Huawei (or China) Slams into US National Security Concerns, Again

Wolf Richter's picture

Wolf Richter

Huawei is a prime example of Chinese companies scaling the value chain through innovation and technology transfer—top priorities in China's five-year plan. But its efforts to become a major player in the US give the US government, and anyone concerned about national security, the willies. And now, these concerns dissolved another deal, yet the root problem remains.

Huawei, already one of the world's top suppliers of telecom and networking equipment, has branched out into servers, data management centers, cloud-based software services, smartphones. You name it. It even sports a tablet. It has all the marks of success, from scrappy startup to multinational. In 2011, sales increased by 14% to $32 billion. It is active in 140 countries, operates 23 R&D centers worldwide, and has a global workforce of 140,000. Since 2001, it has made significant inroads into the US, where it employs 1,700 people. Last year, according to SFGate, it spent $230 million on R&D in the US. Its center in Santa Clara, CA, for example, focuses on photonics, optics, and LTE devices (wireless communication of high-speed data).  

It is also a huge customer: since 2001, procurement agreements with US businesses exceeded $30 billion. This included $6 billion in contracts, announced in February, with Qualcomm, Broadcom, and Avago, all California companies—supposedly creating tens of thousands of jobs in the state. "A demonstration of confidence in the long-term relationships we have cultivated with our local high-tech partners," said Chen Lifang, Senior Corporate Vice President of Huawei.

But the US government is worried. It relies on US supplied technologies for its secure data centers, networks, and communication channels worldwide. Breaching them by introducing equipment or software would be the absolute homerun for a foreign intelligence service. With potentially catastrophic consequences for national security—though they may not always be obvious to the media: “It's not clear what the U.S. government's problem with Huawei is, apart, perhaps, from generalized concerns about China's coveting of other countries' advanced technology,” SFGate stated naively.

Run of the mill breaches happen all the time. We already know from NASA Inspector General Paul Martin’s testimony before Congress that his agency experienced 13 security breaches last year, some of which could compromise US national security. For more on this and some spooky privacy issues, read....  Can't Even Urinate in his own Yard Anymore.

Huawei, whose largest customer is the Chinese government with its state-owned enterprises, consistently denies having links to security services—but even if that were true, it wouldn't change much. So the US government has confronted Huawei in numerous ways, most visibly when it blocked it from acquiring US companies. In 2008, the Committee on Foreign Investment in the United States (CFIUS) torpedoed the acquisition of 3Com. In 2010, Republicans in Congress raised a ruckus about Sprint Nextel’s efforts to buy telecom equipment from Huawei. In 2011, Huawei had to unscramble the acquisition of 3Leaf's assets. But Huawei became a bit savvier in the American way: it has hired a Washington a law firm headed by former Secretary of Defense William Cohen.

Now it emerged that Symantec, the largest maker of computer security software, is dissolving its joint venture with Huawei, according to anonymous sources cited by the New York Times. This is a step further than the announcement last November that Symantec would sell its 49% share to Huawei. Apparently, Huawei already dismissed some of its employees in the joint venture's office in Silicon Valley and would transfer all activities to locations overseas. “Increased American government oversight" was the reason, according to the Times.

Protecting the US from all cyber threats may be impossible, but the government is trying to come up with new ways. According to the Times:

In January, the Pentagon transferred an information-sharing pilot program, called the Joint Cybersecurity Services Pilot, to the Department of Homeland Security. The program was originally intended to share classified National Security Agency intelligence with military contractors. Homeland Security is expected to extend the program beyond those companies to antivirus companies, like Symantec, and network providers.

Clearly, Symantec wanted to feed at the big trough. And Huawei needed to be kept away from classified-cyber threat information—a separation that may become theoretical as tech companies are increasingly interwoven through their complex international supply chains and partnerships.

Chinese expansion overseas—and the technology transfers associated with it—is a national priority. And Chinese companies, many of them government owned, have gone on veritable shopping sprees. For how this dynamic is impacting export powerhouse Germany, and for the fretting it produces, read.... China, the Number One Foreign Investor in Germany.

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silverserfer's picture

wen you look at the overall wretched behavior of chinese in general it becomes aparent that you should avoid doing business with them entirely (if you can) and buying their products. Theire counterfeiting of  US silver 90% coins and bullion particularly piss me the fuck off.

