Leaked memo from Intel shows Major Linux Effort

Posted by tadelste on Jan 11, 2006 4:32 AM EDT
LXer.com; By Tom Adelstein, Carla Schroder
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LXer received a document from a source with the message "I read your article on linuxJournel about countries growing use of Linux. The attached article was posted in Intel's intranet site." It reveals that Intel expects to sell hundreds of millions of Linux-based computers in rural China. If Intel can sell a Linux computer in rural China, why can't they do the same thing in the United States?

Is it such a risk? Look at IBM in the US, they have committed to Linux with facilities, staff, sponsorships of projects. Was the risk so great for IBM? Obviously not. So, Intel, put up!

[Ed: Original published in November and updated in light of new reports. -tadelste]

I (Tom Adelstein) received a document from an anonymous source with the message "I read your article on linuxJournel about countries growing use of Linux. The attached article was posted in Intel's intranet site."

Indeed, I spent approximately two years writing a web column for Linux Journal about the use of Linux in government in the US and emerging nations. Everywhere I explored, I found Microsoft lobbying against Linux and open-source software. Their tactics seemed deplorable to me. On occasion, Microsoft's partner Intel would join the fray and also lobby against Linux.

Last year, Microsoft initiated legal proceedings against a Brazilian magazine and a senior government official, Sergio Amadeu, claiming the company had been defamed.

"In defending free software, Mr. Amadeu does not abstain from criticising Microsoft, accusing the company of a 'drug-dealer practice' for offering the operational system Windows to some governments and city administrations for digital inclusion programs," says Microsoft in the claim filed at Sao Paulo's criminal court on 7 June (2004).

Then we have the infamous slush fund many journalists covered such as John Lettice in The Register. John wrote:

Microsoft's head of worldwide sales last summer circulated a 'stop Linux at any price' email to sales execs and senior company executives, including Steve Ballmer, Jim Allchin and Jeff Raikes. According to the International Herald Tribune, which has seen the email, Orlando Ayala was aiming to block Linux's progress in government. "Under NO circumstances lose against Linux," he said, saying that in cases where the deal involved governments or large institutions there was a special fund available which could be used to offer large discounts, or even to give Microsoft software away.

The existence of what the casual observer might term a slush fund is confirmed in an IHT interview with Microsoft EMEA chairman Jean-Philippe Courtois, who defends it as "part of a strategy to be 'competitive' and 'relevant' in the market for big government and educational deals." Microsoft is known to be particularly concerned about the prospect of an open source avalanche engulfing its European government operations, and the likely European focus of the 'get Linux' operations is confirmed by another email obtained by the IHT, from outside legal counsel.

So, you can imagine my interest when I discovered Microsoft's partner in the Wintel business has "gone over to the other side," so to speak. I always thought that Intel walked a narrow line with Linux, I just didn't know that they expected to sell hundreds of millions of computers in rural China. If the document passed to me is authentic, then that's something about which some people might wonder. Some would consider it admirable.

Personally, I consider it somewhat of a betrayal of the American people. If Intel can sell a Linux computer in rural China, why can't they do the same thing in the United States? What about the No Child Left Behind Act signed by President Bush in January 2002? What about the poor in the US who, with proper training, could easily fill the supposed skills gap that has led to the overseas outsourcing of so many crucial, even sensitive, IT jobs?

I advocate the use of Linux in emerging countries where the average annual income might run around $150 a year. In the US, we have a large surplus of equipment that could accommodate those people's needs. Those low-resource computers Microsoft has managed to make obsolete will run perfectly with Linux. But they will also work for people in this country.

Microsoft and its partners in the United States will not let that happen. They are very successful at influencing the people who supposedly represent us in Congress, the White House, the Judiciary and the hallowed halls of state and local government, to our detriment. But in China, the government sees an advantage to putting computers in the hands of everyone and Linux works just fine for them.

So what about this anonymous document

Carla Schroder and I have excerpted it to give you an idea of what Intel has going in China. The document has different sections. We broke it up into their major parts and would like to discuss them with you. The original document text is in red and contained within our report for commentary purposes.

