Is China’s Huawei a threat to our national security?

Rob Schmitz Jan 17, 2013

Is China’s Huawei a threat to our national security?

Rob Schmitz Jan 17, 2013

Inside the research and development wing of Huawei’s headquarters, engineers are testing equipment. When I enter the room, they stop what they’re doing and look at me suspiciously. Above them, on the wall, big blue Chinese characters set the mood. My guide reads them out loud.

Baoshou gongsi mimi, jianshou zhiye daode. ‘Conduct yourself professionally, protect company secrets.’

For two decades, Huawei has done this well — perhaps too well. The company’s CEO Ren Zhengfei is a former officer in China’s military and he’s notoriously reclusive. The high-tech equipment the company makes is used — some say — to spy on people. Huawei has always managed to leave a trail of suspicion.

“We have not done a good job at telling our story,” says Scott Sykes.

He and others in Huawei’s PR team are now more willing to talk to foreign journalists. This tour is part of a charm offensive in the wake of a U.S. House Committee report that essentially barred the company from doing business in the U.S. The report labeled Huawei a security threat.

“It’s not about security, because we have proven equipment. So what is it about? I think one of the major things would be trade protectionism,” said Sykes.

That view is shared by many members of the foreign business community here in China. They suspect the committee singled out Huawei just because it was Chinese. Sykes says the report gave no evidence that Huawei, a private company independent of China’s government, should be seen as a threat.

“Huawei is not China. Huawei is Huawei,” said Sykes. “We are an independent commercial company. Zero percent ownership by the Chinese government.”

Huawei made $35 billion last year selling communications equipment to people in 140 countries. The company’s hardware now connects a third of the world’s population.

In one part of Huawei’s campus in Shenzhen, employees relax at one of many espresso bars. The average age here is 29. They work inside a beautifully manicured campus where each section is defined by a different type of architecture, from neoclassical mansions to ancient Chinese courtyards. Huawei employs 140,000 people worldwide — nearly 2,000 in California. Half its workforce are engineers dedicated to high-tech research. As a result, Huawei’s consistently among the top 5 percent of global companies in patent applications. Sykes says not allowing Huawei to compete in the U.S. hurts American consumers.

“When we’re allowed to participate in a bid, our competitors have to bring their best, most sophisticated and highest quality equipment in order to win,” he said.

But Huawei’s biggest problem is that it’s a telecommunications company from China. Most telecommunications firms have a relationship with their local government.

“How else would a security service be able to do wire tapping or some other communications monitoring?” asks Peter Mattis, editor of the China Brief at the Jamestown Foundation in Washington. “So the question is: Why is Huawei exceptional from the rest of the world?”

Huawei denies it would ever act on behalf of the Chinese government. Mattis isn’t so sure.

“The question is, what happens in a crisis or when there’s a high demand for a specific kind of service at a specific time to do specific things?” says Mattis. “I mean, would we expect that Huawei isn’t staffed by patriotic Chinese citizens who in a moment of crisis wouldn’t answer their government’s call?”

Huawei’s Scott Sykes says ‘not a chance.’

“We would lose 70 percent of our revenue, or $24 billion last year, like that! Overnight! It would be corporate suicide, foolish, and we would never do that,” Sykes says.

Ultimately, it may not matter to Huawei whether it’s given the keys to the U.S. market. It’s doing spectacular business elsewhere. In 2011, the last year on record, Huawei’s revenue grew by a third in Europe. In the past year, it’s opened up a research center in Finland and doubled staff in Great Britain — jobs that won’t be coming to the U.S. anytime soon.      

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