REPORT: Huawei and ZTE Is A Risk To National Security

Posted Oct 8, 2012

A congressional panel is warning that Huawei and ZTE are a threat to U.S. national security and should be blocked from making any mergers or acquisitions in America.  The panel conducted an 11 month investigation in the two companies.

The panel said that ZTE and Huawei have failed to show that they were not associated with the Chinese government or military.  Huawei is the second largest company of telecommunications networking technology after Ericsson.

Based on the smartphone market, ZTE is ranked #5 and Huawei is ranked #6.  Both companies make only a small amount of income in the United States — 4% of Huawei’s income is from the U.S. and 2-3% of ZTE’s income is from the U.S.

“China has the means, opportunity and motive to use telecommunications companies for malicious purposes,” states a report from the U.S. House of Representatives Intelligence Committee.  “Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems.”

However Huawei and ZTE denied the allegations.  ZTE and Huawei appeared in court this past September to deny claims that some of their equipment was installed with codes that relays sensitive data back to China.  Huawei was founded by a former member of the People’s Liberation Army in 1987 and the company was blocked in its proposed acquisition of American computer company 3Leaf Systems last year by a security panel.  Huawei faces accusations that they are tied to the Chinese military.

“Chinese telecoms companies have been developing their international business based on market economy principles,” stated Chinese ministry spokesman Hong Lei.  “Their investment in the United States embodies the mutually beneficial nature of Sino-American economic and trade relations.”