Huawei calls US "bluff," invites probe to clear reputation

The Chinese network equipment supplier invites the U.S. to investigate the company

Chinese telecommunications equipment supplier Huawei wants to clear its reputation and has asked the U.S. government to investigate the company for concerns that it poses a national security risk.

The call for the formal investigation comes after Huawei saw a U.S. acquisition unravel after a government panel requested the Chinese company reverse the deal. In May, Huawei had paid US$2 million to buy intellectual property from 3Leaf Systems, a California-based startup that specializes in grouping servers to build more powerful mainframe computers.

The collapse of the deal was just the latest setback Huawei has seen in the U.S. due to what the company calls "misperceptions" that it is tied to the Chinese military and has the financial backing of the Chinese government. One major security concern is that the technology bought from Huawei could be secretly used by the Chinese military to spy on and interfere with U.S. telecommunications.

But in an open letter released on Thursday, Huawei called such claims "false" and insisted the U.S. government launch a formal investigation of the company to "prove that Huawei is a normal commercial institution and nothing more."

"We believe we can work closely with the United States government to address any concerns and we will certainly comply with any additional security requirements," the letter said, which was written by Ken Hu, deputy chairman of Huawei.

Analysts say that Huawei's struggles in the U.S. have more to do with politics than real worries the company is a national security threat.

Huawei's letter was essentially "calling the bluff" on the U.S. government's concerns surrounding the Chinese company, said Craig Skinner, a senior consultant with research firm Ovum. "If the U.S. doesn't do (the investigation), then what is the real reason for not letting them in the market?" he said.

In the letter, Huawei tries to dispel the different misperceptions, including those relating to its CEO Ren Zhengfei, who had served in China's People's Liberation Army from 1974 to 1983 as an engineer. Ren left the military after his engineering corps had been disbanded, in which he then went off to found Huawei with about US$2,500.

"It is a matter of fact that Mr. Ren is just one of the many CEOs around the world who have served in the military," the letter said. "no one has ever offered any evidence that Huawei has been involved in any military technologies at any time."

Huawei notes that it has only received tax incentives from the Chinese government, which it says are similar to tax incentives U.S. companies receive from the U.S. government. The letter ads Huawei hires independent third-party security companies to audit their products to certify the safety and reliability of them.

"There is no evidence that Huawei has violated any security rules," the letter said.

Huawei's letter highlights what could be a growing tension between the U.S. and China over trade deals. Earlier this week, China's Ministry of Commerce issued a statement on the subject, saying U.S. regulatory authorities have been "obstructing and interfering in the investment activities of the Chinese enterprises in the U.S., on all kinds of excuses including protecting national security."

In the past, Huawei has lost out on bids for contracts and was forced to abandon a $2.2 billion deal to acquire network equipment vendor 3Com due to the national security concerns.

However, the security concerns seem to be inconsistently leveled at Huawei, because many U.S. companies also have manufacturing in China, Skinner said. "If it really was about national security issues as opposed to trade issues, the national security would investigate all the manufacturers, not just focus on the ownerships," he said.

Resentment over China's economic rise and even concerns about the country's communist political system could be leading U.S. government officials to want to halt Huawei's business deals, Skinner said. The U.S. will likely ignore following Huawei's request to conduct an investigation, he added.

"If they did do a full security audit and Huawei passed that, it wouldn't leave any good excuses to keep them out of the American market," he said. "I think (the government) would be looking to try and avoid that."

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Tags governmentregulationbusiness issuesMergers / acquisitionsHuawei Technologies

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Michael Kan

IDG News Service
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