Is Huawei, the huge Chinese technology company, giving up on efforts to build its business in the U.S.? Today, spokesman Scott Sykes told Bloomberg News in an e-mail that the U.S. won’t become a primary revenue source for its network equipment business for the “foreseeable future.” He was responding to reports by Reuters and the Financial Times citing Deputy Chairman Eric Xu saying at a meeting with analysts that Huawei is “not interested in the U.S. market anymore.”
Huawei Technology (002502) has good reason to sour on the U.S., given the strong opposition it has encountered from lawmakers and regulators in Washington. For instance, on April 8, Mike Rogers, the Republican chairman of the House Intelligence Committee, told Bloomberg Television that Huawei is a security risk to the U.S. Rogers also said he wants to ensure that Clearwire, the wireless company owned by Sprint Nextel (S), won’t use Huawei equipment. While Clearwire relies on equipment from Cisco Systems (CSCO) and Ciena (CIEN) for its core network, it does use some Huawei equipment, said Chief Technology Officer John Saw in October.
What Rogers thinks about what equipment Clearwire can buy is of significance now, since Japanese telecom operator Softbank (9984) is trying to acquire Clearwire’s parent, Sprint. In Japan, Softbank is a Huawei customer, and Rogers seems intent on making sure the Japanese company doesn’t continue that relationship in the U.S. Indeed, his April 8 statement is just the latest in a series of comments expressing worries about risks posed by Huawei. On March 28, Rogers told Bloomberg News that the companies had told him they wouldn’t use Huawei products in Sprint’s network. “I expect them to make the same assurances before any approval of the deal,” he wrote. “I have met with Softbank and Sprint regarding this merger and was assured they would not integrate Huawei into the Sprint network and would take mitigation efforts to replace Huawei equipment in the Clearwire network.”
The GOP isn’t the only party taking shots at Huawei. In Washington, speaking out against the perils posed by the Chinese company is a rare issue of bipartisan accord. Last month, President Obama signed the Consolidated and Further Continuing Appropriations Act of Fiscal Year 2013. Amid the appropriations bill’s many provisions is Section 516, prohibiting the Departments of Commerce and Justice, NASA, and the National Science Foundation from buying IT systems from Chinese companies unless those agencies cooperate with the FBI or other Federal investigators to assess the potential for cyber mischief.
Section 516 has prompted some pushback from industry groups. On April 4, BSA The Software Alliance and 10 other business groups wrote to Congressional leaders to criticize the provisions, and defend Huawei—without mentioning the company by name. “Product security is a function of how a product is made, used, and maintained, not by whom or where it is made. Geographic-based restrictions run the risk of creating a false sense of security when it comes to advancing our national cybersecurity interests.” The groups said the law sets “a troubling and counterproductive precedent that could have significant international repercussions and put U.S.-based global IT companies at a competitive disadvantage in global markets.”
