According to market research firm IHS iSuppli, U.S. telecom operators were already wary of buying equipment from Huawei and ZTE because of the investigation and other scrutiny by the U.S. government. Despite their global sales growth, neither has been able to crack the U.S. market despite a decade of effort, IHS said.
"The U.S. government has blocked numerous contracts and acquisition deals between American companies and Chinese equipment makers, usually in an indirect manner," said Lee Ratliff, principal analyst for broadband & digital home research at IHS, in a statement.
Ratliff added that the committee's report could further hamper the ability of Huawei and ZTE to penetrate the U.S. market in the future.
Jagdish Rebello, director for consumer and communications at IHS, said the concern among U.S. lawmakers mostly centers on the transition to 4G wireless networks, which will bring an exponential increase in complexity.
"Because of this, many carriers are now contracting with networking OEMs to not only supply the equipment but also to partner with carriers to build the networks," Rebello said. "This makes the networking equipment makers, such as Huawei and ZTE, a critical part of the infrastructure deployments."
According to IHS, became the world’s largest supplier, of wireless communications infrastructure equipment during the first nine months of 2011, with sales of $8.9 billion and market share of 29 percent. ZTE ranked fifth in the world over the same period, with revenue of $2 billion and market share of 6 percent, IHS said.
Huawei is regarded as a price and technology leader, according to IHS. The company has won contracts with many European carriers for 4G deployment and network management and with many carriers in the emerging markets for 3G deployment, IHS said.
The U.S. Department of Defense previously highlighted Huawei’s links to the Chinese government in a 2008 report to Congress. Huawei’s efforts to buy its way into the U.S. market through acquisitions of 3COM and 2Wire were scuttled due to concerns of a U.S. government veto, according to IHS.
IHS said Huawei and ZTE reported in 2010 that the Indian government started blocking purchase orders placed with them based on similar security concerns.