Huawei, ZTE Face US Federal Ban

Proposed legislation could deal a huge blow to Chinese vendors still trying to build a bigger presence in the US market.

Iain Morris, International Editor

January 15, 2018

4 Min Read
Huawei, ZTE Face US Federal Ban

In a sign of growing hostility towards Huawei and ZTE from some quarters of the US establishment, Texas Congressman Mike Conaway has proposed new legislation that would prohibit US authorities from buying any product or service from the Chinese companies.

The legislation could prevent Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) from selling gear, including networks and consumer devices, to operators that fulfill US government contracts, which effectively means any of the major national players.

In a statement about the bill, entitled "The Defending U.S. Government Communications Act," Conaway notes that the bill "prohibits the U.S. government from purchasing or leasing telecommunications equipment and/or services from Huawei, ZTE, or any subsidiaries/affiliates thereof."

Operators including AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ), T-Mobile US Inc. and Sprint Corp. (NYSE: S) have been warned off from using Huawei and ZTE network equipment since 2012, when a US government report described the Chinese vendors as a potential security threat because of their perceived links with the Chinese state. (See US vs Huawei/ZTE: The Verdict and China Lashes Out at 'Cold War Mentality'.)

That report, and the recommendation that network operators should not deploy Chinese technology, was enough to shut Huawei and ZTE out of the running for network systems deals with the major operators, but there was no bill and no legislation.

Since then, there have been hopes in China that US policymakers might eventually soften their position and allow Huawei and ZTE to compete for business against Western equipment makers including Ericsson AB (Nasdaq: ERIC) and Nokia.

Those hopes appeared to recede with the election to the US presidency of Donald Trump, whose protectionist rhetoric seems at odds with any effort to open the door for the Chinese companies.

An admirer of Trump's hardline stance, Texan representative Mike Conaway is now attempting to slam it firmly shut, locking the Chinese out for good with legislation (rather than just recommendations) that covers network technology and end user devices.

In a statement published on his website late Friday, Conaway delivered a blunt assessment of the "threat" posed by Huawei and ZTE.

"Chinese commercial technology is a vehicle for the Chinese government to spy on United States federal agencies, posing a severe national security threat," he said.

"Allowing Huawei, ZTE and other related entities access to US government communications would be inviting Chinese surveillance into all aspects of our lives," Conaway added. "This legislation falls directly in line with President Trump's policy of putting American national security interests first, a policy I'm proud to support."

The threat from Huawei and ZTE is on the rise, Conaway argued, amid signs of spying and surveillance activities by the Chinese government.

"This is an issue we've followed for years at the House Permanent Select Committee on Intelligence (HPSCI)," he said. "The threat receded after the release of an incriminating HPSCI report, but is now re-emerging as the Chinese government is re-attempting to embed themselves into US technology."

"This is extremely dangerous because the Chinese government is trying to compromise the integrity of US businesses and spy on our closely held national security secrets," Conaway concluded.

For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.

The legislative move came after a week of negative publicity for Huawei, which failed to secure a major smartphone distribution deal with US telecom giant AT&T. (See Huawei Still Knocking on US Door – but AT&T Deal Thwarted.)

"The US market presents unique challenges for Huawei, and while the Huawei Mate 10 Pro will not be sold by US carriers, we remain committed to this market now and in the future," Huawei said in a statement last week.

According to a report from Reuters, security concerns were raised during the negotiations between AT&T and Huawei.

Conaway's legislation, if passed, could permanently end discussions between major US operators and Chinese manufacturers about such distribution deals.

While Huawei and ZTE are locked out of opportunities to serve and work through the likes of AT&T and Verizon, they have catered to a number of regional and local operators.

Huawei already sells its smartphones to US consumers, but not through the mobile service provider channels that account for the lion's share of smartphone sales.

— Iain Morris, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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