Will Spying Charges Hurt Huawei?

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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laserbrain2 12/5/2012 | 1:30:02 AM
re: Will Spying Charges Hurt Huawei? I heard they're doing networks for the Bunny Cosmetics Testing Association and Lunch Money Bully Society too.
turing 12/5/2012 | 1:29:55 AM
re: Will Spying Charges Hurt Huawei?
Actually, the funny thing about almost all of your examples of everyday acts (eating some fruit without buying it, letting children eat candy without buying it, using a product and returning it as defective, etc.) are in fact EXACTLY immoral. They're not in the same class of immoral as robbing a bank, obviously, but they are wrong nonetheless. But in this Supercomm case, it went beyond that - to fit with your analogies, it's as if you went into the store when it was closed and did those things.
fls 12/5/2012 | 1:29:42 AM
re: Will Spying Charges Hurt Huawei? I don't think it is a big deal to take photos. I used to work in Lucent MA and we take out cisco's board and exam each chip to figure out why their ATM router can reach full linerate using the same chipset as ours.
whyiswhy 12/5/2012 | 1:29:40 AM
re: Will Spying Charges Hurt Huawei? Turing:

Duh, that was my point. But it hardly makes any difference in the midst of super acts of immorality like the war in Iraq, international bankers arbitrage, offshoring jobs, etc.

5514DD 12/5/2012 | 1:29:21 AM
re: Will Spying Charges Hurt Huawei? I have seen photos of the bombed-out COs in Iraq in quite a few cities -- you can clearly read the "Huawei" label on the equipment that was in them. Maybe Huawei didn't install or sell these directly, but their equipment was definitely in Iraq prior to our invasion.
Peter Heywood 12/5/2012 | 1:29:16 AM
re: Will Spying Charges Hurt Huawei? Is there any way of letting me see these pictures?

[email protected]
coreghost 12/5/2012 | 1:29:12 AM
re: Will Spying Charges Hurt Huawei? I guess the question is, &#8220;If these allegations are of merit, then why hasn&#8217;t the Bush Administration taken action against Huawei?&#8221;

The answer is that if the US has a problem with
Huawei, it takes the problem up with the Chinese
government directly. Most of the bad Huawei deals
were before the improved security relationship
between China and the US.

The contracts in Iraq and Afghanistan were Huawei
working with (and on behalf) of the PLA and its
agenda. Talking to or putting pressure on Huawei
would not change Huawei's behavior. But talking
to the government can.
Abby 12/5/2012 | 1:29:12 AM
re: Will Spying Charges Hurt Huawei? I guess the question is, GÇ£If these allegations are of merit, then why hasnGÇÖt the Bush Administration taken action against Huawei?GÇ¥ Maybe Light Reading can get an answer for us.

Excerpt from

Technology Two-Timing
By Kelly Motz and Jordan Richie
The Asian Wall Street Journal
March 19, 2001
GÇ£The U.S. government has the means to defend its interests. First, the Commerce Department should deny Motorola's export license. American technology should not go to a company that is violating U.N. sanctions and helping Iraq take better aim at U.S. Air Force pilots. Second, President Bush should invoke the 1992 Iran-Iraq Nonproliferation Act against Huawei. This U.S. law forbids the transfer of American technology to a company that helps Iraq acquire communication systems that "destabilize the military balance." Under the act, such a company could not receive U.S. export licenses for two years.
Third, President Bush should ask the American companies that are cooperating with Huawei to cut off their assistance. Do American firms really want to aid Huawei's illegal quest to outfit the likes of Saddam Hussein? And are they content to watch American pilots risk their lives to bomb things that they helped develop? It is folly to think that the United States can supply powerful technology to a country like China without eventually paying the price.GÇ¥

5514DD 12/5/2012 | 1:29:11 AM
re: Will Spying Charges Hurt Huawei? Can you see them? Sure. Can you have copies of them? Probably not, I want to keep my job if possible.

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