3-5-2 Directive – The Chinese government s to replace foreign hardware and software with its national technology within the next three years.

Officials from the Beijing government ordered all government offices and public institutions to replace foreign hardware and software with Chinese solutions within the next three years.

The Government has issued a directive, tracked as “3-5-2,” to public institutions earlier this spring that includes the details for the replacement. The directive doesn’t apply to privately-owned Chinese companies, that will be authorized to continue using foreign hardware and software.

The directive will have a significant impact on major U.S. firms including Dell, HP, and Microsoft.

“Beijing has ordered all government offices and public institutions to remove foreign computer equipment and software within three years, in a potential blow to the likes of HP, Dell and Microsoft.” reported the Financial Times. “The directive is the first publicly known instruction with specific targets given to Chinese buyers to switch to domestic technology vendors, and echoes efforts by the Trump administration to curb the use of Chinese technology in the US and its allies.”

The name of the directive comes from the replacement process, the replacement will start in 2020 with the goal to replace 30% of their foreign hardware and software. The Chinese government will replace 50% of the foreign technology for 2021 and the remaining 20% within 2022.

The directive was revealed only the past week when someone from a private cybersecurity firm informed the Financial Times.

According to analysts at the China Securities broker, 20m-30m pieces of hardware will need to be replaced in compliance with the Chinese directive, most of them beginning next year.

“Analysts at Jefferies estimate that US technology companies generate as much as $150bn a year in revenues from China, although much of that will come from private sector buyers.” continues the FT.

The ‘3-5-2’ directive was likely issued in the same period the Chinese military received the order to develop a custom operating system to replace Windows.

“The impact of the 3-5-2 policy could be significant since the government can control procurement for the agencies covered under the policy, another cyber security analyst said. When it comes to private companies, “let’s see what the government orders are — they will not proactively want to substitute, since the investment is high”, the analyst added.” concludes the FT.

Pierluigi Paganini

(SecurityAffairs – 3-5-2 directive, China)

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