Huawei's Open Letter to the US

On Thursday, Huawei Technologies Co. Ltd. sent out an open letter following its aborted acquisition of 3Leaf. (See Huawei Sheds 3Leaf.)

The letter discusses that situation, but it also goes much further, addressing all the major concerns that have tailed the company in the United States. That would include Huawei's alleged ties to the Chinese military, its funding and its previous intellectual property spats, including the famous one with Cisco Systems Inc. (Nasdaq: CSCO).

In short, Huawei has finally decided to take a stand against what officials believe is an unfair perception of the company.

Here at Light Reading, we felt it was worth presenting the entire 2,000-word letter. Especially the last paragraph. Enjoy.

— The Staff, Light Reading

Huawei Open Letter:
Author: Ken Hu,
Deputy Chairman of Huawei Technologies, Chairman of Huawei USA
We would like to provide the basic facts behind the recent 3Leaf matter that has been the subject of much attention and discussion about Huawei. These facts will not only help understand the real situation behind the proposed acquisition, but also Huawei’s position on this matter. They will also clarify some long-standing and untrue rumors and allegations regarding Huawei.

Futurewei, Huawei's U.S. subsidiary, purchased certain assets from 3Leaf, an insolvent technology start-up located in Santa Clara, California, in May and July 2010, when 3Leaf was ceasing its operations and no other buyers for its intellectual property were forthcoming. Huawei submitted a timely request to the Bureau of Industry and Security at the Department of Commerce in advance of completing the purchase in May and the Department of Commerce certified that no license was required to export the 3Leaf technology. After learning that CFIUS was interested in the 3Leaf transaction, Huawei submitted draft and formal voluntary filings to initiate a CFIUS review of the transaction in November 2010.

On February 11, 2011, CFIUS formally notified Huawei that it recommended that Huawei withdraw its notice under terms dictated by CFIUS. We originally decided to decline the offer with an intention to go through all of the procedures to reveal the truth about Huawei. However, the significant impact and attention that this transaction has caused were not what we intended, and on February 18, we decided to accept the recommendation of CFIUS to withdraw our application to acquire specific assets of 3Leaf.

The United States of America is a great country and one for which Huawei has always had the utmost respect. The values of democracy, freedom, rule of law and human rights in the U.S. are the very values that we at Huawei respect, advocate, and live by. As a company, we are learning much from our close links with the American people. In his inauguration speech, President Obama said, "On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord. On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn-out dogmas that for far too long have strangled our politics." We share that vision, and it is the foundation on which we have sought to build our cooperation with American firms as we have invested and grown our business in the United States over the past decade.

Who We Are
Huawei Technologies, founded in 1987 in Shenzhen, China, is a private company owned entirely by its employees. We are currently the second largest telecommunications equipment provider in the world.

Huawei is committed to being a long-term investor in the United States where we already have over 1,000 U.S. employees. In 2010, we purchased products and services from American companies totaling some US$6.1 billion. Our investment in research and development activities in the United States has grown by an average of 66% per annum and it reached US$62 million in 2010. We have long been offering innovative products and services to our customers in the United States and we have always been a responsible investor, employer, taxpayer and corporate citizen.

Facts versus Misperceptions
Unfortunately, over the past 10 years, as we have been investing in the United States, we have encountered a number of misperceptions that some hold about Huawei. These include unfounded and unproven claims of "close connections with the Chinese military," "disputes over intellectual property rights," "allegations of financial support from the Chinese government," and "threats to the national security of the United States".

These falsehoods have had a significant and negative impact on our business activity and, as such, they must be addressed as part of our effort to correct the record. First, the allegation of military ties rests on nothing but the fact that Huawei’s founder and CEO, Mr. Ren Zhengfei, once served in the People’s Liberation Army. Born on October 25, 1944 into a rural family where both parents were schoolteachers, Mr. Ren spent his primary and middle school years in a remote mountainous town in Guizhou Province, and studied at Chongqing Institute of Civil Engineering and Architecture, where he graduated in 1963. He was employed in civil engineering until 1974 when he joined the military’s Engineering Corps as a soldier tasked with building the then French-imported Liao Yang Chemical Fiber Factory. From there, Mr. Ren was promoted to Technician, Engineer and Deputy Director, a deputy-regimental-chief-equivalent professional role that had no military rank. Because of his outstanding performance, Mr. Ren was invited to the National Science Conference in 1978 and the National Congress of the Communist Party of China in 1982.

