For the past few years, Cisco Systems and other telecom hardware manufacturers have been successful at convincing American businesses, telecoms, and government agencies to stay away from Huawei and ZTE products for fear of industrial and communications espionage by Chinese organizations and authorities. So far the market share of Huawei products in the United States has dropped to a record low of 5%.
Adding to the pain, back in 2012, the US government took the unprecedented move of banning all kinds of Huawei equipment from its networks, to the outrage of the Chinese government and delight of American manufacturers. While other countries, mostly US allies, have been considering a similar move, Australia’s government has been the only one to make it policy, effectively banning Huawei from bidding on the contract for the country’s National Broadband Network (NBN) roll-out.
Huawei has been working hard to fight the allegations, claiming that security concerns are unfounded and that the company has been caught in a "trade conflict" between the US and China. Earlier this month, during UBM’s Interop conference in Las Vegas, Patrick Zhang, president of the marketing and solutions department at Huawei, claimed that the company is now trying to regain its rightful place in the US market, fighting the "fear of Huawei." Zhang said, "It's a challenge, but we will prove ourselves with our good solutions. We will bring our differentiated technology and solutions and prove ourselves with some good references."
In addition, Huawei has offered the US, Australian, and several European governments complete and unrestricted access to its software source code and equipment. But there is still long-term damage to the relationship to overcome.
The irony, however, is that documents leaked by former NSA analyst Edward Snowden and published last month suggest that the US government was actually involved in hacking Huawei network equipment in order to spy on China and other countries, including US allies, using Huawei hardware. While it is widely believed that US intelligence agencies have for years been seeking the collaboration of technology companies, including Cisco, to spy on foreign targets, this is the first time that the hacking activities of the NSA involving a foreign manufacturer have been exposed.
An NSA document claims, "Many of our targets communicate over Huawei produced products, we want to make sure that we know how to exploit these products."
In the meantime, Huawei has been very successful in most markets, including Europe. Recently, the UK government expressed support for the Chinese company. Prime Minister David Cameron said:
We have a proper system in the UK for examining whether investments in the UK are pro-competitive and whether they're in the national interest. We also have a very good way of defending ourselves in terms of cyber-security, I think we're one of the most advanced countries in the world in terms of the action we're taking on cyber-security, and I've made sure we've put extra money into it.
Huawei has extensive experience managing wireless networks, and many US telecoms executives are privately concerned that not being able to use Huawei equipment and software will be extremely costly, because they need to upgrade their networks for the increased demand in data traffic.
What the US is losing in competitiveness, Europe is gaining.
"Our core business principle in Europe is to achieve mutual benefits and win-win outcomes," said Ken Hu, Huawei's deputy chairman and rotating CEO, at World Economic Forum Annual Meeting 2014 in Davos:
Europe benefits from a deep-rooted history of culture, management, and technology expertise as well as a great tradition for innovation. Huawei regards Europe as a key competency center. By localizing our operations and collaborating extensively with European partners, we have improved our overall capabilities. At the same time, our global value chain enabled the capability transfer from Europe to other parts of the world, which generated even greater value from these capabilities. In this process, we have also created a large number of job opportunities for Europe and helped move the industry forward.
There is no doubt within the intelligence community that the Chinese government is involved in extensive cyber-espionage operations, and China does more of it than all the other countries combined. But Huawei cannot be held responsible for the hacking activities of the Chinese and US government on Huawei products. The company is the second largest manufacturer of telecom equipment and the fifth most innovative company in the world, and they can’t afford to lose more business because of security allegations.