US Intelligence Report – Don’t Trust Huawei

After hearings with Huawei representatives, and apparently satisfied  with neither the cooperation they   not received nor the answers, a senate committee released their sixty page “Investigative Report on the U.S. National Security.  Issues Posed by Chinese Telecommunications Companies Huawei and ZTE” on October 8.

In brief, "The investigation concludes that the risks associated with Huawei’s and ZTE’s provision of equipment to U.S. critical infrastructure could undermine core U.S. national-security interests "

"If I were an American company today, and I'll tell you this as the chairman of the House Permanent Select Committee on Intelligence, and you are looking at Huawei, I would find another vendor if you care about your intellectual property, if you care about your consumers' privacy, and you care about the national security of the United States of America," Mike Rogers said on 60 Minutes.

One issue with this, of course, is that it reduces the companies that a customer will have bid on a proposal. Another is that in a "nuetral" world, Huawei may have the best solution from a technology perspective. US companies still compete globally. Long term, Huawei competitors are losing out when Huawei surpasses them in innovation. Other country's governments may not be as vocal with respect to suggesting Huawei not be used for major  network infrastructure projects. 

The Intelligence Report's Major Recommendations

1. The United States should view with suspicion the continued penetration of the U.S. telecommunications market by Chinese telecommunications companies.  (a)  The United States Intelligence Community (IC) must remain vigilant and focused on this threat.  The IC should actively seek to keep cleared private sector actors as informed of the threat as possible.  (b) The Committee on Foreign Investment in the United States (CFIUS) must block acquisitions, takeovers, or mergers involving Huawei and ZTE given the threat to U.S. national security interests.  Legislative proposals seeking to expand CFIUS to include purchasing agreements should receive thorough consideration by relevant Congressional committees.  (c) U.S. government systems, particularly sensitive systems, should not include Huawei or ZTE equipment, including component parts.  Similarly, government contractors – particularly those working on contracts for sensitive U.S. programs – should exclude ZTE or Huawei equipment in their systems.
2. Private-sector entities in the United States are strongly encouraged to consider the long-term security risks associated with doing business with either ZTE or Huawei for equipment or services.  U.S. network providers and systems developers are strongly encouraged to seek other vendors for their projects.  Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems
3. Committees of jurisdiction within the U.S. Congress and enforcement agencies within the Executive Branch should investigate the unfair trade practices of the Chinese telecommunications sector, paying particular attention to China’s continued financial support for key companies
4. Chinese companies should quickly become more open and transparent, including listing on a western stock exchange with advanced transparency requirements, offering more consistent review by independent third party evaluators of their financial information and cyber-security processes, complying with U.S. legal standards of information and evidentiary production, and obeying all intellectual-property laws and standards.  Huawei, in particular, must become more transparent and responsive to U.S. legal obligations.
5. Committees of jurisdiction in the U.S. Congress should consider potential legislation to better address the risk posed by telecommunications companies with nation-state ties or otherwise not clearly trusted to build critical infrastructure.  Such legislation could include increasing information sharing among private sector entities, and an expanded role for the CFIUS process to include purchasing agreements. 

“60 Minutes” aired a story on Huawei on October 7.  They were able to only speak to a “company representative” in the US.  They flew a crew to China to try to meet with company officers, but were unsuccessful in their attempts to meet with anyone.  The complete transcript is available at http://www.cbsnews.com/8301-18560_162-57527441/huawei-probed-for-security-espionage-risk/?tag=contentMain;cbsCarousel

Where's Andy Rooney when you need him! 

One comment by Network World - 60 Minutes torpedoes Huawei in less than 15 minutes.  http://www.networkworld.com/community/node/81554

In March, Symantec completed the sale of Symantec’s 49 percent stake in Huawei Symantec Technologies Co., Ltd. (Huawei Symantec) to Huawei for USD $530 million.  The sale liquidated Symantec’s ownership interest in the joint venture and gave Huawei sole proprietorship over all elements of the joint venture entity.  There were “fears” that the relationship could potentially negatively impact business with the US government. 

 http://www.symantec.com/about/news/release/article.jsp?prid=20120330_01

Cisco filed an intellectual property lawsuit against Huawei Technologies, Co., LTD and its subsidiaries, Huawei America, Inc. and FutureWei Technologies, Inc. in January 2003.  It was settled in 2004.  "The completion of this lawsuit marks a victory for the protection of intellectual property rights," said Mark Chandler, Vice President and General Counsel, Cisco Systems.  "Innovation is the lifeblood of the industry, and protecting our intellectual property is of paramount importance to Cisco.  We are pleased to conclude the litigation as a result of the steps that were taken to address our concerns." 

 http://newsroom.cisco.com/dlls/2004/hd_072804.html

To view the complete Investigative Report on the U.S. National Security.  Issues Posed by Chinese Telecommunications Companies Huawei and ZTE -

http://intelligence.house.gov/sites/intelligence.house.gov/files/documents/Huawei-ZTE%20Investigative%20Report%20%28FINAL%29.pdf

  

 US companies will be picking their partners carefully  in the telecommunications and security sectors for a while.  http://kensek.blogspot.com/2012/08/sometimes-you-have-to-pick-your.html

To read more about Huawei:
  http://kensek.blogspot.com/2012/10/uk-and-european-commission-to-look-at.html