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China Puts Another Tech Company in the Hot Seat

By Chris Neiger - Apr 10, 2013 at 3:00AM

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Just weeks after attacking Apple's customer service policies, Chinese public media has set its sights on Microsoft.

Well, it seems China is at it again. China National Radio chastised Microsoft (MSFT 2.76%) yesterday for not following a national warranty law for its Surface Pro tablets. The criticism comes on the heels of Apple (AAPL 4.08%) getting rebuked for poor customer service in China.

Bloomberg first reported on China's criticism of the Surface warranty, and said that the national warranty law China is referring to is for notebook computers (which would seem to exclude tablets). That law says that notebooks must have a one-year repair warranty and two-year warranty for the main parts of the computer.

It's hard not to draw a connection between China's public criticism of Apple a few weeks ago and the new attack on Microsoft this week. Apple CEO Tim Cook responded to China's disapproval by issuing an apology for its customer service in China after two weeks of repeated disparaging comments from Chinese press and celebrities. The apology statement also said that Apple would make its warranty more clear, would update the warranty policy for the iPhone 4 and 4S and provide more training and oversight to Apple Authorized Service Providers. The apology has, so far, taken Apple off of China's naughty list. 

What's odd about the criticism of Microsoft's warranty policy is that the Surface tablet launched in China back in October and the Pro and new Chinese Surface version just launched in the country. This means that the products would be covered under Microsoft's most comprehensive warranty right now. It's hard to imagine that many of Microsoft's tablets are falling apart and being returned for service so soon after their launch.

But the big question for investors is why the Chinese government and the press are targeting American tech companies. Some have speculated that the Chinese government is retaliating because Congress forbid American telecom companies from buying certain parts from Chinese companies ZTE and Huawei due to security concerns. 

As competition heats up in the technology space, the Chinese government may be protecting its own interests as well. China owns about two-thirds of the world's largest telecom company, China Mobile, and parts of other Chinese tech companies. Bashing Apple and Microsoft could directly or indirectly benefit Chinese technology companies, or help foster better deals between American and Chinese companies. 

Although the reasoning behind the attacks may not be clear, the importance for companies like Microsoft and Apple to receive positive (or at least neutral) press in China, is. China is now the largest mobile market and American tech companies can't afford to lose face in the country. If the attacks keep coming against Microsoft, CEO Steve Ballmer may want to follow Apple's lead and issue an apology. Investors should keep an eye on China's public criticism of tech companies closely, as their attacks could sway public opinion of products and services in the country. So far, it hasn't seemed to hurt Apple or Microsoft's sales, but further attacks could have negative results for both.

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