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Tuesday, October 9, 2012

US report warns about working with Huawei and ZTE

Huawei and ZTE, two of the largest telecommunications companies based in China, shouldn’t be trusted by government departments in the USA. That’s the warning from a US House of Representatives select committee report published yesterday.

It said the companies “failed to provide evidence that would satisfy any fair and full investigation. Although this alone does not prove wrongdoing, it factors into the Committee’s conclusions”. It concluded that US national security could be undermined if Huawei or ZTE provided equipment to the country’s critical infrastructure.

Recommendations from the committee included:

  • US government systems and government contractors should exclude any Huawei or ZTE equipment or component parts.
  • US network providers and systems developers are strongly encouraged to seek other vendors for their projects.
  • Acquisitions, takeovers or mergers involving Huawei and ZTE should be blocked.
  • Trade practices of the Chinese telecommunications sector should be investigated.
  • Chinese companies should become more open and transparent.
  • Legislation should be considered to address the risk posed by telecommunications companies with nation-state ties or those otherwise not trusted to build critical infrastructure.

ZTE has responded by saying it had set an unprecedented standard for cooperation by any Chinese company with a US congressional inquiry. It released a statement saying it was disappointed the Committee chose to focus its review on the two largest Chinese companies and to exclude Western telecom vendors and their Chinese joint venture partners, given that virtually all US telecom equipment is produced in China.

David Dai Shu, ZTE’s director of global public affairs, said “It is noteworthy that, after a year-long investigation, the Committee rests its conclusions on a finding that ZTE may not be ‘free of state influence.’ This finding would apply to any company operating in China. The Committee has not challenged ZTE’s fitness to serve the US market based on any pattern of unethical or illegal behavior.”

A statement from Huawei said the report conducted by the House Permanent Select Committee on Intelligence failed to provide clear information or evidence to substantiate the legitimacy of the Committee’s concerns.

“Over the past 11 months, Huawei has cooperated with the Committee in an open and transparent manner, and engaged in good faith interaction: our top management team carried out multiple rounds of face-to-face communication with the Committee members in Washington D.C., Hong Kong, and Shenzhen; we opened our R&D area, training center, and manufacturing center to the Committee and offered a wealth of documentation, including the list of members of the Board of Directors and the Supervisory Board over the past 10 years, and the annual sales data since our establishment in 1987; we also made the list of our shareholding employees, the shares they hold, as well as information about our funding resources and financial operations available to the Committee. We adopted a transparent approach in providing this information to ensure the results are fact-based and unbiased, hoping the Committee's objective review of our business activities and the global cyber security issue can clarify the misperception of Huawei. However, despite our best effort, the Committee appears to have been committed to a predetermined outcome.”

[Report (pdf)]

Author: The Fonecast
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