Repercussions As Huawei Is Deemed a National Security Threat

The release of a Congressional report labels two Chinese companies, Huawei and ZTE, as threats to U.S. security and economic interests. The U.S. is not the only country to voice concern over Huawei's practices, as the Chinese telecom firm could face a Commons inquiry in the U.K. on similar questions of national security.

Sixty-nine percent of solution providers, in a Channelnomics survey, stated that it is unlikely their customers will buy foreign-made products deemed to be national security threats. Around 80% of solution providers stated they would refuse to work with distributors aligned with foreign vendors.

Monday's report released by the House Permanent Select Committee on Intelligence have put Huawei and ZTE in the spotlight; both companies may be agents of China's military government. Mike Rogers, the House committee chairman, even urged U.S. businesses not to buy Huawei and ZTE products. Rogers suggested that the two Chinese telecommunications and network equipment manufacturers could risk exposure and compromise of business pro data and customer privacy.

Huawei does not qualify amongst trusted vendors or U.S. solution providers. According to the survey, Cisco, IBM and Hewlett-Packard are the three most trusted hardware vendors, and no solution provider selected Huawei as trustworthy.

In response to these government and media reports and allegations, the Chinese government in Beijing state that there is no basis for the negative report, and said that in attempting to downsize the role of Huawei and ZTE, the U.S. is violating American free market principles.

As there are no issues involved in Washington or American businesses dealing with foreign suppliers, the U.S. stance on Huawei and ZTE has been deemed as a double-standard and hypocritical by some.

Shen Danyang, a spokesperson for the China commerce ministry, told the Wall Street Journal, “We hope the U.S. can make concrete efforts to create a just and fair market environment for the two countries and promote sound development of bilateral economic and trade ties.”

Huawei's American executives have consistently denied the suspect label and refute claims that customer data and network integrity is compromised, additionally stating that any such action would be in breach of their business interests. ZTE even went as far as to say that all China-made IT equipment should be banned, as should those made by American companies; all are susceptible to being compromised by the Chinese government.

Few partners of Huawei have mentioned the recent report. The ongoing controversy brought forward by the U.S. government and media tarnishes the records of Huawei and ZTE, and will probably upset product sales and channel development.

Huawei and ZTE competitors, on the other hand, have been much more vocal in their reaction to the report as they seek to capitalize on the situation. Cisco Systems ended ties with ZTE (which was selling Cisco products to Iran despite the presence of economic sanctions). Furthermore, Cisco is calling on Huawei to release documentation (regarding security and intellectual property theft allegations) on the lawsuit the two companies settled in 2004. (CY) Link