US Gets Worried About Huawei
Huawei Technologies Co. Ltd. 's push into the US hit another rough patch this week when eight senators called on the Obama administration to investigate whether national security would be compromised if the China-based supplier sold gear to Sprint Corp. (NYSE: S), which has contracts with domestic military and government agencies.
The group, led by Sens. Jon Kyl (R-AZ) and Christopher Bond (R-MO), fired off a letter on Aug. 18 expressing concern "that Huawei's position as a supplier of Sprint Nextel could create substantial risk for U.S. companies and possibly undermine U.S. national security."
Their reaction comes about six weeks after the Financial Times reported that Huawei was bidding for a big wireless contract with Sprint.
The senators said they were alarmed about reports that the supplier sold gear to Saddam Hussein's regime in Iraq and had previously supplied the Taliban. They also worried that Huawei has become a "leading presence in Iran, especially with military industries" and that, based on current US sanctions on Iran, "Huawei should be prohibited from doing business with the US government."
They labeled Huawei's purported relationship with China's People's Liberation Army (PLA) as "most troubling," noting Huawei founder and CEO Ren Zhengfei previously served as a PLA officer.
"At worst, Huawei's becoming a major supplier of Sprint Nextel could present a case of a company, acting at the direction of and funded by the Chinese military, talking a critical place in the supply chain of the US military, law enforcement, and private sector."
Concerns such as these are growing increasingly commonplace for Huawei and fellow China-based supplier ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) as they continue to push international growth strategies. Sales by those vendors to India had been blocked over similar concerns, but on Friday, the Indian government ended that temporary ban after the companies reportedly agreed on several conditions, including the handing over of certain network source codes. (We'll have more details on the situation in India soon.) (See Huawei Confident of Indian Import Resolution.)
In the US, the senators outlined a list of questions for the proposed investigation, including whether the government had any unclassified info regarding Huawei's affiliation, if any, with the PLA. They also want to know what contracts the Department of Defense (DoD) has with Sprint, and if it would present a national security threat if Huawei "gained a measure of control over a US contractor involved in sensitive US government contracts."
Huawei's image in the US has already taken some hits regarding allegations of intellectual property theft, most recently with Motorola Inc. (NYSE: MOT) and, before that, with Cisco Systems Inc. (Nasdaq: CSCO). (See Moto Accuses Huawei of Theft, The Trouble With Huawei..., Huawei in Spying Flap, and Cisco & Huawei Extend Stay.)
Huawei released a statement in response to the concerns spelled out by the senators, noting disappointment that "old mischaracterizations about the company still linger." Here's the full statement, supplied to Light Reading on Friday:
Huawei is disappointed to learn that old mischaracterizations about the company still linger and we want to reiterate some of the facts. The truth is Huawei is an employee-owned private company. Government or military organizations do not hold any shares, or control the company in any form.
As a leading global telecommunications solutions provider, Huawei abides by and respects third-party intellectual property rights (IPR) and strives for continuous innovation to maintain our leadership position. Huawei has not been found in violation of IPR infringement by any court in any country nor has Huawei been found to have acquired inappropriately any third-party proprietary information.
Huawei has a comprehensive trade compliance organization, policies and operation system, and strictly complies with all the laws, regulations, and related trade compliance regulations established by the UN and all the countries where we operate including the U.S. This also applies to Iran, where our business operation is similar to other western vendors in the market.
We are deeply committed to long-term investment in North America, and will continue to contribute to this market by providing innovative communications network solutions and services to address our customers’ challenges and needs. Huawei strives to be open, transparent and is committed to cooperate fully with all stakeholders to advance the U.S. telecommunications industry.
Although Huawei's position at Sprint is coming under fire, the vendor has had some success penetrating the US cable industry, mostly notably a confirmed wireless equipment agreement with Cox Communications Inc. and a purported one with Comcast Corp. (Nasdaq: CMCSA, CMCSK) related to IP Multimedia Subsystem (IMS) equipment. It's also been able to sell set-tops and optical gear into Suddenlink Communications . (See Cox, Huawei Make Wireless Connection , Huawei DTAs Break In at Suddenlink , and Huawei, Ericsson Get a Piece of Comcast's IMS Action .)
— Jeff Baumgartner, Site Editor, Light Reading Cable