The U.S. House Intelligence Committee is scheduled to release a report on its investigation on Monday. It made its conclusions after finding that both Huawei and ZTE could be influenced by the Chinese state government to undermine U.S. security, according to media reports. The committee has also recommended the U.S. block any attempts by the two companies to make acquisitions or mergers in the country, and has encouraged U.S. private firms to consider the security risks in doing business with Huawei and ZTE for equipment or services.
The investigation's findings could tarnish the reputations of both Huawei and ZTE, which have faced repeated accusations that the companies' equipment could be used by the Chinese government to spy on U.S. telecommunication networks.
In an interview on CBS News' show 60 Minutes aired on Sunday, chairman of the committee and U.S. representative Mike Rogers said, "If I were an American company today ... I would find another vendor if you care about your intellectual property, if you care about your consumers' privacy, and you care about the national security of the United States of America."
While Huawei and ZTE have yet to receive the report, both companies have repeatedly defended themselves from allegations that they pose security risk, while trying to assist with the committee's investigation. Last month, representatives from Huawei and ZTEappeared at a hearing with the House Intelligence Committee, and denied any ties with the Chinese government, stating that their companies would never sabotage a customers' network.
"The security and integrity of our products are world proven," said Huawei spokesman Scott Sykes, citing how the company has done business in almost 150 markets with more than 500 telecommunication operators. "Those are the facts, political agendas aside," he said in an email.
ZTE spokesman David Dai Shu said the company would offer comment once the congressional committee's report is released. A ZTE letter addressed to the committee on Sept. 25, however, questioned why ZTE was the focus of the committee's investigation, when larger Western telecommunication equipment vendors were also manufacturing their equipment in China.
"By way of example, ZTE's U.S. telecom infrastructure equipment sales last year were less than $30 million. In contrast, two of the larger Western vendors alone had US sales in excess of $14 billion," the letter said. "ZTE has suggested, respectfully, that the scope of the Committee's inquiry is too narrow to fully protect US national security."
The congressional committee, however, has justified its investigation by pointing to the growing number of cyber attacks allegedly coming from China, along with the "wealth of opportunities" ZTE and Huawei could provide to the Chinese government to sabotage U.S. networks, if their telecommunication equipment was bought.
"One of the main reasons we are having this investigation is to educate the citizens in business in the United States of America," said Dutch Ruppersberger, the ranking member of the committee, during the 60 Minutes interview.
But analysts have also questioned the congressional committee's approach in examining only Chinese companies in its investigation. "This is not a problem that is unique to Huawei and ZTE. In fact, if there is a problem, it's a problem with everybody," said David Wolf, CEO of Wolf Group Asia, a Beijing-based technology consultancy. "Telecommunication equipment manufacturers that make equipment under China would include about everyone in the industry."
It's unclear what evidence the investigation has cited in its findings, with media reports noting that the committee made its conclusion from both classified and unclassified information. Wolf, however, said that in the case of Huawei no hard evidence has been found showing the company's equipment has posed a national security threat.
"The solution that the [committee] is proposing doesn't solve the problem," he added. "One can only be led to believe that there are other motivations at work here, especially since there is no evidence of anything ever happening with the equipment purchased from Huawei. And if there is a problem with information vulnerability, why are we not investigation everything from every foreign information company?"
Matt Walker, an analyst with research firm Ovum, said politics was driving the congressional committee's investigation. " It's election season. Voting is less than one month away in the U.S. And the China threat is a potent political issue in the US nowadays. It's almost a simple math equation," he said.
Both China and the U.S. have political rivalries, which spill over into the commerce sector, Walker added. "But my guess is that this issue will fade away significantly in a few months. If it doesn't, at some point Huawei and or ZTE might be smart to consider whether the US market is worth the effort -- for now, anyways."
