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Huawei: Separating fact from fiction

Industry veteran David Newman analyzes the charges made against Chinese telecom vendor

By David Newman, Network World
October 10, 2012 01:17 PM ET

Network World - Chinese telecom provider Huawei was hardly a household word a few months ago, but it's had lots of negative publicity of late, from an Economist cover story to a 60 Minutes piece.

And now the US House Intelligence Committee has issued a report recommending that Huawei and ZTE, another Chinese telecom company, be viewed "with suspicion."

Huawei customers defend their security after congressional report

As the president of a third-party test lab, I've had some experience dealing with Huawei, its competitors, and its customers. And as a U.S. history buff, I'm also aware that this is hardly the first attempt to drum up fear of "The Other" in the name of patriotism and national security.

 
Bullet Huawei customers defend their security after congressional report
Bullet Huawei, ZTE ban is questionable, given its impact
Bullet House Intelligence Committee report blasts Huawei, ZTE as threats to U.S. national security
Bullet Cisco said to cut ties to ZTE
Bullet '60 Minutes' torpedoes Huawei in less than 15 minutes

 

While some claims about Huawei are valid, others are unsupported. Let's sort through these. (I'm focusing on Huawei here because I know it better than ZTE.)

1. Huawei is succeeding because of Chinese government backing.

This is true. Beijing is a huge customer and subsidizer of Huawei's development efforts.

Then again, Huawei has lots of company. Toyota's popular Prius wouldn't have happened without a hand from the Japanese government. Airbus and its majority shareholder EADS wouldn't exist if Western European governments hadn't encouraged defense contractors to merge.

We have hugely successful public/private endeavors in the U.S., too. Some of our most important scientific and engineering achievements - things like atomic energy, space travel, human genome mapping, and the Internet itself - came out of government research programs.

The problem we have is too little R&D spending, not too much. Scream about waste all you want, but there's a baby/bathwater problem here. There's been a long-term slump in U.S. R&D funding while China is increasing its funding 10% year over year. We're not doing enough R&D spending to keep pace.

2. Buying Huawei is unpatriotic; it means replacing U.S. gear with Chinese stuff.

All telecom providers, including U.S. ones like Cisco, make at least some gear in China.

It's true that Huawei's profits go back to China. Then again, it's also common practice for U.S.-based multinationals not to "repatriate" their overseas profits for tax reasons.

This goes beyond factory locations. All major networking companies are multinationals, and all their engineering groups look like the United Nations. This can complicate matters for U.S. companies holding defense contracts with citizenship and security-clearance requirements.

Ironically, some manufacturers are scaling back in China as wages rise. These days we see more components coming into the lab from places like Malaysia and Vietnam.

3. Huawei doesn't care about intellectual property rights.

Huawei tried to enter the U.S. market a decade ago with an effort that would have been hilarious if it wasn't so ham-handed.

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