In the first section a slide show showing how Intel has worked to raise awareness of the need for computers and promote its brand seemed to exist. We say seemed because the headers merged. Here's what we saw:

Intel is offering an affordable computer in rural areas of China. In context of the entire document, the product sells for $350 using an inexpensive but high-quality Intel processor, with an expected take rate of 73 percent. The originator of the document believes that they will sell hundreds of millions of units. The operating system marketed with the product uses an unnamed distribution of Linux.

This excerpt came from the initial slide and provided the talking points for the rest of the document. Intel says it is offering:

  • A new and inexpensive Intel processor-based

    machine called the farmer PC is helping rural citizens in China

    get online and gain access to agricultural and farming data.

  • Potential demand for the farmer PC is

    huge: 73 percent of rural citizens surveyed said they'd be

    interested in buying one.

  • The farmer PC is one of a number of

    branding and marketing efforts in rural China

    which represents a potential market of hundreds of millions of


Next, the document showed photographs of Intel's work in rural areas of China. Note the captions.

School children in front of a freshly-painted wall

in Huidong County

project to increase awareness of the benefits of PC ownership.>

The Cool Bus is part of a project in Huidong County to increase Intel's brand awareness.

One of about 50 walls that have been painted
in Huidong County with slogans promoting the power of information technology in rural life.

The second part of the document contained a story of how Intel has made its presence felt in China. The initial part of the story called "Spreading now all across rural China", gives us more of idea regarding Intel's intentions. Again we wonder about Intel's inability to provide the same access to schools in the United States and poorer regions of Latin America. What about rural areas of our continent? What holds back Intel from making its farmer PC available to poor farmers in the US and Mexico?

Intel discusses the first purchaser of its farmer PC below. The buyer is Mr. Yushan Yang. He's happy with his Linux computer. It does everything a user could possibly want.


now all across rural China


Kirsch, Employee Communications, with Hui

Zhang in Shanghai October 25, 2005 (WW44)

Mr.Yushan Zhang was the first buyer of the new farmer PC. Mr. Zhang lives in Hexi Village outside Beijing. All across the countryside in China, a new breed of Intel processor-based computer is

on the march. Its name? The farmer PC. These are inexpensive Linux*-based

machines that operate with home-appliance simplicity and offer

features such as a one-touch reset button.

Equipped with an Intel Celeron processor and priced at $350, the

farmer PC offers online access to agricultural market data as well as

planting and cultivation tips. The PC, for example, could help a

rural farmer decide how to most profitably sell his rice, wheat,

corn, or cotton.

The farmer PC is attracting keen interest

among vast numbers of rural Chinese citizens, unlikely buyers before,

who now say they want to own their own personal computers.

Of course, we find it interesting that the rural Chinese were unlikely buyers before. We find it even more interesting that they say they want a personal computer after Intel painted their walls and streets, brought in a low price package and provided enough eduation that people can understand the advantages to the quality of their lives by owning a computer.

Linux has always stood at the threshold of the "haves and have-nots". From inception, Linux provided people who could not afford proprietary software and hardware with a means to learn UNIX. Now that Linux has the better user interface and the safer operating system, it's available to the Chinese. What better way for Americans to accelerate the decline of our competitiveness than to provide a billion people with computers so they can undercut us in the world market? Must the development of overseas markets be done at the expense of the domestic economy?

73 percent of rural households willing to


This is not a complex, cold machine, but a lively information application system to us, says Yushan Zhang. Zhang is a farmer who tends row crops outside his home, and who also runs a small family hotel in Hexi Village outside Beijing. Zhang says he uses his machine for light accounting, and allows his children to use the new PC for homework and games.

Zhang very much wanted a PC. He is not alone. A recent government survey revealed that although just 4 percent of households in the countryside outside Beijing< currently own a PC, a whopping 73 percent of residents say they are willing to buy one.

We believe that Intel has the ability to assess market opportunities. If they believe that their market opportunity runs a whopping 73 percent, who are we to argue with them. We do question the market opportunity in the US and elsewhere. We wonder how strong an influence Microsoft has on Intel when it comes to marketing a similar product as the farmer PC to others.

In fact, we believe that our government should investigate the relationship between Intel and Microsoft. We believe the government should appoint an independent special prosecutor to investigate everything Microsoft does, especially the relationships between Microsoft and hardware vendors; not only desktop systems, but peripherals like network devices, printers, expansion cards, and so forth. That's where customer choice has been completely derailed. Logically, it makes no sense for a hardware vendor to limit their own customer base to Windows-only, or to offer only token support for other platforms. There must be powerful forces operating behind the scenes. (See John Terpstra's excellent series on this issue.)

