Huawei too dangerous to do business with?

The controversy swirling around use of Huawei telecom gear raises some interesting questions about the global nature of business and the future of cyberwarfare.

The U.S. House Permanent Select Committee on Intelligence just issued a report warning telecom firms to avoid buying Huawei gear for fear the Chinese government/military has required the company to build in backdoors that would enable a host of nefarious activities, everything from snooping to theft of intellectual property and remote control.

ANALYSIS: Huawei: Separating fact from fiction

The Economist first stirred the pot in August with its story "The company that spooked the world," which explored how Huawei has grown in 33 years to become the second largest telecom equipment supplier in the world with revenues in 2011 of $32 billion.

"Critics are convinced [Huawei] ... has stolen vast amounts of intellectual property," the magazine wrote, "and that it has been heavily subsidized in its expansion by the Chinese government, eager to use it as a Trojan horse with which to infiltrate itself into more and more foreign networks."

While Huawei seems to have outdistanced the intellectual property accusations, U.S. regulators are still spooked about the company's relationship with the Chinese government, even after holding hearings to explore those relationships.

In hours of interviews, Huawei "failed to provide thorough information about its corporate structure, history, ownership, operations, financial arrangements, or management," the report states, and also would not provide "specific details about the precise role" played by the Chinese Communist Party Committee.

Some observers dismiss all of these concerns as paranoia, reasoning the company is too big to risk its very existence this way, while others say it is simply FUD stirred up by U.S. firms afraid of the arrival of this low-cost provider.

But those with experience doing business in China not only believe what has been said, they simply expect it to be true. "Companies and the government are very tight over there," said one observer. "And people feel it is what they should be doing to help the government." What's more, he said, even though no sign of wrongdoing has been found, it doesn't have to be Trojan code, it could simply be vulnerabilities that could be exploited later.

Congress is rightly worried about the possibility of having zombies at the heart of critical infrastructure that could be awakened by a foreign power to spy on companies or play a role in a cyberwar. Failing better cooperation, it makes sense to keep Huawei out, but there are risks.

One, China is a huge and growing market that many domestic players are counting on to fuel growth. What happens if China decides to treat our top players the same way? And two, global supply chains being what they are, with components sourced from all over, does this just give us a false sense of security?

More investigation is required.

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