After retiring from the army in 1983, when China’s central government disbanded the entire Engineering Corps, Mr. Ren became dissatisfied with his job at the logistics service base of the Shenzhen South Sea Oil Corporation and decided to establish Huawei with RMB 21,000 (about US$2,500) in capital in 1987. He became the President of Huawei in 1988 and has held the title ever since.

It is a matter of fact that Mr. Ren is just one of the many CEOs around the world who have served in the military, and it is also a matter of fact that Huawei has only offered telecommunications equipment that is in line with civil standards. It is also factual to say that no one has ever offered any evidence that Huawei has been involved in any military technologies at any time.

The second issue is about intellectual property rights. Since our establishment, Huawei has respected and protected the rights of all intellectual property holders while vigorously defending our own intellectual property rights. We have applied for 49,040 patents globally and have been granted 17,765 to date. In addition to our own innovations, we buy access to other patent holders’ technologies through cross-licenses. In 2010, Huawei paid western companies US$222 million in licensing fees. Of that total, US$175 million was paid to American firms. For example, over the years we have paid U.S. company Qualcomm more than US$600 million in fees related to their intellectual property. The fact that Cisco withdrew the lawsuit it filed against Huawei in 2003 regarding allegations of intellectual property rights infringement further vindicates Huawei’s position in that matter and supports our position that we are only engaged in legitimate business practices. We learned from that experience that while disputes may arise in the course of business, they can be settled properly through bilateral negotiations. With respect to the claim that Huawei receives financial support from the Chinese government, the truth is that we operate like any other private corporation. Our company is financed through capital from our shareholders and through normal commercial loans. In addition, Huawei is headquartered in the Shenzhen Special Economic Zone, so our company has always grown within a market economy.

Like many other companies that operate in China, Huawei receives tax incentives provided by the Chinese government to high-tech enterprises and support for some of our research and development initiatives. This is similar to tax incentives offered by American government agencies to U.S. companies. In 2010, Huawei received a total of RMB 593 million (USD$89.75 million) of financial support from the Chinese government for our research and development activities. All of this is consistent with financial support that is provided to normal businesses in China and in many other countries, including the United States.

The credit lines made available through Huawei by China’s commercial banks are actually designated for Huawei’s customers, not Huawei. As an intermediary, Huawei recommends loans to our customers and, once taken, our customers are responsible for paying the principle and interest directly to those banks. It is important to note that these types of loans only represented about 9% of Huawei’s annual income in 2010, a level that is similar to our industry peers. In 2004, the China Development Bank agreed to offer a US$10 billion buyer’s credit line to our customers and the amount was subsequently increased to US$30 billion in 2009. As of today, US$10 billion has been loaned to our customers from the China Development Bank.

The allegation that Huawei somehow poses a threat to the national security of the United States has centered on a mistaken belief that our company can use our technology to steal confidential information in the United States or launch network attacks on entities in the U.S at a specific time. There is no evidence that Huawei has violated any security rules. Not only that, in the United States we hire independent third-party security companies, such as EWA, to audit our products in order to certify the safety and reliability of the products at the source code level. In addition, Huawei has established a "trusted delivery" model to protect the security of networks we supply.

If the United States government has any real concerns of this nature about Huawei we would like to clearly understand those concerns, and whether they relate to the past or future development of our company .We believe we can work closely with the United States government to address any concerns and we will certainly comply with any additional security requirements. We also remain open to any investigation deemed necessary by American authorities and we will continue to cooperate transparently with all government agencies.

As a privately-owned civil communications equipment provider, we were the first company to establish an end-to-end network security system globally. We have been actively tackling challenges of network security through partnerships with network security regulators throughout the world. We believe that security problems will become more and more significant for everyone in our industry as the amount of data continues to grow rapidly. We are committed to working together with governments in all countries to take all necessary measures to protect information security.

Former American president Abraham Lincoln once said, "Character is like a tree and reputation like its shadow". In recent years, misperceptions and rumors have been the shadow of Huawei, affecting Huawei’s reputation and, we believe, the United States government’s judgment of Huawei. We sincerely hope that the United States government will address this issue by carrying out a formal investigation of any doubts it may have about Huawei in an effort to reach a clear and accurate conclusion.

