Huawei: The Chinese Company That Scares Washington

Is Huawei an agent of the Chinese state, as critics charge, or simply a successful foreign business that might challenge the titans of American tech?

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Dominic Nahr / Magnum for TIME

One of the main Huawei buildings on its compound in Shenzhen, China

There is not much that brings together Democrats and Republicans these days. But on Huawei, the Chinese telecommunications giant, American politicos are uncharacteristically united. Though largely unknown to U.S. consumers, Huawei Technologies is an industry leader in the field of telecommunications infrastructure, the “plumbing” of mobile-phone networks. Last year its sales topped $35.4 billion — more than Goldman Sachs and McDonald’s. It likes to brag that one-third of the world’s population is hooked up to networks that use its gear. But that’s precisely what makes the U.S. nervous.

In this week’s magazine (available to subscribers here), business correspondent Michael Schuman explores the U.S.’s distrust of the private Chinese firm, which reflects Washington’s wider distrust of Beijing. Is Huawei an agent of the Chinese state, as critics charge, or simply a successful foreign business that might challenge the titans of American tech?

U.S. lawmakers see the private Chinese firm as something of a Trojan horse. Writes Schuman:

Experts worry that allowing Huawei equipment to plug into the networks would give the Chinese government or the People’s Liberation Army (PLA) backdoor access to sensitive computer systems or telephone lines, potentially allowing them to disrupt communications or pilfer valuable economic and military secrets. The danger, the company’s detractors say, isn’t just theoretical. “We believe that China has the means, opportunity and motive to use their tele­communi­ca­tions company against the U.S.,” says Congressman Dutch Ruppersberger, the ranking Democrat on the House Permanent Select Committee on Intelligence. He says the committee wants “to put our citizens on notice” about “how serious this is and that the Chinese government is working with them and is involved.” Fears over Huawei also reflect the growing concern about the vulnerability of American communications networks, which have recently come under repeated attacks by Chinese hackers.

(MORE: Hack Attack: China and the U.S. Trade Barbs on Cyberwarfare)

Indeed, the attention garnered by recent cyberattacks has done little for the firm’s prospects in the U.S.

In recent weeks President Barack Obama and Treasury Secretary Jack Lew have both warned China to stop its online aggression, and Defense Secretary Chuck Hagel in March called for U.S. intelligence assets to be repositioned from the Middle East to Asia to protect against the growing threat. In February a U.S. security firm accused the PLA of running a massive hacking ring. (There’s also alarm about old-fashioned spying. In the past year alone, the Justice Department has charged more than 100 individuals or corporate defendants with stealing trade secrets or dual-use technology for China or Chinese entities.) With the links between Huawei and the Chinese state and military still murky, its critics are convinced that the company is a Trojan horse. As a major global telecom player, Huawei is certainly too big to ignore. Is it also too big to trust?

Huawei insists it would never spy on the U.S. or anyone else. Countries like South Korea and the U.K. use Huawei gear without incident. Some see the American response as tech protectionism.

“It would be immensely foolish for Huawei to risk involvement in national security or economic espionage,” Charles Ding, a senior vice president at the company, told the House committee during hearings last year. Other Huawei officials suggest that security jitters are a cover for old-­fashioned protectionism. “Security is not the real issue,” says Rajiv Weimin Yao, a Huawei vice president based in Gurgaon, near New Delhi. Huawei says its competitors benefit from steps to block its progress. “You can’t help looking at the U.S. [security concerns] with jaded eyes,” says Eric Harwit, a professor of Asian studies at the University of Hawaii and the author of China’s Telecommunications Revolution. U.S. politicians, he says, “are just protecting their own companies.”

For now, at least, U.S. lawmakers seem unlikely to budge, a fact that may force Huawei to focus on the market for smartphones rather than telecommunications infrastructure. “No one cares about handsets,” James Lewis, director of the technology and public-policy program at the Center for Strategic and International Studies tells TIME. “They can sell as many as the market can take.” Or that’s the hope, anyway. With all this talk of spycraft, will America buy in?

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