For a current example of inappropriate influence, in Massachusetts we ask what business does a Secretary of State have contradicting the head of the Information Services department in a public hearing? Once it was announced that the State of Massachusetts was going to require the Open Document Format for all public archives, which does not exclude Microsoft in any way, the heat was on. Do you see similar influence in China? No. Evidently, the pressure's off in China and Intel has the ability to do what it wants without who-knows-what threats.

The farmer PC: Catching on fast

Until recently, owning a PC made little

sense for rural Chinese. Machines were priced out of reach, they were

hard to use, they offered few customized applications, and they were

difficult to buy, let alone maintain.

The farmer PC has changed all that in the

quick span of less than one year.

In November 2004, Intel signed a memorandum of understanding (MOU)

with the Beijing Municipal Science and Technology Committee (BMSTC)

to expand the use of PCs in rural areas. In March 2005, farmer PCs

became part of the Beijing GAPP project. In July of this year, the

first 500 farmer PCs began shipping to rural residents.

Well, now we understand why Intel can have success in China. Intel has a MOU with the Beijing Municipal Science and Technology Committee. They can't do that in the US and other places where such an arrangement would create jobs.

    The machines feature:

  • A Linux operating system

  • 46 applications

  • Online access to agricultural databases and

    farming know-how sites

  • E-classroom lessons through Beijing Middle School #4,

    one of the best schools in Beijing

  • Games

  • A one-touch recovery button that resets the

    system to its former state

  • A large voltage range to accommodate

    different rural power supplies

  • A $350 price for an Intel Celeron

    processor-based machine (Intel Pentium processor-based

    machines cost more)

We find this document revealing. Recently, we covered a story by Michael Singer called Linux PCs: Customer service or lip service? in which he asked an important question. How to you find one? He wrote:

While for years mainstream computer makers such as IBM, HP and Dell have been professing their love for alternatives to Microsoft Windows, the overwhelming majority of open-source-powered machines are business servers and high-priced workstations.

Finding an entry-level home PC that doesn't have a Windows XP sticker on it requires consumers to search through a maze of Web sites. If they try calling a major PC maker, the agent is likely to have a hard time steering them toward a Linux-based or bare-bones system.

"There is no champion for Linux clients among the major vendors," PC industry analyst Roger Kay said.

Again, we want to understand how Intel can champion a Linux PC in China where it expects to sell hundreds of millions of units, but either can't or won't champion one here.

The machine is not a stripped-down bargain

unit, according to project leaders in Beijing. The first farmer-oriented PC released today is a really user-friendly PC, not a simplified PC, said Ma Lin, director


Now, ask any mainstream reporter from ZDnet, C/Net, ComputerWorld, Forbes.com, USA Today and the New York Times about Linux computers. They will say in unison that a user-friendly Linux PC does not exist. Linux is hard, doesn't have the drivers to work with standard Intel-type hardware, much less the newer hardware from China. No one wants it, they want Windows!

One-stop-shop IT centers make PC

ownership easy

To help ensure that PC ownership is simple

and painless, the Beijing

government is setting up 4,000 one-stop rural IT centers that offer

sales, training, and customer service.

By the end of 2005, farmer PC sales in the

countryside outside Beijing alone are likely to surpass 10,000 machines.

Hello Intel! You can arrange for this in China but not in the United States? Sales, training and customer service for Linux? You'll go broke doing such a crazy thing. If you don't believe us ask the industry media. Try to market Linux in the US and you'll experience disasters of Biblical proportions. Everybody knows this.

Intel strategy: Work with governments,

rally the industry

Sales and demographic data like this are

both the drivers and the outcome of a broad Intel strategy of working

with local Chinese jurisdictions in Government Assisted PC Purchase

(GAPP) programs to promote the benefits of PC ownership.


Zhang (sitting down) uses his farmer PC to obtain access to online

agricultural information, and also to help run his small family


Says Eric Chang, GAPP program manager for

Intel China, "Our strategy is to work with the government to

influence the industry in its beginnings. We

have the ability to rally the whole industry toward a shared vision

of digital inclusion.

