HONG KONG--Huawei Technologies Co. said Wednesday that shutting
out Chinese telecom equipment suppliers from the U.S. market won't
solve any cyber security problems in the U.S.
The response came after people familiar with the development of
Softbank Corp.'s $20 billion deal to take over Sprint Nextel Corp.
said that the two companies have in principle agreed to give the
U.S. government veto rights over Sprint's equipment purchases, a
move that would limit access by Chinese suppliers like Huawei.
Under the agreement, which addresses U.S. officials' national
security concerns, Sprint affiliate Clearwire Corp. would need to
remove Huawei equipment it currently uses, if Sprint's deal to
merge with Clearwire goes through, the people said.
"The debate over protecting American networks and data has
seemingly lost its way," said Scott Sykes, Huawei vice president
and head of international media affairs. "Suggestions that networks
and data will somehow be made safer by blackballing vendors based
on geography of headquarters are either misinformed or
dissembling."
Mr. Sykes said that no matter who supplies Sprint's network in
the future, every major telecom infrastructure vendor, regardless
of where they are headquartered, conducts some of their research,
development and manufacturing operations in China.
Mr Sykes said any efforts to secure American networks and data
should focus on establishing global and industry-wide standards
covering supply chain and operations to raise the cyber-security
bar.
"Anything else is just protectionism."
The security debate regarding the Softbank-Sprint deal follows a
U.S. congressional report in October, which recommended that U.S.
telecom operators avoid using network equipment from Huawei and
another Chinese supplier ZTE Corp., claiming that their equipment
could be used by the Chinese government to spy on Americans.
Although Huawei and ZTE denied such allegations and said that
their equipment wouldn't pose any security threats, the report
effectively eliminated any business opportunities the Chinese
companies might have had in the U.S. network infrastructure
market.
Even before the congressional report, the U.S. had never been a
major market for Huawei, accounting for only a fraction of its
overall revenue.
Despite the decisive setback in the U.S., Shenzhen-based Huawei
has enjoyed robust growth elsewhere, moving closer to overtaking
Sweden's Ericsson as the world's biggest network equipment supplier
at a time when most suppliers face a tough business environment in
a sluggish global economy. Huawei said last month that its net
profit rose 32% last year to 15.38 billion yuan, while revenue rose
8% to 220.2 billion yuan. The company also predicted 10% compound
annual growth in overall revenue for the next five years.
In an interview last month, Bob Cai, a Huawei vice president in
charge of wireless network marketing, said the company's core
wireless-network business doesn't expect any U.S. growth this year
because it has been effectively shut out of the country. Still, he
said that the company still expects growth elsewhere as China
shifts to next generation high-speed mobile networks and demand
from European customers remains solid.
Write to Juro.Osawa@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires