Huawei Dismisses Economic Impact of U.S. Government Warning: Report

A Huawei executive told Reuters that a U.S. Committee's warning that U.S. companies be leery of its telecom equipment isn't likely to have an impact on sales.

Huawei, the leading Chinese telecommunications equipment manufacturer, doesn't expect a U.S. government warning to potential customers to affect its business, according to an Oct. 17 report from Reuters.

Zhang Chunxiang, Huawei's senior vice president, told a Reuters reporter at a business event in Hangzhou, China, that the United States and Huawei were still in talks, and the U.S. investigation was a sign of "trade protectionism."

Zhang added, "They investigated for 11 months and they didn't consider all the different material supplied by Huawei and they still came to that conclusion. They investigated like they never investigated at all."

On Oct. 8 the U.S. House Intelligence Committee issued a report saying that, after a long investigation, it found that Huawei and ZTE, a rival China-based telecom company, could pose a threat to U.S. national-security interests. The Committee made five recommendations, including that the U.S. view the penetration of the U.S. telecom market by Chinese companies "with suspicion" and that government systems in "sensitive areas" "not include Huawei or ZTE equipment."

The Committee's fear, it wrote, is that, "to the extent these companies are influenced by the state, or provide Chinese intelligence services access to telecommunication networks, the opportunity exists for further economic and foreign espionage by a foreign nation-state already known to be a major perpetrator of cyber espionage."

A Huawei spokes person, William Plummer, immediately responded by calling the report a reckless threat to American jobs and saying that it should "be exposed as a dangerous political distraction from legitimate public-private initiatives to address what are global and industry-wide cyber challenges."

The Committee's investigation was started at the prompting of Huawei, which feared—correctly, said the report—that without an investigation into its corporate activities, the United States wouldn't be comfortable trusting its equipment and services in U.S. telecom networks. And still, neither Huawei nor ZTE provided investigators with sufficient information to allay their fears.

"Huawei, in particular, failed to provide thorough information about its corporate structure, history, ownership, operations, financial arrangements, or management," stated the report. "Most importantly, neither company provided sufficient internal documentation or other evidence to support the limited answers they did provide to Committee investigators."

"I don't think there will be an impact," Huawei's Zhang told Reuters.

The U.S. currently contributes single-digit percentages to the revenues of both companies. IHS iSuppli analyst Jagdish Rebello explained in an Oct. 8 report that prior to the Committee report, "U.S. telcos already were reticent to purchase equipment from the top Chinese firms due to scrutiny from the American government."

According to Reuters, the U.S. Committee report has prompted Canada and Britain to consider the issue.

By contrast, the European Commission, which had been considering launching a case against Huawei and ZTE, regarding a different matter, decided to hold off for a time, Reuters reported Oct. 9. The EC didn't want to add to the burden of its second-largest trade partner, China.

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