China could be leveraging electronic exports to spy on the US

The United States is forcingtelecommunications companies like AT&T and Verizon to hand over sensitive data regarding their network infrastructure to sniff out potential Chinese spies. Officials are concerned that China may be leveraging their exports into the county to spy on the US.

The US Commerce Department sent out a survey in April asking for detailed records regarding foreign-made software and hardware that telecommunications companies, software makers and information-security companies are using. Specifically, the survey requested to know the manufacturer of equipment including optical-transmission components, base-station controllers and transceivers.

Results from the survey were to be shared with the Defense Department and added to a database to map who made which parts on various networks.

AT&T and Verizon were among the dozens of businesses that received the survey. To collect data from companies, the US is using a 1950 law called the Defense Production Act that was used sporadically during the Cold War. Failure to comply could result in unspecified criminal penalties.

According to Joshua Pennell, president of Seattle-based cyber security firm IOActive Inc., spyware embedded within hardware or hidden in millions of lines of code could intercept sensitive information while being extremely difficult to detect. Having access to such data would give China industrial and political advantages.

In 2008, an Insignia brand digital photo frame sold by Best Buy was discovered running malicious software that had been embedded during the manufacturing process. The retailer was able to trace the software to a single computer at the manufacturer’s plant in China but refused to comment on who specifically installed the code or why.

Data was to be submitted by June 10 according to the survey but that deadline was extended when several companies expressed concern about how the sensitive material would be handled.

Hard drive supplies could be affected through late 2012

If you were hoping to stock up on cheap storage this holiday shopping season, you might be disappointed. Not only could therecent flooding in Thailand slow hard drive shipments through the fourth quarter of this year, supplies could be affected through the end of 2012, according to Seagate CEO Stephen Luczo.

Although Seagate's shipments are affected by the disaster, the company has been in good fortune. Two of its large factories have been spared by the floodwaters, but its business partners haven't been so lucky -- and therein lies the heart of the matter. Even though Seagate's facilities have remained out of harm's way, the company relies on parts from 130 or so suppliers, many of which are still under several feet of water.

Western Digital and Toshiba have factories in the flood zones and all told, the industry is expected to ship 50 million drives short of its 180 million target. Despite that gloomy projection, many sources claim that the crisis isn't as bad as it looks. One such article by DigiTimes yesterday says hard drive prices could begin dropping by December and that the balance between supply and demand is "not as serious as originally expected."

Some of the optimism stems from the relatively weak PC demand. Others cite the recovery of a Nidec plant that produces HDD motors. DigitTImes' sources believe we will see an "obvious improvement" in the situation by January 2012. Seagate's boss isn't so confident, however. "This is going to take a lot longer than people are assuming, until the end of 2012 at least," he told Bloomberg. "And by then, demand will have gone up."

The industry is hopeful that floodwaters will disperse by early December, so Luczo believes it's unrealistic to expect a full rebound by early or mid-2012. The situation is more complicated than just waiting for water to dissipate. Many facilities will have to replace their gear and some will be forced to relocate. Neither will be cheap and Seagate is reportedly fronting loans to some of its suppliers so they can get back on their feet.