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Huawei in Spying Flap

Light Reading
Supercomm News Analysis
Light Reading
6/24/2004
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A major equipment vendor is accusing a Huawei Technologies Co. Ltd. employee of corporate espionage following an incident that occurred after the Supercomm exhibit floor closed on Wednesday, Light Reading has learned.

Sources close to the situation say the Huawei worker was caught at a competitor's booth where he was examining circuit boards taken from the vendor's displayed gear and taking photographs of the company's products.

Supercomm security was called and the vendor confiscated the Huawei worker's camera Memory Sticks and took photocopies of his passport, visa, and several pages of notes. On the worker's exhibitor badge, the company's name was listed as "Weihua," which a source interpreted as an attempt to obscure his employer. Supercomm management stripped the worker of his credentials and told him to leave the area.

The employee -- a technical engineer named Yi Bin Zhu -- says the incident is a misunderstanding. Zhu spoke to Light Reading through an interpreter on Thursday at Huawei's Supercomm meeting room. He says this is his first time traveling outside of China and he was not aware that photography was prohibited on the Supercomm show floor.

Zhu says the incorrectly listed name on his exhibitor badge was also a misunderstanding. He says the Chinese custom of listing surnames first caused him to fill out his show paperwork incorrectly, resulting in the mangled name.

But there was plenty more to explain. Zhu's notes contained two pages of proprietary diagrams of an AT&T Corp. (NYSE: T) central office, a source familiar with the documents says. Also in his possession was a list of several vendors he had either visited or was about to visit, the source says.

The vendors on Zhu's list included Ciena Corp. (Nasdaq: CIEN), Lucent Technologies Inc. (NYSE: LU), Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), "Nothtel," Fujitsu Network Communications Inc. (FNC), White Rock Networks Inc., and Turin Networks Inc. Two specific products were singled-out in the list: FNC's Flashwave 4300 and Nortel's Optical Multiservice Edge 6500.

The contents of Zhu's Memory Sticks included photographs of the FNC 4300, with its casing removed, as well as some video clips of various company Supercomm presentations that were taken from what one source calls "surreptitious angles."

Zhu says his notes were just a guide to the vendors he was interested in. He denied pulling out any vendor's circuit boards to have a closer look.

David Swanston, Supercomm's director of communications, says that with more and more sophisticated devices, unauthorized photography is difficult to stop. "You can't prevent all of it," he says. "But we will prevent all we can."

At least two vendors on Zhu's list, upon being contacted by Light Reading on Thursday, say they're looking into what legal options are available.

In the past, Huawei has been accused of stealing intellectual property from Cisco Systems Inc. (Nasdaq: CSCO). Huawei's own investigation found that rogue developers were at fault, concluding that the incident was isolated (see Cisco & Huawei Extend Stay). — Phil Harvey, News Editor, and Peter Heywood, Founding Editor, Light Reading; and Ray Le Maistre, International Editor, Boardwatch

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got_light
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got_light,
User Rank: Light Beer
12/5/2012 | 1:28:35 AM
re: Huawei in Spying Flap
I think the poll appears to be incomplete. Mot only did I feel like taking the poll because of the contents, I also feel that it looks like justifying Espionage by giving inadequate statistics. I bet Huawei wold be pretty happy to see the poll results. What a waste of time LR is doing to cheer Huawei!
heads-up
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heads-up,
User Rank: Light Beer
12/5/2012 | 1:28:40 AM
re: Huawei in Spying Flap
Abby Wrote:

It is the account teamG«÷s responsibility to find this out and work with the powers that be in corporate to package the deal and improve customer satisfaction.
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Nothing wrong here. My point is, too much of
someone else's investment portfolio, in dollars,
in going into an activity (reverse engineering),
just to figure out how the box works. This takes
valuable time away from creating and innovating
new products. I'm starting to wonder if this
has been the driving force behind the meltdown
in the Valley. Maybe its time for me to take a
more Heads-Up approach and steal time away from
my ICE, wires, bus-analyzers, and understand
what's going on. BTW, from you've indicated, I
think maybe customers coulb be part of the blame.

heads-up
sigint
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sigint,
User Rank: Light Beer
12/5/2012 | 1:28:42 AM
re: Huawei in Spying Flap
Good points stephencooke,

I might add here that many a times, customers, especially alpha customers, would take your box apart to estimate BOM costs. that would give them a number to work with during price negotiations.

sigint
whyiswhy
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whyiswhy,
User Rank: Light Beer
12/5/2012 | 1:28:44 AM
re: Huawei in Spying Flap
Abby sez:

"Just like a good parent knows they don't have the luxury to pick and choose when they want to be a parent, the entities that make up the most powerful economy in the world know they don't have the luxury to pick and choose when to be a global leader, either. It's a matter of responsibility."

