The world's dominant semiconductor company said China's homegrown encryption technology failed to work well with chips based on the existing global standard known as Wi-Fi.
Intel's decision could force it to stop selling some of its most popular chips in one of the world's fastest growing markets.
"After an extensive review ... we concluded we can't find a technical solution to a number of serious concerns we have about the technology, including interoperability, performance, deployment and application support," Intel spokesman Chuck Mulloy said Wednesday.
Like other chipmakers, Intel would not rule out eventually using the technology, called WAPI, provided China is open to making technical changes. But the Chinese government, pushing the technology through two dozen local companies, has remained steadfast in requiring wireless vendors to support it by June 1.
Typically, standards are debated and set by groups made up of companies that manufacture and sell the products affected by the rules. In the case of WAPI, China developed the technology internally and has not openly shared details.
"This is kind of a little bit of a curve ball for all of us," said Frank Ferro, senior manager of wireless LAN marketing at Agere Systems Inc., which makes Wi-Fi hardware.
No U.S.-based chip makers have announced plans to have chips available by the deadline.
In December, China ordered wireless equipment makers to use the locally developed standard, ostensibly out of security concerns. But the move also gives the country's domestic manufacturers an edge over foreign competitors and leverage in patent-swapping negotiations.
The requirement, if enforced, would mean foreign companies having to purchase the technology from one of two dozen Chinese companies that may ultimately become rivals. Often, such deals involve an exchange of intellectual property rights.
Chipmakers and other companies complained, and there have been hints from Beijing that the government might extend the deadline for compliance. The press office at the Chinese Embassy in Washington did not return calls seeking comment.
Earlier this month, three U.S. officials--Secretary of Commerce Donald Evans, Secretary of State Colin Powell and White House trade representative Robert Zoellick--wrote a letter to China's deputy prime ministers expressing concern and urging a resolution.
Intel, which makes the popular Centrino wireless chip set, informed the Chinese government that it would not have a compliant product available by June 1.
"We don't have a schedule for when we will have products," Mulloy said. "At this point, the challenges are significant enough that we can't make a commitment."
The Wi-Fi Alliance, which represents wireless networking vendors, said the Chinese government has not widely released technical details of the plan.
"We feel the adoption of a unique standard ultimately is costly, inefficient and unnecessary for the marketplace," said Wi-Fi Alliance chairman Dennis Eaton. "Basically, it disrupts the economies of scale that manufacturers of goods based on a single standard can obtain."
Ultimately, it results in higher costs for makers and consumers, he added.
China is one of Intel's largest markets, and the Santa Clara, Calif.-based company maintains a significant presence in the country. Mulloy declined to say what impact, if any, the wireless dispute might have on overall sales.
Still, Intel said it would continue to work to resolve the situation.
"The door is still open," Mulloy said. "We believe that if we keep working at it, we might be able to come to solution."