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Huawei criticises US security complaints


Joe McDonald

Huawei smartphones on display at the Consumer Electronics Show in Las Vegas.

Huawei smartphones on display at the Consumer Electronics Show in Las Vegas. Photo: AFP

Chinese tech giant Huawei has labelled US claims the company might be a security risk as trade protectionism that harms consumers.

The comments came as Huawei, a maker of network switching gear and smartphones, disclosed details of its 2012 performance in an effort to show transparency and allay security concerns.

Chief financial officer Cathy Meng expressed frustration about US security complaints. She said Americans pay about twice what Europeans do for third- and fourth-generation mobile phone service and suggested it was due to impediments to competition.

"These measures using trade protectionism to interfere with free competition will ultimately harm the benefits of end users and consumers," Meng said at a news conference. "As we continue to invest in this industry and work with our customers, our customers and markets generally see the value we create for them."

Outside the US, Huawei has grown rapidly in developing countries and is increasing sales in Europe, becoming the first Chinese firm to break into the top ranks of global technology companies. It is challenging Sweden's Ericsson for the status of the biggest network gear supplier.

Last year's profit rose 33 per cent over 2011 to 15.4 billion yuan ($A2.4 billion) on sales of 220.2 billion yuan ($A33.7 billion), according to Meng. Still, last year's profit was less than half 2010's high of 24.7 billion yuan ($A3.8 billion).

Huawei is privately held but has released more financial details in recent years in an effort to ease concern about the company.

The news conference was the first of its kind for Huawei and part of an effort to "honour our commitment to transparency," said Meng, a daughter of Huawei founder Ren Zhengfei. She did not respond directly to a question about possible plans for further disclosures about things such as how key company decisions are made.

Huawei was set up in 1987 by Ren, a former Chinese military engineer, to sell imported telecoms equipment and later started to develop its own. The company says it is owned by its employees and denies it is controlled by the communist government or China's military, but such concerns have hampered its efforts to expand in the US.

In October, a US congressional panel recommended phone carriers avoid doing business with it or its smaller Chinese rival, ZTE. Beijing rejected the report as false and an effort to block Chinese companies from the US market.

In Australia, Huawei suffered a setback in 2011 when the government barred it from bidding to work on the National Broadband Network.

The US and Australian actions highlight concern about Beijing's cyber warfare efforts, a spate of hacking attempts aimed at Western companies and the role of Chinese equipment providers, which are expanding abroad.

Huawei issued a pledge last year not to co-operate with spying.

Its financial rebound came as ZTE warned on Sunday it is likely to report a loss for 2012 of 2.5 billion yuan to 2.9 billion yuan ($A382 million to 444 million) due to thinner margins on contracts in Africa, South America, China and elsewhere in Asia.

Huawei says it serves 45 of the world's 50 biggest telecoms carriers. The company has 140,000 employees and research and development centres in Europe, Silicon Valley and elsewhere. Meng said R&D spending last year rose 26 per cent to 29.9 billion yuan ($A4.6 billion).

Last year, only one-third of sales came from its home China market, according to Meng. Europe, the Middle East and Africa accounted for 35 per cent of sales, while 17 per cent of sales were in other Asia-Pacific markets and 15 per cent from the Americas.

Meng said Huawei paid 12.5 billion yuan ($A1.9 billion) in employee bonuses last year but said some top executives received no bonus because they failed to meet personal performance targets. She gave no other details.

Major carriers need to keep making long-term investments and are forecast to increase spending by about 5 per cent this year, Meng said. She said that should help to insulate Huawei from swings in the global economy.

"It's not as if people stop talking on the phone because the economy is weaker," Meng said. "We will not be influenced too much by the economic downturn in our industry."


8 comments so far

  • I was dubious before but now that they given a pledge....

    Date and time
    January 22, 2013, 8:55AM
    • I would trust them just as much as I would any of the telcos in the world.
      Just like the recent NSA warrantless surveillance controversy (AKA "Warrantless Wiretapping") in the USA: I would guess that Telstra, Optus and all the other telcos in Australia would probably "help out" ASIO, ASIS and the police if asked nicely.

      Date and time
      January 22, 2013, 10:34AM
      • That's fair judgement.

        Date and time
        January 22, 2013, 11:42AM
      • @Jeff - you are obviously completely oblivious to the legal compliance obligations that telecommunications service providers have in supplying network access to law enforcement and intelligence agencies - both in Australia and overseas.

        That is only eclipsed by your naivety to the various compliance and anti-corruption obligations that Western Telco vendors strictly follow - and Chinese ones don't!!

        But THAT is a whole lot different to wholesale and illegal international telecommunications espionage that Huawei and the Chinese Government undertake.

        Lukecom is SO correct. The average person has no idea what a serious risk to national security and the economy of the Western world, that these Chinese vendors - closely tied to Chinese intelligence and subversive Chinese Government interests - represent!


        Get Real
        Date and time
        January 22, 2013, 10:39PM
    • The Chinese Government has an abundant supply of money and young women which are the most powerful weapons to obtain whatever confidential data they care to obtain. As long as there are corruptions, there is no National security.

      Date and time
      January 22, 2013, 12:50PM
      • Dont be naive, deploying Chinese telecom core equipment is the easiest way for that government to position themselves for eavesdropping on national/corporate secrets. They are aggressively taking up market share by undercutting all others and are involved in stealing ideas and reverse engineering products so they can be re badged with the Huawei logo..... Be afraid, be very afraid!

        Date and time
        January 22, 2013, 3:02PM
        • And deploying American equipment is any safer? Are you kidding. There are plenty of safeguards available to governments as witnessed in the UK and SIngapore. The US would be better served by focusing its senate committees on gun control and actually reducing the totally out of control murder by gun than worrying about Huawei.

          Date and time
          January 22, 2013, 5:09PM
      • If you read the US Federal Government's investigation into Huawei ( -44 pages worth, it explicitly outlines the United States' core concerns.

        They are extremely real, and extremely valid. Remember Huawei ASKED for this review to be done, and then did not cooperate with requests for information.

        Secondly, their structure, board of directors, finance mechanisms, and accounts are all totally opaque. Ren Zhengfei (founder) is a former PLA Intelligence officer, and Sun Yafang, current chairwoman, according to the FBI, was formerly in the ministry of state security. Huawei has never tried to disprove either, and only issued a blanket "we are not affiliated with the Chinese Government in any way". The way to prove otherwise would be to list on a major stock excahnge where it would be forced to be more transparent - accounts, boards of directors, management structure, finance sources etc - these would all be immediately open for scrutiny.

        I am not anti-China. At all. What they have done to lift themselves and are starting to do with africa are astoundling. They have massive issues, yes, but they are acheiving massive results.

        If however, they are going to play on an international stage in business, then the playing field does need to be even.

        It currently is not.

        Date and time
        January 22, 2013, 11:04PM

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