You know, I am by far the wealthiest person in my neighborhood...I think the neighbor that never mows his lawn, and never waves to me in the morning deserves removal. His wife is too good looking for him. Just a quick bump off, and his wife and house are mine.

It's my responsibility to keep the neighborhood clean. Of course, I'll take responsibility for his house and wife after the deed. is done. It's my duty. Can't leave the lawn un-mowed, or the poor widow lonely.

-Why

Abby
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Abby,
User Rank: Light Beer
12/5/2012 | 1:28:47 AM
re: Huawei in Spying Flap
Stephen:

DonG«÷t misunderstand me that this applies to every situation, but here is my experience with the items on your list:

- full feature list and price points

A full feature list can be useful as a checklist, but can also be disruptive, i.e. chasing the competition instead of meeting the customerG«÷s real requirements. Price points can be useful , but often encourage price sensitivity is the sales organization that eats away at a large % the companyG«÷s margin. IG«÷ve seen price quotes at negative and less than 5% margin. Who really wins? How do you justify paying the commission, if the company isnG«÷t going to make money on it is the real question that G«£shouldG«• be answered.

- customer list

How you obtain a customer list can get your company sued, at least here in the U.S.

- who they have relationships with inside each customer

This can be beneficial. Ever here the story about the sales guy that bashed a competitor to a client who was a new VP that came from a company that was a big implementer of the competition? Big mistake!

- what is their feature roll-out plan with timescales

How you obtain a feature roll-out plan can get your company sued, at least here in the U.S. More importantly, sometimes features are customer specific and have no value beyond that customer. Or niche in market where your product doesnG«÷t fit. Or hype and never really take off. IG«÷m not saying they are useless, but they can be very dangerous if misunderstood.

- what is customer perception of quality vs. price (obtained from someone other than the customer purchasing contact who is trying to leverage you on price)
- difficulties that they have had and their response time, customer perception of same
- customer decision-making criteria that got them in over someone else

It is the account teamG«÷s responsibility to find this out and work with the powers that be in corporate to package the deal and improve customer satisfaction.

stephenpcooke
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stephenpcooke,
User Rank: Light Beer
12/5/2012 | 1:28:47 AM
re: Huawei in Spying Flap
Hi Abby,

I understand your A vs. B scenario. The problem in the current market with this is that most hardware is outsourced to thrid party manufacturers (ie: the manufacturing processes, etc. are all available for a price to all comers). To get an idea of the costs involved might be valid but that also depends on the gate count/yield of the ASICs, the complexity of the software, the feature content, etc. all of which are very difficult to discern from looking at the hardware.

I would suggest that more valuable competitive intelligence would include things like:
- full feature list and price points
- customer list
- who they have relationships with inside each customer
- what is their feature roll-out plan with timescales
- what is customer perception of quality vs. price (obtained from someone other than the customer purchasing contact who is trying to leverage you on price)
- difficulties that they have had and their response time, customer perception of same
- customer decision-making criteria that got them in over someone else
- etc.

On the corporate side I would suggest that each of these is more useful.
stephenpcooke
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stephenpcooke,
User Rank: Light Beer
12/5/2012 | 1:28:47 AM
re: Huawei in Spying Flap
A few comments on reverse engineering...

The best way to get to market is to innovate your own stuff. There are many reasons for this including personal drive to take your very own product to market (ie: you have pride and a sense of ownership). You are more likely to make sure that as many of the bugs get fixed as possible, in short, you will go that extra mile, usually without the need of having your manager ask you to.

There is a serious time factor involved to even consider reverse engineering. Basically you have to re-engineer a product that had some latent flaws. It takes time even to re-build hardware, that is totally ignoring the software development effort. You might be able to get the non-custom part placement right on the board, you might be able to get the track thickness right on the back- (or mid-) plane, you may even be smart or lucky enough to figure out what the registers do on the custom parts, but writing the code to run the box is totally out there.