For its part, the Chinese government wants

to introduce technology to farmers as a way to increase the

productivity of the workforce and to reduce the technology gap

between city and country.

The potential is huge. Hundreds of

millions of rural Chinese citizens comprise the world's single

biggest future market for Intel processor-based PCs.

Advocates in the open source industry have said this for many years: work with governments to influence the industry in its beginnings. So, our discussion of Microsoft bringing legal action against a Brazilian magazine and a government official might shine some light on Microsoft's strategy. As to that, the admission of a slush fund to keep Linux out of government and you have an understanding of why people call for investigations in to such things as Microsoft's activity with regard to the Foreign Corrupt Practices Act. Intel, do you have anything to say about that?

Beyond the farmer PC: Intel's brand

awareness in rural China is spreading

To continue to strengthen Intel's

relationship with local governments in rural China Anand Chandraseker, vice president and general manager

of Intel's Sales and Marketing Group, joined an Oct. 13 signing

ceremony for a new MOU with the Guangdong Province Information

Industry Bureau.

are under way in rural China to spread PC adoption and to broaden Intel's brand


Intel's Anand Chandraseker seems to know how to market Linux. We believe he had good intentions. We continue to request a realistic, no-spin-zone response from Intel. If you knew your approach in China would work, then what's stopping you from using it in the US, Mexico, South America, Africa, the Middle-East and other regions of Asia?

Painting project: 50 walls, 10 villages,

one logo

Anand Chandrasekher,

Intel VP of Sales and Marketing, joins local school children to help

paint a village wall in rural China.

One unusual example of Intel's marketing

and branding efforts in rural China is the recently completed Huidong

Wall Painting Program. Intel joined with local governments and

original equipment manufacturers to paint Intel logos and PC-related

slogans on 50 walls in 10 villages in Huidong County

The theme: the power of information

technology to improve rural life for adults and youngsters alike.

The wall-painting program was more than

just paint, however. It also offered first-time PC demos to local

farmers and students, and encouraged local governments to set up the

basic infrastructure for PC use. The program also helped open Guangdong Provinces first one-stop-shop community center for PC

sales, service, and support.

Efforts such as these have the potential to

reach huge numbers of people in rural but densely settled southern China. In

Guangdong Province alone, a GAPP in which Intel is playing a role

extends to 12,000 villages that are home to 40 million people.

Copyright Intel Corporation, 2005. All rights reserved.

*Other names

and brands may be claimed as the property of others.

**Intel is not responsible for content of sites outside our


Since we received the document from which we reported above, we have come to question issues that affect the every day lives of people around the globe. Not many years ago, China and India could not feed their populations. People died on the streets from starvation and no one could do anything about it.

Today, China and India have become powerhouse economies. Both have become net exporters of food. They achieved their separation from starvation by discovering technology. Other areas of the world have done the same. Intel seems to have wiggled into China almost unnoticed.

As a publication dedicated to technology and social change, we appreciate whoever provided us with the material presented above. We only hope that others will consider it significant. The only constant in our lives is change. We believe that the time has come to change the way technology enters people's lives. LXer.com's community focus on Linux news means that stories like these are what we're "all about", after all.

Related Links
Intel's Client Linux Resource Center.

Government Assistented PC Programs and Open Source: Lessons from the Intel Experience

Intel Drives Growth Through Localized Computing Solutions

Intel® Linux™ versus Microsoft® Windows

Dave Whitinger contributed to this report.

» Read more about: Story Type: Editorial, LXer Features; Groups: Intel, Microsoft

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Subject Topic Starter Replies Views Last Post
Great article and great idea mdl 2 4,547 Mar 13, 2006 6:23 AM
here is also a Brazilian bus project ;-) henke54 1 4,037 Mar 13, 2006 6:07 AM
It's different in the USA vs. China Skapare 2 5,323 Mar 13, 2006 6:06 AM
Regarding Sergio Amadeu and 'drug-dealer practice' grouch 0 4,206 Mar 13, 2006 5:28 AM
Companies selling preinstalled Linux in the US cyber_rigger 0 4,543 Nov 22, 2005 7:17 AM
We Definitely Need More Freedom of Choice dcparris 0 3,925 Nov 4, 2005 1:00 PM
This is huge! xetn 4 5,012 Nov 4, 2005 11:40 AM

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