US warns against Huawei

The heads of six US intelligence agencies including the FBI and the CIA have warned US citizens about using products made by Chinese tech giants Huawei and ZTE.

In January, the US blocked a deal between Huawei Technologies and US carrier AT&T. At the time authorities cited security concerns.

Background

Huawei Technologies is a Chinese multinational networking and telecommunications equipment & services company headquartered in Shenzhen, Guangdong. It is the largest telecommunications equipment manufacturer in the world, having overtaken Ericsson in 2012.

In 2012, the House Intelligence Committee in the US released a report that urged US telecom companies not to do business with Huawei. The report also warned companies against Shenzhen-based firm, ZTE. The report stated that these companies could threaten US security.

In January 2018 it was reported that the deal between China’s Huawei Technologies & US carrier AT&T has fallen through, amid concerns about security. The two companies had decided to come together to sell Huawei’s smartphones in the United States.

ZTE, is a Chinese multinational telecommunications equipment and systems company headquartered in Shenzhen, Guangdong. It operates in three business units: carrier networks (54%), terminals (29%) and telecommunication (17%).

US-China ties

United States and China are the two largest economies in the world. Both countries consider the other as a partner in trade and an adversary in geopolitics. US President Donald Trump has previously been a critic of China. He blamed the country for loss of jobs within the US. He also has often criticized the US trade deficit with China. China's trade surplus with the United States widened in 2017 while total foreign trade volume maintained rapid growth.

Analysis

In February 2018, the US Senate Intelligence Committee discussed US security concerns especially with regards to China. Officials discussed the “whole of society” approach taken by Beijing, and its strategic use of academic institutes, businesses, and telecommunications. They believed that Chinese spies were infiltrating the United States through universities.

During the meeting FBI Chief Christopher Wray said, "We're deeply concerned about the risks of allowing any company or entity that is beholden to foreign governments that don't share our values, to gain positions of power inside our telecommunications networks.”

The heads of six US intelligence agencies additionally also warned Americans against using any products developed by Chinese tech companies Huawei and ZTE. This includes heads of the CIA, NSA, FBI and the Defense Intelligence Agency. During the testimony in front of the US Congress, they said that the phones by Huawei posed a threat to American citizens and could compromise on their security.

Wray said, "That provides the capacity to exert pressure or control over our telecommunications infrastructure. It provides the capacity to maliciously modify or steal information. And it provides the capacity to conduct undetected espionage.”

"This is a challenge I think that is only going to increase, not lessen over time for us," said Adm. Michael Rogers, the NSA's director. "You need to look long and hard at companies like this."

A spokesperson for Huawei has responded to these allegations by noting, “Huawei is aware of a range of U.S. government activities seemingly aimed at inhibiting Huawei's business in the U.S. market. Huawei is trusted by governments and customers in 170 countries worldwide and poses no greater cybersecurity risk than any ICT vendor, sharing as we do common global supply chains and production capabilities.”

In the recent months, a number of acquisitions of US companies by Chinese conglomerates have been blocked. In January 2018, the US blocked the sale of money-transfer service Moneygram to Ant Financial, an affiliate of Chinese e-commerce giant Alibaba. The sale had been worth $1.2 billion.

Assessment

Our assessment is that the concerns from US intelligence regarding Huawei have been voiced for many years now. Huawei, which was founded by a former engineer in China’s People’s Liberation Army, has been described to be “effectively an arm of the Chinese government.” Thus, the US has often moved to block its presence in America. The US will continue be wary as China’s influence continues to grow globally. We believe that this concern will definitely extend to India, as most of our telecom operators use equipment from Huawei.