The bottom line here is that no matter how cheaply you can make a product, if it doesn't work no one will buy it from you. Those who made the box in the first place know it inside and out and have made corrections along the way to mistakes, etc. If you copy the design you will have an incredibly hard time getting it right and you have no hope on the quality side because you will just not have the 'feel' of the product.

When I was a designer at Nortel many years ago we had a Lucent OC12 box in the lab at one point. Did we take it apart? No. Did we have the expertise to reverse engineer it? Probably. Did we try to figure out how it worked? No. We really didn't look at it much. If anything we may have done some interop testing with it but I didn't even see anyone doing that, we just didn't have the manpower or the time.

If reverse engineering is the only option that you've got, good luck. In this industry you have already lost. The better approach is to buy the company and have them help you integrate the product into your corporate strategy.
Abby
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Abby,
User Rank: Light Beer
12/5/2012 | 1:28:48 AM
re: Huawei in Spying Flap
heads_up said:

I'm having trouble understanding why reverse engineering is considered an appropriate method
for being competitive. Maybe I'm a bit old- fashioned; but, I would take better pride in myself if I were to come up with an idea with some potential market promise, rather then wasting my time trying to undo someone else's work. I mean why? Hence, there's has to be a budget for all this reverse engineering to take place. Right? What a waste of money.

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Going back to what I said, G«£reverse engineering, considered an appropriate tool for competitive intelligence, may yield important competitive intelligence information about a competitorG«÷s quality and costs,G«• IG«÷ll try to explain the rational of why itG«÷s considered appropriate.

Consider the case of auto manufacturer A and B where A sells passenger cars that are less durable in extreme cold or hot climate while and B sell luxury cars that are more durable under these conditions. Through reverse engineering A can learn from B the type of paint composition required for improve the durability of its passenger cars. Hence, A can now build passenger cars with better durability to satisfy the needs of customers in the passenger car price range. Likewise, although B sells luxury cars, B would like to sell a low-end luxury car for consumers who are price sensitive to its luxury line. Through reverse engineering of AG«÷s cars, B can learn a lot about where it can lower its costs to build the low-end luxury car to satisfy the needs of customers that would buy a luxury car at a lower price.

Competitive intelligence offers these kinds of benefits which help consumers get better products that meet their needs. The problem arises when itG«÷s abused like patent infringement because the originator of the idea is not being compensated for its creativity or innovation. Another problem that arises is that competitive intelligence is often misunderstood as to why the company is doing it. As a result, it gets to the point that it literally cripples a corporation. For instance, the company gets so caught up in the competition (what they are doing or what they have that it doesnG«÷t) that typically they get defocused and lose sight of the real value of their product and company and what they have to offer.
heads-up
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heads-up,
User Rank: Light Beer
12/5/2012 | 1:28:48 AM
re: Huawei in Spying Flap
This is just my two cents. Crack the books,
examine other people's code (nothing wrong with
that) and walk away learning something. But
refrain from plagiarizing or copying material.
I told you I was old-fashioned.
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Yes. You are indeed old fashioned. This attitude may work in academia, but it does not apply to the business domain. Its a dog-eat-dog world out there, winner take all. A competitor which can offer the same product at a lower cost will always win in the end, provided the law doesnt impede their success.

Huawei is doing its part to get to the top of the router world. Lets at least give them credit for that.
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So much for creativity and innovation.

Sad

heads-up
heads-up
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heads-up,
User Rank: Light Beer
12/5/2012 | 1:28:49 AM
re: Huawei in Spying Flap
Abby Wrote:

What many will do in a grocery store, like taste the fruit to see if itG«÷s ripe or read magazines without buying them, defies the laws of morality too, but they still do it. As for this guy from Huawei, the issue of whether his conduct was immoral or not is between him, his management, and the other parties involved. I personally, donG«÷t think the rest of us are in a position to cast stones since none of us are witnesses or have all the information.
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Okay, so someone in Grocery Store sampled a piece
of fruit, pastry, or other consumable items. So,
if you see it, make sure you tell someone who
works at that particular store about it. Don't
take a bind-eye approach. If you see and feel
this is wrong, then alert a store manager.

As for the part on casting stones, there are a
many good engineers out there, who sweat, push,
and do what it takes to innovate, create, and
make a product happen. Those who have achieved
this level of work, have earned the right to
criticize. Yeh, I'm old-fashioned.

heads-up
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