The American telecommunications market is the largest in the world and Huawei has been striving to demonstrate our capabilities with a view to becoming a key contributor in this important market. However, unfounded accusations have jeopardized our business activities, with many false claims driven by competitive interests, which we understand because competition can be difficult. Huawei’s world-leading wireless broadband technologies can bring American telecom operators, as well as the general public, more advanced technologies and higher network speeds at a lower price. With the structure of wireless base stations becoming simpler, they do not pose any threat to national security, just as mobile phones do not pose risks to national security. While we can commit to not selling any products that concern American operators, we sincerely request guidance from the United States government on the scope of such restricted products and the duration of the related restrictions, as certain technologies that may seem crucial today will lose their leadership and sophistication over time. A full and permanent restriction is way too costly and unfair to any company.

We sincerely hope that the United States government will carry out a formal investigation on any concerns it may have about Huawei. The United States is an advocate for democracy, freedom, rule of law, and human rights. The United States government has demonstrated its efficiency in management, fairness and impartiality and we have been impressed by that ever since we made our first investment in this country some 10 years ago. We have faith in the fairness and justness of the United States and we believe the results of any thorough government investigation will prove that Huawei is a normal commercial institution and nothing more.

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moon_shot 12/5/2012 | 5:38:19 PM
re: Huawei's Open Letter to the US

Huawei stole every single IP document from Nortel Networks over a 10 year period, as recently reported globally.  Hmmm.  Sounds like an upstanding and forthright company to me.


paolo.franzoi 12/5/2012 | 5:12:09 PM
re: Huawei's Open Letter to the US


My take is that we should ban all Chinese engineered products from the comm network in the US.  It is simply too big a hole for security.  If Huawei were willing to create a wall and do all of its development for US sold products in the US, then I would consider buying from them.  An alternative would be that they deliver every schematic and line of source for every version of every product that they build to the NSA.  Once the NSA declares it good, then we can allow it in.




lowprofile 12/5/2012 | 5:12:09 PM
re: Huawei's Open Letter to the US

The loan given by China Development Bank to Huawei's customers are for buying Huawei's products and services, right? 

China Development Bank is controlled by Chinese government, right?

The customer that gets the loan uses it to pay Huawei, right?

The bank does not provide the same loan to Cisco or Juniper or Brocade customers, right?


If the above is correct, then the logical conclusion is Huawei is indeed financially supported by the Chinese government to the extent to $30billion, which is a lot!

keepsimple 12/5/2012 | 5:12:09 PM
re: Huawei's Open Letter to the US

This letter is long overdue. I am wondering if Cisco / Juniper / Motorola are fully restricted in China?


Taporirz 12/5/2012 | 5:12:09 PM
re: Huawei's Open Letter to the US

Seven, in that case I suggest you start buying some stamps for postage because its probably the only means of communication that you could use that won't require any product "engineered" in China. We live in a global economy in which an ecosystem exists and development is done across many regions.  Every major viable vendor in the world today has some development in China or atleast some component that is developed in China.  So from your absolute statement the NSA should be very busy verifying everyones code.

General comments like "it is simply too big a hole for security" is an insult to the technical community. 


paolo.franzoi 12/5/2012 | 5:12:08 PM
re: Huawei's Open Letter to the US


My take is that the NSA has already hacked all Cisco and Juniper products (as well as Alcatel and Erricson routers).  The idea is that they get the Huawei gear so they can hack all the Chinese Government Communications.  

If it were me I would actually ban ALL imports from China and default on the debt owed them, but that is me.  We live in a Global Economy but the US for now is still several times the size of the Chinese Economy.

Engineering is one thing, manufacturing is another.  I said engineering to be specific.  If it is designed in China you should assume that the Chinese Government can use it to hack your networks.  Really think this is a good idea when we are on a collision course with China?



pdonegan67 12/5/2012 | 5:12:08 PM
re: Huawei's Open Letter to the US

Governments are entitled to their concerns, whatever they may be. Under a democratic system, there is nothing more sacred than a citizen's right to expect that their security will never be knowingly compromised by those they elected.

