Xiaomi’s censorship claims could cloud its global ambitions

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According to analysts, the Lithuanian government’s recommendation that its citizens throw out Chinese smartphones, singling out Xiaomi Corp’s devices for their censorship capabilities, raises the red flag for the continued business expansion of these tech companies across Europe, according to analysts.

Last week, a report from the National Cyber ​​Security Center (NCSC) of the Lithuanian Ministry of Defense claimed that Xiaomi’s Mi 10T 5G smartphone, which is widely sold in Europe, has the built-in ability to detect and censor terms such as “Tibet free “,” Long live the independence of Taiwan “or” movement for democracy “.

“If the problem is contained in Lithuania, then the impact is low [for Xiaomi]Said Dan Baker, senior vice president at Morningstar Research Services. “Lithuania has only about 3 million inhabitants.”

He said, however, that “if other countries, even the EU, came to similar conclusions, then the impact would be greater for Xiaomi and other major Chinese smartphone makers.”

Following the Lithuanian government’s findings, the German Federal Office for Information Security, the Federal Office for Information Security, said it had already started the technical review of a smartphone model from Xiaomi, according to a Reuters report on Wednesday.

“Political tensions between China and the West play a critical role” in cybersecurity investigations in Lithuania and Germany, “said Linda Sui, senior director of smartphone research at Strategy Analytics.

Tensions between Vilnius and Beijing have simmered since the Baltic country’s decision in July to allow autonomous Taiwan to open an office in its capital under its own name. Ties between Germany and China, meanwhile, are heading into the unknown, as Chancellor Angela Merkel steps down this year.

The stakes are high for Xiaomi to overcome the negative impact of the Lithuanian and German investigation on its flagship devices. The Beijing-based company aims to overtake Samsung Electronics to become the world’s largest smartphone supplier in three years.

Xiaomi has denied having censored users of its smartphones. “Xiaomi has never and will never limit or block any personal behavior of our smartphone users, such as searching, calling, browsing the web or using third-party communications software,” a statement said. of the company released last week.

The NCSC report, which also analyzed Huawei Technologies Co’s P40 and 8T 5G smartphones, says the list of terms that could be censored by the Xiaomi smartphone’s system apps, including the default Mi browser, currently includes 449 terms. in Chinese and is continuously updated. .

The feature at the center of this report, however, is ad management software, which is used to protect users from unwanted content, including pornography, violence and hate speech, according to a spokesperson for Xiaomi. . It is “common in the smartphone industry and the Internet around the world,” the spokesperson said.

Earlier this week, Xiaomi said it hired an independent third-party expert to assess the points raised by the Lithuanian government’s report regarding its smartphone’s censorship function.

“As long as the US government doesn’t put Xiaomi and other Chinese brands on its entity list, unlike what Huawei and ZTE have experienced, the impact [of the cybersecurity investigations] would be manageable, ”said Sui of Strategy Analytics.

The US government removed ZTE from its commercial blacklist in March 2017, while Huawei has been under US sanctions since May 2019.

While “filtering ads is a more logical guess” in the case of the Xiaomi management software in question, “we need more caution and investigation to determine what the [prohibited terms] list was actually used for, ”said Tony Chen, a veteran Android smartphone systems programmer.

It also doesn’t make sense for Chinese smartphone makers to develop censorship features, according to Chen. “It’s a bit meaningless because the great firewall of China is already doing its job [of censorship]. I don’t think the smartphone makers have a reason to invest time and resources in this, ”he said. Yet a number of Chinese mobile browsers have restricted user access to online content that is not covered by the Great Firewall.

The cybersecurity surveys conducted by Lithuania and Germany also show that different countries have different compliance requirements. There will be differing opinions on the functions of smartphones from different groups in all countries, including China, according to Morningstar’s Baker.

Germany is Xiaomi’s second-largest market in Europe, according to data from technology research firm Canalys. The country accounted for 10% of Xiaomi’s total market share in Europe, with 9.2 million smartphones shipped in the first half of this year.

During the same period, Xiaomi held 45% of the smartphone market in Lithuania, according to Canalys. He said Lithuania only accounted for 0.4% – around 400,000 smartphone shipments in the first half of the year – of Xiaomi’s total European business.

“There is a stereotype that Chinese brands have not done enough when it comes to data privacy or protecting consumer rights, which cannot be resolved in a short time,” said Nicole Peng, vice president of mobility at Canalys. She said major Chinese smartphone suppliers still do not have the long experience that Samsung and Apple have in doing business with highly regulated companies such as banks.

“Putting more effort into the corporate sector, which usually means coordinating with governments, can help these consumer electronics brands understand how to operate in a highly regulated environment and build trust,” Peng said. .

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