Chinese telco giant Huawei faces skepticism in pursuit of U.S. market

China’s telecommunications giant Huawei has its sights set on global domination — in a good way, it insists.

It is already the world leader in 4G technology, and third in smartphone sales. But while much of the world is embracing Huawei, the U.S. market is wary. Last fall, a Congressional report said U.S. networks and entities shouldn’t buy equipment from Huawei and fellow Chinese telecommunications company ZTE, because of security concerns.

Huawei says they’re just plain wrong. But this is about perceptions — and the recent spate of unrelated Chinese hacker attacks haven’t helped.

Huawei has a story it would like to tell, of a scrappy little telecommunications company started 25 years ago by a laid-off army engineer that’s grown into a leader in its field.

“Our vision is that, in the future, information will explode, so we want to build as big a pipe as we can,” said Zhang Linbo, a guide at Huawei’s Exhibition Center at the company’s headquarters in Shenzhen. “We have already established our leading position in this area, like in IP network, fixed network, and wireless network, we are ranking in the top three. No other company can do this.”

That’s not even going into the consumer devices Huawei started making more recently — laptops, tablets, mobile phones and USB dongles.

Just this week, Huawei announced it’s teaming up with Microsoft in Africa to offer a $150 smartphone, using Windows software.

Huawei has also developed what it calls “no edge” networks — overlapping circles of coverage, so there aren’t dropouts.

Zhang Linbo said the company has tried to talk to AT&T, but there are “political” issues.

Those political issues played out in the House Intelligence Committee last autumn. Congressman Mike Rogers co-chaired a House Intelligence Committee investigation into whether Huawei, and fellow Chinese telecommunications company ZTE, pose a potential security threat to the United States.

“We’ve heard reports about backdoors and unexplained beaconing from the equipment sold by both companies,” Rogers said at the hearing. “Our sources overseas have told us there is reason to question whether the companies are tied to the Chinese government or whether their equipment is what it appears. Certainly, there are vulnerabilities built into the equipment that appear to be there by design.”

The Committee’s report didn’t cite any hard evidence that Huawei or ZTE had been spying, but speculated they might in the future, if the Chinese government leans on them. The report recommended U.S. government agencies and American businesses not use Huawei or ZTE equipment, lest it one day be used to spy, steal sensitive information, or shut down entire systems.

Duncan Clark, chairman of the Beijing-based high-tech consultancy BDA found the argument far from convincing.

“I think it was a very unwise report, in that it’s cutting off to the U.S. access to one of the world’s largest providers of telecommunications and IT equipment,” Clark said.

He said Huawei’s technology is some of the best, fastest and most competitively priced on the market. And the U.S. could use all that because it’s steadily falling behind the international standard.

And, he points out, Cisco and others telecommunications companies already get many of their components from China, too.

Still, at least some security experts say Huawei’s code is much easier to break into than Cisco’s — and there’s the suspicion that if the Chinese government asked, Huawei couldn’t say no.

Such arguments clearly frustrate Scott Sykes, Huawei’s vice president for corporate media affairs.

“We have an impeccable track record in terms of security,” he said. “Nobody disputes this fact. We’ve been in business for 25 years. We are in 140 countries. We are a $32 billion company.”

Sykes says if customers didn’t trust Huawei’s products, “it would just be impossible to get to that point.”

And with two-thirds of Huawei’s revenue coming from outside of China last year, Sykes says it would be corporate suicide to act in a way that would lose international customers’ trust.

Huawei wants people to see it as an international company, and it’s trying to be more transparent, even though it’s still a private company. The reclusive founder, Ren Zhengfei, still doesn’t give interviews. But, increasingly, others in the company do, to dispel what they say are false impressions, for instance, in terms of company ownership.

“Zero percent is owned by the Chinese government,” said Sykes, adding that the company is not working with Chinese military intelligence. And while, yes, it has a Communist Party Committee, so do many foreign companies of any size in China, including Walmart.

It’s part of the cost of doing business, and the committee doesn’t interfere with business decisions.

But that doesn’t mean they couldn’t, or so critics contend, concern enough that Australia and Canada, have blocked Huawei from pursuing some contracts, and India’s been wary as well. Britain, on the other hand, has gone ahead, building a network with Huawei, after doing its own security tests.

“In some ways, I think Huawei is much more sophisticated than China (the government),” said BDA Chairman Duncan Clark. “Huawei’s problem is that it’s bumping up against the glass ceiling that China itself imposes through its foreign policy, or through the perception it creates around the world. The resistance to Chinese products or Chinese companies is something Huawei is powerless to change.”

The recent spate of computer attacks on U.S. media, ostensibly by Chinese-backed hackers, certainly hasn’t helped. On top of all this, the U.S. International Trade Commission also has two cases pending against Huawei for patent infringement.

If Huawei is found guilty, those products would be banned for sale in the United States, which could affect parts of Huawei’s consumer product line.

Still, Huawei doesn’t give up easily. It’s big in the world, and wants to be big in America. But for all the allure of faster, cheaper, more reliable telecom networks, and cool phones and teach, there’s at least as much ambivalence about whether this is all a Trojan horse.

Huawei is left with the unenviable task of proving a negative.