LIU JIN
Behind closed doors, Google Inc. and Beijing are starting to talk.
In public, the world's most popular search engine and the Chinese government are refusing to budge in an increasingly acrimonious dispute over Internet censorship and industrial espionage.
Google raised the stakes once more on Tuesday, saying it is halting the Chinese market launch of two smart phones that run on its mobile operating system, Android.
But a source close to Google confirmed that the company is postponing the smart phone launch because its executives "will be having a series of conversations with Chinese authorities in the coming days and weeks. Without knowing the end result of those discussions, [Google]felt it best to postpone these launches," the source said.
Talks will almost certainly focus on Google's concerns about cyberattacks against its technological infrastructure, which threaten to shake customer confidence in some of its services. In addition, the company is likely to discuss the amount of self-censorship it is required to do in order to remain in the Chinese market.
Until the company has more "clarity" on the outcome of the talks, the source said launching the phones now would be irresponsible, as the uncertainty "would result in a poor user experience."
By delaying the smart-phone launch, Google once more expands the number of companies affected by its war of words with China's government. The launch was a joint partnership with telecommunications giant China Unicom, and was set to feature phones designed by Samsung Electronics Co. and Motorola Inc.
Such product announcements are crucial for all the companies involved because China is seen as a potential smart phone gold mine. Hundreds of millions of Chinese consumers are expected to migrate from traditional "talk-and-text" cellphones to more powerful mobile devices such as Apple's iPhone and Research In Motion's BlackBerry.
"It's really early days as far as the Chinese [smart-phone]market goes - Google still has time, lots of it," said Kevin Restivo, an analyst with market research firm IDC. "Still, any leg up [in China]the likes of RIM and Apple can get is good."
In the long run, the Chinese mobile market may be more important to Google than the search market. The company believes mobile devices will become the primary means of connecting to the Web, and many of its most recent search-related innovations have been specifically designed for smart phones.
Dell Inc. recently released an Android-based mobile device in the country, Mr. Restivo noted, meaning Google still has some presence in the Chinese market.
But so far, Google has refused to back off its threat to leave China, where it employs about 800 people. The company announced last week that it had detected a cyberattack against more than 30 major Western corporations, as well as attempts by hackers to access e-mail accounts of human rights activists. Tying the attacks to a separate concern over Internet freedom, Google said it will re-examine whether it can remain in China at all under current conditions.
Beijing has not publicly compromised either, refusing to exempt Google from what it describes as a responsibility to help "guide" citizens' opinions in a direction of the government's choosing.
Other Western technology firms have been mixed in their reaction to Google's move. Microsoft's executives dismissed any suggestion the software giant would abandon the Chinese market as a result of the hacking and Internet censorship concerns Google cited - concerns virtually every technology firm in the country must deal with.
Yahoo has been perhaps the biggest and most vocal supporter among Google's competitors. The search company said last week it was "aligned" with Google in its response to the hacking incident. However, Yahoo's statement quickly drew sharp criticism from the company's partner in China - the Web firm Alibaba, which called Yahoo's statement "reckless." Yahoo's 39-per-cent stake in Alibaba represents the Web company's only major presence in China.
With its unprecedented public rebuke of Beijing last week, Google's exit from the Chinese market - at least temporarily - seemed almost certain. However, talks between the two sides may well make that outcome less likely.
"It would be leaving potentially the fastest-growing smart-phone market in the world if it were to leave China permanently," Mr. Restivo said.