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.
"Both companies are suspected of having ties to the Chinese government, military and China's ruling communist party."
Well, duh! Of course they do. You don't where they are in China *without* such ties.
"The firms have been accused of designing communications equipment to allow unauthorized access by the Chinese government, a charge that has stoked fears over national security and the potential for corporate espionage."
I'm trying to imagine gear produced over there and bought here where the ability for the Chinese government to listen in would be hidden carefully enough that US engineers *wouldn't* find it. (For that matter, I'm having trouble imagining and purchases where such security might be an issue where US engineers wouldn't *look* for such back doors, given the guarded nature of the relationship between China and the West.)
I don't really see a security risk, only evidence that Congress doesn't have a technical clue, but we hardly needed more evidence to prove that point.
Starting in the early 1970's, the military systems people started using commercial components rather than the old custom military parts. I remember our military products people used to get custom IC's made at Motorola, and sadly we had to shut down other parts, and move all non-US citizens out of factory, then they brought in their wafers and masks, we ran a few operations, they took their stuff (including any broken pieces of wafers) out, and we never knew what they were for.
In 1968 Nasa started to set up its own pilot fab (for beam-lead CMOS !) in Alabama...we wrote a plan for them. Not sure how many other secure fabs were set up. But that could not keep up with cost-benefit of commercial chips.
Iridium phones and Motorola sat pagers were first good communication gear that the Chinese Army got to talk back to their leaders from remote regions. That may have prevented some border wars due to confusion. But they had to think that we were also listening.
The web and consumer electronics changed everything. Everything is open now. Perhaps that is safer? No secrets? Well...NOT if you are using the web to control the electrical grid, for example, or power plants. Options?
I must have supplied chips to you and I know how you guys work. I have no idea how the Chinese government is involved with the Huawei & ZTE business, but I have seen the revenue from you guys are declining year on year.
I see more of you guys mistakes have helped Huawei and ZTE rather than they have done better.
If you look into Marconi's performance when BT started thire 21CN, you may understand more.
Not allowing Huawei & ZTE to get into US market, the only thing we can have is to use expensive equipments which isn't any better.
Who's to say that US companies aren't doing the same thing: Leaving backdoors, etc for exploits such as Stuxnet and Flame. Or for that matter, what about PC's in general ? There's no practical way to reverse-engineer the multitude of custom SoC's that could easily have eavesdropping hardware built-in.
And then there's software...it's a given that M-Soft products have more security holes than a block of Swiss cheese.
The only way to keep your data safe is to leave your brand new computer in the box and never turn it on. Nothing is secure anymore.