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Will Spying Charges Hurt Huawei?

Light Reading
Supercomm News Analysis
Light Reading
6/28/2004

The capture of a Huawei Technologies Co. Ltd. employee taking photographs of equipment at the Supercomm tradeshow last week has many people scratching their heads – because the damage it could cause the company far outweighs any benefit it was likely to reap (see Huawei in Spying Flap).



Yi Bin Zhu, a Huawei technical engineer, admits that he was taking pictures and says he didn't realize this wasn't allowed. In an interview with Light Reading, he denied having taken circuit boards out of boxes to photograph them, even though sources say he was found taking pictures of a piece of equipment with its cover removed. Memory sticks confiscated from Zhu's camera also allegedly contain pictures of circuit boards.

Opinions differ on the value of information that could be gleaned from photographing equipment and making notes about it (Zhu's confiscated notebook was packed with hand-drawn diagrams and other data, probably of equipment he'd looked at, according to sources who saw it). The way fiber is routed and equipment is cooled can give important clues to developers, according to Andrew Knott, VP of marketing and customer service at White Rock Networks Inc., one of the vendors Zhu was planning to visit, according to a list found in his posession. White Rock is waiting to find out whether Zhu took pictures of its equipment.

It's also clear that Zhu's activities are far from unusual. "It would be a rare tradeshow that I didn't have to metaphorically slap someone's wrists for taking photos, prodding buttons, lingering too long, etc.," says Knott. "The most overtly inquisitive companies are usually Asian and Israeli."

The fact that Zhu was caught in the act is likely to be damaging for Huawei, coming as it does after a couple of other instances where the company appeared to be involved in underhanded business practices.

One episode concerns the copying of routing code belonging to Cisco Systems Inc. (Nasdaq: CSCO). In this case, Huawei blamed rogue developers for the problem (see Cisco & Huawei Extend Stay).

The other concerns allegations that Huawei built an optical network in Iraq which had a dual use – for telecommunications and for a missile network. A March 17, 2001, Washington Post article said: "Pentagon officials have accused the company of laying optical communications cables between Iraqi antiaircraft batteries, radar stations, and command centers, which they say could significantly aid Baghdad's efforts to shoot down U.S. warplanes patrolling the 'no- fly' zones over northern and southern Iraq. The Pentagon officials cited the alleged construction work as the primary reason for a joint U.S.-British air raid on Feb. 16, the largest strike against Iraq in two years."

Richard Lee, a Huawei spokesman, has refuted these charges in the past. He says Huawei won two projects in Iraq in 1999 but didn't go ahead with the actual work. Huawei spent two years seeking approval for the project under the United Nations' Oil for Food program (now itself under investigation), and when the go-ahead finally came through, Huawei decided not to go ahead "for business reasons," according to Lee. Another vendor, possibly French, took over the project, he says.

"During the bidding process, Huawei complied fully with United Nations Security Council (UNSC) Resolution 661. Details on the contract terms and technical solutions of the projects were submitted to and approved by the UNSC 661 Committee," Lee writes in an email message.

This latest incident might be enough to persuade some prospective customers and partners that Huawei isn't to be trusted. 3Com Corp. (Nasdaq: COMS) declined to comment on the effect it might have on its partnership with Huawei, targeting enterprise users (see 3Com Feeling Cisco's Heat). Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) hadn't responded at press time to requests for comment on whether the spying charges might dent its reseller agreement with Huawei.

Perhaps the most serious repercussions could be on Huawei's ambitions to stage an IPO in the U.S. These plans have already been put on ice once before (see Huawei's US Aspirations on Hold and Light Reading's Top Ten Private Companies).

— Peter Heywood, Founding Editor, and Phil Harvey, News Editor, Light Reading

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markjohn20
markjohn20
12/5/2012 | 1:30:16 AM
re: Will Spying Charges Hurt Huawei?
I know this was brifly mentioned in the original story, but I see that the company name has been reversed on the name badge. In the original story, I think the Huawei employee was quoted as saying that in China names are reversed.

I speak Mandarin and I lived in Asia for 8 years, and I personally have never known a COMPANY to reverse its name.

Names of *people* are reversed in Chinese (though, for Chinese people, western names are reversed :]) - for example, Chen Sulin (Chen is the surname). But to reverse a company name would be meaningless.

So, *if* it is true that the preson in question said that the reason that the company name was reversed was due to the Chinese convention, then I would seriously have to doubt everything he has to say.

