spy agencies pretty faithfully here at SlashGear, and while all that cloak-and-dagger, hack-and-spy, Big-Brother-Is-Watching-You drama can be provocative, that’s not why we cover it. We cover it because it affects the tech industry and, by extension, the gadgets we obsess over. The reverberations of mass data surveillance by governments do eventually make their way down to consumer tech. Today we’re seeing one way spying has chilled the industry that underpins our toys. Take the recent decline in US tech sales in China and yesterday’s statements by executives from Qualcomm and Cisco, for example.
According to the Wall Street Journal, a number of large US computer and software companies have seen a sudden drop in sales in China. Some executives link this drop, in part, to the ongoing firehose of revelations about the NSA and other spy agencies coming out of the neverending birthday-gift-to-journalists known as the Snowden documents. Those documents show a sustained, confirmed effort on the part of spy agencies to infiltrate private tech companies and use them to seize 360-degree vision of the digital world.
One effect of this is that Chinese companies are losing trust in US tech companies. It’s affecting not only sales but the very nature of the way American companies do business in China.
“We are definitely seeing increased pressure. All US tech companies are seeing pressure,” Qualcomm CEO Paul Jacobs told the WSJ. “You have to be very cautious. We are always very careful with whatever steps we take. How we sell. How we interact.”
Qualcomm’s $1 billion in China revenues last fiscal year may not see a repeat next year if such suspicion-fueled pressure continues. As such, the health of the Snapdragon manufacturer as a whole may see a decline.
Meanwhile, Cisco saw its revenues from China plummet by 18 percent last quarter. The company expects to lose 8 to 10 percent in worldwide revenues this quarter largely due to a projected continued decline in China sales. Cisco squarely blames the NSA fallout for some of those losses.
But the suspicions go both ways. The US government recently deemed the Chinese tech companies Huawei and ZTE Corp. to be risks to national security, claiming the former’s telecommunications equipment could be used as a Trojan horse for spying on the US. As such, the US government has placed a “de facto ban” on those companies’ products, which Cisco cites as another reason for declining trade involving large US tech companies.
Granted, it’s not all about the spying. The Chinese economy as a whole is slowing a bit. Some of the internal politics in the nation of 1.35 billion have worked to effectively slow tech imports, as has a new push there to buy local. While the ongoing PR disaster that is the NSA is certainly not solely to blame for the difficulties US tech companies are seeing in China, these initial trade-level murmurings in response to the Snowden papers may signal a long-term chilling effect on tech innovation.