The U.S.-China Tech Conflict Fractures Global Technical Standards: The Example of Server and Datacenter Energy Efficiency
Sanctions play a crucial role in the United States’ tech and trade conflict with China. They prevent Chinese companies from acquiring advanced U.S. technologies and entering the U.S. market. Huawei—the world’s largest telecommunications firm—is among the most targeted Chinese firms due to concerns that it assists the Chinese Communist Party spy on the United States (and its allies). While sanctions against Huawei are justifiable, the Biden administration needs to ensure that these sanctions don’t inadvertently harm other U.S. technological and economic interests. The 2019 U.S. sanctions against Huawei had unintended consequences on the open technical standards system, underpinning America’s position as a global tech leader. Notably, the sanctions fractured the standard to measure and compare the energy efficiency of data center servers. China created its own duplicative and objectively worse standard. Not only must firms use this standard in China, but China is also advocating that others, such as the European Union, use its standard here as well. The Biden administration eventually addressed these sanctions’ impact on standards activities, but the damage was done. The case highlights why the Biden administration should take a nuanced approach to addressing national security issues that involve technical standards.
Global technical standards—specifications defining how a product or service performs—are the hidden foundation for the innovation, trade, and use of technologies that transform how we live, work, and communicate. Open and global standards are the secret sauce that translates U.S. technological innovation and ingenuity into standards power. Global standards provide a common language for firms from different countries to make interoperable components. Imagine a world where every country has its own Wi-Fi or cell phone standard, and you quickly realize why global standards are important. The World Trade Organization has detailed provisions relating to developing and using international standards, as countries could easily use country-specific standards as a discriminatory barrier to trade. This is exactly what overly broad U.S. sanctions have led to, with China creating its own standard for server energy efficiency.
The benchmarking standard for testing the energy efficiency of servers may seem esoteric, but the growing number of servers and data centers means the fragmenting of this standard will have a global environmental impact. A typical data center may have around 100,000 servers. The number of servers quickly adds up. Just taking the United States, Germany, and China as examples, as of January 2022, there were 2,700 data centers in the United States, 487 in Germany, and 443 in China. While this is just a rough estimate (as most data centers don’t disclose how many servers they have for security and other reasons), this would mean there were 363 million servers in the three countries. It’s easy to see how marginal changes in energy efficiency in China and other key markets could have a large impact on energy usage.
In 2019, the Trump administration enacted sanctions against Huawei, Sugon, and other Chinese firms (via the Department of Commerce’s “entity list”) for undermining U.S. national security and foreign policy interests. Never mind that Huawei has also benefited from extensive and unfair Chinese government support and has been charged with stealing U.S. trade secrets and circumventing U.S. sanctions against Iran. However, in sanctioning these Chinese firms, the Biden administration failed to include a clear and broad exemption for sanctioned firms to remain engaged in standards-setting activities and for standards development organizations (SDOs) not to breach U.S. sanctions law. Furthermore, the Department of Commerce’s exemption did not consider the global benchmarking standard for server energy efficiency—known as the Standard Performance Evaluation Corporation’s (SPEC)’s server energy efficiency rating tool (SERT)—as a standard.
This was not an incidental mistake. It reflects the fact that key national security officials in the Biden administration fundamentally do not understand technical standards and how they’re made. These officials mistakenly view standards development as a zero-sum, adversarial process in which China is winning and the United States is losing. Combined with the misunderstanding that technical standards involve the sharing of confidential, sensitive technologies (which it doesn’t), this leads to poor policies like this one involving U.S. sanctions law.
SPEC was one of several SDOs impacted by the lack of a clear and broad exemption for standards activities not to be considered in breach of U.S. sanctions law. Some SDOs shifted overseas. Some SDO members stopped participating in SDO meetings in the United States. Soon after the sanctions were announced, global server firms and the U.S. tech sector pointed out the problem with the exemption to the Department of Commerce. Like many U.S.-based SDOs, SPEC ended Huawei and other targeted Chinese firms’ membership out of fear of breaching U.S. sanctions law. Over two years later, the Department of Commerce provided guidance on the exemption for standards activities that was still not clear enough. Finally, earlier in 2023, the Department of Commerce made further revisions, including that SPEC SERT is considered a standard and that Huawei and others could rejoin SPEC. SPEC issued a public statement making this clear. But Huawei and other former Chinese SPEC members haven’t rejoined.
SPEC is an industry-led non-profit organization that has been around for 35 years and has about 140 member companies worldwide, including AMD, Dell, IBM, Intel, and Microsoft. SPEC’s global membership works together on different standards and issues in over 22 different committees, with the server energy efficiency rating tool SPEC SERT being just one of their key tools. SPEC SERT is unique in that it is not a technical standard but a complex piece of software used to test and benchmark servers. However, SPEC is governed like a standards organization, and SPEC SERT is referenced in international standards. SPEC operates on a democratic system with equal votes for all members, preventing any firm or group of firms from dictating its work. Transparency and trust among competing firms are supported by rules that allow a firm to review a competitor’s SPEC SERT results.
