Huawei, ZTE Growth to Slow on U.S., India Security Concerns, ISuppli Says

Huawei Technologies Co. and ZTE Corp., China’s two largest phone-equipment makers, face slower sales growth because of U.S. and Indian security concerns about their products, according to researcher ISuppli Corp.

“The vendors face serious opposition in several of the largest markets left to penetrate,” El Segundo, California- based ISuppli said in a statement dated yesterday. “Having already picked the low-hanging fruit, these companies may find it more difficult to grow in the future than they have in the past. And each pause on the way to growth for the Chinese companies is an opportunity instead for Western vendors.”

Huawei, founded by former Chinese army officer Ren Zhengfei, and ZTE haven’t cracked the U.S. market after more than a decade, due to U.S. government concern about security risks from China-made networks. India blocked the companies from selling network equipment to domestic phone carriers because of security concerns, two people with knowledge of the matter said April 30.

The combined global market for wired and wireless telecommunications infrastructure gear is projected to exceed $65 billion this year and reach $83 billion in 2014, making the stakes “enormous” for Huawei and ZTE, ISuppli said.

Huawei forecasts sales will rise 20 percent this year, following a 19 percent gain to $21.8 billion last year, Ross Gan, a spokesman for closely held, Shenzhen-based Huawei wrote in an e-mail today.

Broadband Networks

“This growth is being driven by increased deployments of mobile and fixed broadband networks, further take-up of customized smart devices, and higher demand for professional managed services,” Gan wrote.

Margrete Ma, a Hong Kong-based spokeswoman for ZTE, didn’t immediately respond to an e-mailed request for comment.

Huawei failed to reach agreements to buy two U.S. assets because the sellers doubted Huawei’s ability to win U.S. government approval to purchase software supplier 2Wire Inc. and Motorola Inc.’s wireless-equipment unit, two people with knowledge of the matter said earlier this month.

Last week, eight Republican lawmakers wrote to the Obama administration that Huawei’s efforts to expand its U.S. business could undermine national security.

--Edmond Lococo. Editors: Jonathan Annells, Aaron Sheldrick

To contact the reporter on this story: Edmond Lococo in Beijing at elococo@bloomberg.net

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