Huawei Says It's No Threat to U.S. Security, Invites Probe on Any Concerns

Huawei Technologies Co. said perceptions that the Chinese phone-network equipment maker threatens U.S. national security are unfounded and invited the government to probe the company about any concerns it may have.

“Over the past 10 years, as we have been investing in the United States, we have encountered a number of misperceptions that some hold about Huawei,” Ken Hu, chairman of Huawei’s U.S. operations, wrote in an open letter on the company’s website. “We sincerely hope that the United States government will carry out a formal investigation on any concerns it may have.”

The comments come a week after the company withdrew its purchase of Santa Clara, California-based 3Leaf Systems’s patents, in compliance with a recommendation by the Committee on Foreign Investment in the United States. China’s Ministry of Commerce said last week the move was regrettable and that U.S. intervention on Chinese companies’ investments in recent years has affected trade cooperation between both sides.

Unfounded perceptions about Huawei include claims of close ties with the Chinese military, allegations of financial support from the Chinese government, and threats to national security, Hu wrote.

Huawei has been trying to expand in the U.S. for the past three years and has been thwarted repeatedly as U.S. lawmakers raised opposition about security risks from the Chinese company. Prior to 3Leaf, Huawei failed in bids to acquire companies including 3Com Corp. in 2008 and 2Wire and Motorola’s wireless business last year.

’Serious Risk’

Huawei’s possession of 3Leaf’s technology “could pose a serious risk” to U.S. computer networks, five U.S. lawmakers wrote to Obama this month.

The repeated rejection of investment by Huawei in cases from 3Com to 3Leaf shows that the U.S. is using security concerns as a pretext to reject investment by Chinese companies, Yao Jian, spokesman for China’s Ministry of Commerce said Feb. 17. This “has influenced Sino-U.S. cooperation,” Yao said.

“As far as the investment activities of Chinese enterprises in the United States, it’s clear that there are many cases where the United States is using a security review to refuse investment by Chinese companies,” Yao said.

The U.S. should increase the transparency of the approval process and give Chinese companies investing in the U.S. “fair treatment,” Yao said.

Cloud Computing

3Leaf, founded in 2004, developed technology for cloud computing that lets businesses and government agencies move applications and programs such as e-mail to remote networks owned and operated by a third-party.

Huawei is China’s largest maker of phone network equipment, and ranks second globally only to Stockholm-based Ericsson AB, according to Redwood City, California-based Dell’Oro Group. Huawei’s share of the global market for mobile phone network equipment almost doubled to 21 percent in the third quarter of 2010, from 11 percent in the third quarter of 2008, according to Dell’Oro Group. Ericsson’s share was 34 percent in the third quarter.

Still, Huawei has had difficulty penetrating the U.S. In 2009, combined revenue in North and South America accounted for only 12 percent of Huawei’s total sales of $21.8 billion, spokesman Ross Gan said in November. China accounted for about 33 percent, other Asian markets 20 percent, and Europe, the Middle East and Africa accounted for 35 percent.

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

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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