Like most standards bodies, SPEC works in the background without fanfare or attention yet plays a critical role in ensuring technologies address public policy goals, like energy efficiency and climate change. SPEC standards are widely used in the server industry for marketing, pricing, and regulatory purposes, as they provide an apples-to-apples comparison for energy efficiency and other issues. Governments use SPEC standards in relevant laws and regulations and refer to specific scores for firms and products to meet. For example, regulators could use the benchmark to see what SPEC score it would use to cut off the bottom 10 percent of the most energy-inefficient servers from the market. Over a decade ago, the U.S. Environmental Protection Agency (EPA) asked SPEC to develop and maintain SPEC SERT, which was then adopted not only by the United States but also by Japan, the EU, and other countries. The U.S. EPA also uses SPEC SERT for its 1-100 energy star score for data centers. SPEC SERT eventually became a formal International Standardization Organization (ISO) and International Electrotechnical Commission (IEC) standard (ISO/IEC 21836).
Until the Biden administration sanctioned them, Huawei, Sugon, and over a dozen other Chinese firms were SPEC members, and China’s government and industry were working to use SPEC SERT in China. Huawei wasn’t even involved in the SPEC committee that maintains the SERT benchmark, but the firm wanted to use it, given its global use. China previously attempted to create its own benchmarking test for server energy efficiency, but developing and maintaining benchmarking software is actually complicated. Eventually, China’s National Institute for Standardization (CNIS) reversed course and started working with Green Grid (which is a global industry body that focuses on tools and policies to support server energy efficiency) to help it adopt SPEC SERT. A previous draft Chinese standard for server energy efficiency used SPEC SERT as the only benchmark for firms to use. That all stopped with the U.S. sanctions against Huawei and other Chinese firms.
Huawei and other sanctioned Chinese firms went home and worked with CNIS to develop their own Benchmark of Server Energy Efficiency (BenchSee). Huawei argued that it was unfair for them to use a U.S.-developed tool that it was banned from accessing and governing. BenchSee is objectively less ambitious (regarding energy efficiency) than SPEC SERT, but it is mandatory to use in China. BenchSee is controlled by the Chinese government. It is a black box regarding the design, development, testing, and use of the server testing tool. It’s not clear who is making decisions as there is no consensus voting process (which is normal in international standards development organizations like SPEC). It’s not open to genuine debate and feedback (unlike SPEC CERT). Initially, China asked for and received input from BenchSee from global firms. CNIS published an initial response, but it has not provided feedback in subsequent revisions.
China’s server benchmarking test will have a global impact on the environmental impact of servers and the market for servers. China represents a large part of the global market for servers. The Chinese government could make changes that dramatically alter foreign market access in China. A change to BenchSee could affect a firm’s product’s score, rendering the product unsellable in China as it no longer meets minimum energy efficiency requirements. China could also change the test so that inferior Chinese products perform far better than foreign ones.
China is already pushing third-country markets to use its standard along with Chinese servers, saying that the United States unfairly excluded them from SPEC and that countries must also accept the BenchSee test. It is worth noting that the closed and opaque management of BenchSee (and of other Chinese SDOs) makes China’s argument hypocritical. Never mind China’s extensive use of China-specific standards instead of international ones.
The EU is the first major test for extending the use of China’s BenchSee. Huawei and the Chinese government advocated that the European Telecommunications Standards Institute (ETSI, one of three key EU standards bodies) use BenchSee as well as SPEC SERT in European regulations. The EU’s mandatory server regulation (known as EU Lot 9) referenced ETSI standard EN303-470 for its test method for determining mandatory minimum server energy efficiency. Until recently, Huawei made the case that ETSI should use both SPEC SERT and BenchSee, as solely relying on SPEC SERT was a violation of ETSI’s commitment to use non-discriminatory standards (as SPEC was initially not open to Chinese firms).
The Biden administration’s recent fix nullified this argument; however, that has not stopped Huawei and the Chinese government from pushing ETSI to use BenchSee. As part of this, Huawei claims that a lab in China certified (without any evidence) that BenchSee is comparable to SPEC SERT. If ETSI references both SPEC SERT and BenchSee, China could change the test to benefit its own products, even if the EU sets higher energy efficacy standards. This underscores the significance of open, transparent, and consensus-based SDOs. China and Huawei’s goals for BenchSee go beyond Europe. Their plan is likely first to get ETSI to accept it and then, on that basis, take the argument to the ISO/IEC that their own standard (which only references SPEC SERT) should also reference BenchSee.
The fracturing of the global standard for server energy efficiency was an avoidable own goal for U.S. trade, technology, and climate change objectives. The Biden administration could have prevented the fragmentation of a crucial technical test by granting a clear, broad, and explicit exemption for Huawei and other companies to participate in standards-related work in the United States. It’s one thing to target Huawei and other Chinese firms where there are clear national security concerns, but the energy efficiency of servers is not one of them. This is symptomatic of why it’s so problematic that key Biden administration officials use a disproportionately powerful and distorted national security lens when looking at technical standards. Unfortunately, the recent U.S. National Standards Strategy for Critical and Emerging Technology continues to reflect this harmful national security-centered perspective of technical standards.
The Biden administration finally fixed the sanctions-related impact on technical standards, but it now needs to clean up the mess it created. The Biden administration should make the case to the European Commission and EU policymakers (and other governments considering BenchSee) that they should only reference Chinese standards that truly live up to World Trade Organization principles on international technical standards, such as transparency, openness, impartiality, and consensus-based decision making. BenchSee would clearly fail such scrutiny.