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House report on Huawei, ZTE raises real concerns, experts say

Antone Gonsalves | Oct. 10, 2012
Chinese telecom equipment makers deny allegations, one claiming the panel's findings based on 'rumors and speculations'

Grady acknowledged that competition between U.S. and Chinese tech companies couldn't be discounted.

"I do think that a lot of this is driven by the fact that it's China," he said. "We can point to many examples of ties between network or security companies and militaries and governments around the world, but those militaries and governments aren't China, so reports like this haven't been written."

ZTE, the world's fourth largest mobile phone maker, said the committee's finding that it may not be "free of state influence" could apply to any company operating in China.

Nevertheless, The risk posed by companies like Huawei and ZTE is that a government plant could insert spyware within firmware that would still pass regression testing by a quality assurance team, Aitel said.

"In this case, the American government is worried about Chinese major manufacturers from the top down targeting particular segments of the United States infrastructure," he said.

Huawei has significant portions of the worldwide enterprise and carrier markets for networking equipment. The company is strongest in Asia and Europe, but is not an important player in the U.S., Gartner analyst Kathie Hackler said.

The committee report could damage efforts the company has made recently to increase U.S. sales, if the classified evidence the panel has is made public and is proven to be true.

"It will definitely impair great success in the market, because there's going to be that fear, uncertainty and doubt, and certainly within verticals that are very sensitive about security," Hackler said, citing government and financial institutions as examples.

Rep. Frank Wolf, who chairs the House Appropriations subcommittee, has inserted language in an appropriations bill pending in Congress that would prohibit the purchase of telecom equipment produced by Chinese state-owned or state-directed companies.

"I was pleased the report's first recommendation directs all federal agencies to similarly prohibit these risky products moving forward," Wolf said in a statement published by Fairfax News.


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