Mark


DSLGuy
DSLGuy
12/5/2012 | 1:30:15 AM
re: Will Spying Charges Hurt Huawei?
I guess it's time to close the blinds on my test lab since they moved in across the street...
firstmile
firstmile
12/5/2012 | 1:30:15 AM
re: Will Spying Charges Hurt Huawei?
Is there really any doubt related to what the person was really up to?
Now we will never really know whether he was acting alone, or if this was a company sponsored mission.
However, based on the company's proven history...I would guess that they would not frown upon these actions.
...first
paolo.franzoi
paolo.franzoi
12/5/2012 | 1:30:12 AM
re: Will Spying Charges Hurt Huawei?

This stuff happens continuously. I toss people out of our booth every year for pulling cards. Its also why we have lots of "trade show cards" for non-active demos (i.e. they are fake).

If you want a better look at your competitors product, buy one from a distributor. Its just not that hard.

seven
Abby
Abby
12/5/2012 | 1:30:12 AM
re: Will Spying Charges Hurt Huawei?
There was a lot of un-called for commentary was made in the other article's message board, if you know what I mean. In fact, I wouldn't be surprised if a few bridges were burned. So, don't be surprised if Light Reading ends up reporting on your company in the future.
Sisyphus
Sisyphus
12/5/2012 | 1:30:11 AM
re: Will Spying Charges Hurt Huawei?

...if the barrier to entry is low enpough to allow someone to entirely reverse engineer based on pictures taken on a trade show floor, well, never mind Huawei, because there'll be a bunch of others duplicating the gear in no time. I mean, come on, the blatant picture taking is bad form, but it's *other* stuff that one uses to reverse engineer. Stealing code. Procuring equipment and taking it apart. Not taking pictures.

zoinks!
zoinks!
12/5/2012 | 1:30:10 AM
re: Will Spying Charges Hurt Huawei?
I wonder what would've happened if I (a white American) were caught taking pictures at a trade show in Beijing...I'd probably never be heard from again.

Maybe US companies need their own GITMO.

Zoinks!
Dr,Q
Dr,Q
12/5/2012 | 1:30:10 AM
re: Will Spying Charges Hurt Huawei?
I agree with MarkJohn (post #1). I also speak Mandarin, having worked in Taiwan 1.5 years.
Listing the company name as "WeiHua" could only be done deliberately.

...Dr.Q
coreghost
coreghost
12/5/2012 | 1:30:06 AM
re: Will Spying Charges Hurt Huawei?
1) It is VERY unusual to be sneaking into booths
after show hours and taking apart equipment to
photograph. The rules of the game are that
its up to the people in the booth to stop anyone
taking photos if they object, but if your sneaking
into booths after the show there is no
explanation.

2) Huawei wasn't just in Iraq. It was also
helping the Taliban in Afghanistan and can
be generally found wherever the PLA has a need
to sell communications equipment. Huawei
is a close partner of the PLA in achieving
the objectives of the Chinese government
outside of China.
whyiswhy
whyiswhy
12/5/2012 | 1:30:03 AM
re: Will Spying Charges Hurt Huawei?
Yea, yea...

First:

The case is one of PR stupidity. Huawei has no marketing department, so nobody to "package" the place and worry about such minor things as PR, strategy, foreign sales, etc. Think of them more like a US aerospace contractor, then you will understand the mentality. There is no there, there.

Next:

Iran, North Korea, Sudan, Pakistand...you name it. I would wager most companies in the US would compete for the work. They should, until it is made illegal. That's the job of the politicians. So all the neo-cons should shut up on that issue, or get Bush to outlaw it. Fat chance.

Now, as to some of my pet beefs (from actual daily experience here in SilliValley):

Grocery store:

- Tasting fruit to see if it is ripe, taking a few to eat while wandering store
- Using deodorant, mouthwash and/or toothpaste, putting container back into box, onto shelf
- Letting children eat candy from bulk bins, play with toys from toy aisle, and never buying any of it.

Bookstore:

- Read entire articles from magazine or an entire book and never buy it.

Hardware or electronics store:

- Buy item, use it for a week and return it as "defective"

...and it's not just the "consumer" at fault...

- - OSH: store displays used lawnmower with mud on wheels and grass stains, tag with as-new price, same with garden tools and lawn irrigation fixtures
- - Fry's: repackages returned items and sells them at as-new price

It used to be you only encountered this kind of shenanigans at the used-car dealer...no more, it's main stream. It's so common, a complaint will get you stares.

Death of polite civilized culture by a thousand small cuts....

-Why
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