Which Chinese tech companies benefit from cyber security row with US?

Whether it’s a lawsuit, boycott, or armed warfare, you can always bet that someone stands to gain from conflict. The heightened tensions over cyber security between the US and China has elevated beyond rhetoric as of late; China is threatening foreign IT companies with a new “security review” system that could ban them from the country.

American technology is deeply ingrained into “critical verticals” in China like security, government, military, finance, and energy, so pushing out foreign IT companies is no small task. Still, this debacle could be an opportunity for China to take steps toward weaning the country off of foreign tech and replace it with homegrown alternatives. A few of the Chinese brands we’ve listed below are ones you’ll recognize, but a few you might not. And while some areas lack direct homegrown tech equivalents in China, those companies will surely be looking to fill the gaps.

Bloomberg reports that China technology stocks have rallied the most in three months since the US accused five Chinese military officials of cyber espionage.

Many Chinese tech stocks rallied starting around May 17, when the bickering flared up again.

Core IT hardware – Eastcom, Inspur

Even though the controversy has just recently bubbled to the surface again, China has actually been pushing for alternatives to its dependence on IBM (NYSE:IBM), Oracle (NYSE:ORCL), and EMC (NYSE:EMC) (collectively known as ‘IOE’) for the nation’s core information technology systems since last year. The new security reviews are targeted at these three companies in particular.

In the wake of Edward Snowden’s PRISM and NSA revelations, several Chinese IT firms’ stock prices rose sharply. CNStock.com pointed out seven companies in particular that could potentially rival IOE, the biggest being Eastcom (SHE:002017) and Inspur (HKG:0596). Inspur makes servers, while Eastcom manufactures pretty much any type of electronic card you can keep in your wallet.

Bloomberg reports that Inspur has already started a campaign to get IBM’s customers in China on board. The company’s stocks rose nearly 10 percent shortly after the Chinese government advised the country’s banks to ditch IOE servers and software due to security concerns. However, staff at state-owned banks argue China currently has no real IBM counterparts yet. Local companies are still lagging behind.

Lenovo (HKG:0992) just bought IBM’s entire low-end server business in January, boosting its presence in that sector. It’s also in an ongoing joint partnership to develop and sell EMC’s server technology.

Telecommunications – Huawei, ZTE

Cisco (NASDAQ:CSCO) has provided vital telecommunications equipment to China for years, even helping to build the country’s infamous Great Firewall (allegedly). The New York Times, however, reports China has pulled Cisco into the crossfire. China says Cisco is complicit with US cyberspying, although Cisco denies the allegations.

See: Spying or No, China is Stuck With American Technology

In line to take Cisco’s place in China are Huawei and ZTE (SHE:000063). While they might be more familiar to the consumer world as smartphone manufacturers, they are in fact two of the biggest telecommunications equipment makers globally. Huawei especially has been pushing to build infrastructure in nearly every region outside the US, so there’s no reason to think it couldn’t take over in China.

PC makers – Lenovo

HP (NYSE:HPQ) and Dell (NASDAQ:DELL) are also on China’s hit list, putting Lenovo at the forefront of future PC sales. Lenovo is the clear winner here as one of the only PC makers in the world to see PC sales actually experience growth in the past year.

ERP – Aisino, Yonyou, Hejia