The interesting question for me is when you have a company like Huawei which is increasingly leading and defining the telecom industry’s future technology roadmap, at what point does a country’s global competitiveness start to be hindered by denying its service providers access to a major technology leader? And at what point does throttling back on competitiveness actually become a greater national security risk than the risk supposedly posed by the presence in the network of a Chinese vendor?

You might argue that Verizon's networks seems to be doing perfectly well in delivering leading wireline and wireless services without Huawei, thank you very much. In wireless, for example, Verizon is the world leader in 4G LTE deployment as well as in ARPU projections, for goodness sake.

But project that five or ten years further out and how competitive will Verizon remain if it only sticks with its current suppliers? Just as importantly, how can Sprint, AT&T and T-Mobile be expected to stay competitive in the interests of American businesses and consumers unless they’re able to have access to all the best network technology?

However legitimate the motivations of the politicians and the spooks, it seems to me that the balance of risk is bound to shift over time.  Last October Heavy Reading published a report looking at the lengths to which the world's largest vendors, most notably Huawei and NSN, are going to demonstrate their security credentials.  http://www.heavyreading.com/details.asp?sku_id=2613&skuitem_itemid=1288&promo_code=&aff_code=&next_url=%2Flist%2Easp%3Fpage%5Ftype%3Dall%5Freports. Interestingly, the only major vendor that refused to contribute to the report was Cisco, citing reasons of, ahem, "security". Go figure. It's a funny thing this security business….

quicktime 12/5/2012 | 5:12:06 PM
re: Huawei's Open Letter to the US

Though the fact is not true.

I am curious at of the logic behind the induction.

Think about GM, AIG, GS, MS, BOA, JPM

They are all backed by your tax money directly.


Engineering is engineering.  Be rational and be simple.



JeddChen 12/5/2012 | 5:12:06 PM
re: Huawei's Open Letter to the US

I agree with you.

many major IT/CT vendors, like Ericson, the leading solution provider is now recruiting people in China to develop media network and mobile core network.

check the link: http://topic.csdn.net/u/20110119/10/f8b48d8a-ca8d-43b4-8bee-8a77f08287dd.html.


According the point of view of Mr. Seven, this famous European company can sell it solutions to USA? I don't think that Ericson has asked NSA or third party to check all "hole" in its solution. Be careful, it is made in China:-)

Qualcom is also recruiting now on website of www.52rd.com. check the link:


paolo.franzoi 12/5/2012 | 5:12:05 PM
re: Huawei's Open Letter to the US

Here is where I come from.  If you project out 10 – 20 years, China will have its entire communication infrastructure built by Chinese Companies by Chinese Engineers.  What that means is that they will be the only country entirely in control of their own communications infrastructure.  I think that this is a great national security move by the Chinese Government.  It will certainly make it much harder for US spy agencies to penetrate them and just as importantly make their infrastructure more immune to external attack.

What I think is misunderstood is that our infrastructure is very important to our day to day lives. Energy, Water, Transportation and Communications are essential for our society to function.  Imagine a day when nobody in the US could make a call, send a text or use the Internet.  I am not sure there would be “panic in the streets” but if it lasted for very long the US economy and our lives would be hurt very badly.

The problem I have with Huawei (and ZTE and any other equivalent) is that having that equipment in our networks make it more likely that we are vulnerable to these attacks.  It is not Huawei’s fault.  I don’t think the people that work there are evil or bad people.  But I am confused on why anybody thinks its a good idea to hand what is an enemy state the keys to cratering your economy.  Just like I would not oursource Tank or Fighter Jet design to a Chinese Arms manufacture, I think it is an awful idea to outsource communications (or energy or transportation or water or <add your favorite infrastructure>) to a country that is not an ally.  

Think about the deal that Alcatel had to make to be allowed to by Lucent.  I am still wary over that whole thing (we just handed away one of the great research assets of the past to a foreign power).  

My views are clearly quite parochial and old fashion realpolitik.  I have not found human behavior to have changed over time, so I don’t believe that the Chinese are happy to be a minor player in the world (that was a modern oddity of history).  They have viewed us as rivals and so I think we need to defend ourselves.  If that means we don’t buy products from Huawei and ZTE then so be it. 



PS - http://www.cnn.com/2011/TECH/s...

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