Dingleberry's picture

So tell me, how did China become the importer to the US overnite? Did they threaten to invade us or something? Or did our OWN government (that YOU vote for) and CEOs open the gates? Hmmm.  Now another question. China has a horrific human rights record, and even worse labor laws, more so than Cuba. But yet, they are able to do anything in our country, and Cuba is still a pariah. Hmmm.  I guess the word "principle" doesn't apply here.  When I read about "threats from China", I cannot believe that D.C. or Wall Street or corporations care. If they did, we would have never been put in the situation that we are in now. 

forexskin's picture

to clarify this, we probably need to update the immensly descriptive term 'petro dollars' for the china context.

its the debt, stupid (as in the billybub clinton context)

Marc_W's picture

I only use Checkpoint hardware firewalls and Zone Alarm software firewalls, both engineered in Isreal, so I know I'm secure.


Oh wait.


"In the wake of the September 11 terrorist attack, the FBI has stumbled on the largest espionage ring ever discovered inside the United States. The U.S. Justice Department is now holding nearly 100 Israeli citizens with direct ties to foreign military, criminal and intelligence services."

"The spy ring reportedly includes employees of two Israeli-owned companies that currently perform almost all the official wiretaps for U.S. local, state and federal law enforcement."
"The U.S. law enforcement wiretaps, authorized by the Communications Assistance for Law Enforcement Act (CALEA), appear to have been breached by organized crime units working inside Israel and the Israeli intelligence service, Mossad."
nah's picture

there is already too much korean crap for china to do anything about it

Taterboy's picture

"If I had son, he'd look like Obama."--Neville Chamberlain

Bananamerican's picture

" data centers, networks, and communication channels worldwide. Breaching them by introducing equipment or software would be the absolute homerun for a foreign intelligence service"

"Here, let us hand you a bat" - Amerikan Fascism

Henry Hub's picture

I think the best line in the article is:

"Huawei became a bit savvier in the American way: it has hired a Washington a law firm headed by former Secretary of Defense William Cohen."

If you want to buy the whores in Congress you have to go to the right pimp.

Arthur Borges's picture

Well, according to Henry Ford, there is such a thing as an honest politician: somebody who "stays bought."

Doubleguns's picture

If you want to buy the traitorous whores in Congress you have to go to a traitorous pimp.


Fixed it for ya.

holdingontomypants's picture

And a whore he is if he accepted the client. Another former DC whore with no integrity or loyalty other then to the dollar. This is where President Obama needs to step up and put out a memo that nobody is to give Cohen one second of their time and cc a copy to the whore Cohen and to the Chinese company. Send a copy of what the pink slip would look like with the memo so it is crystal clear what will happen to you if you do not comply with the memo.

forexskin's picture

This is where President Obama needs to step up and put out a memo that nobody is to give Cohen one second of their time and cc a copy to the whore Cohen and to the Chinese company.

and why would the whore in chief do that?

DeadFred's picture

Don't forget the cash-in-hand part.

Marc_W's picture

Ain't no rules in "the great game" of geopolitics.


You think the Anglo empire doesn't spy on everyone at all times?  That's what Echelon has been doing for 30 years.  And there are documented cases of the Anglo empire using it spy apparatus to help Anglo companies win contracts against foreign competition.


All this whining about China makes me laugh.  Like a spoiled child crying "it's not fair! he cheated!" after he gets beaten at a board game.


Cheating is a part of the metagame in all games.  And there are no rules in the game nation states play.

old naughty's picture

It's all part of the 'agenda' being played out...

Tech bubble...Chinese style.

What happened to Lucent?

Bartanist's picture

Didn't the government get the memo? Forced globalization is the plan, like it or not. The only question, is which group of psychopaths is at the top of the food chain ... or maybe it is just one group of psychopaths.

Marty Rothbard's picture

The NSA is the group that I am most concerned about.


Marc_W's picture

As you should be.  The Chinese can't send a SWAT team to your house to murder you.  But your American government can.


I am not at all concerned about overseas spying because those countries are no threat to me on a personal level.  The U.S. government is the highest threat to my own personal safety.  The U.S. may kidnap, torture, or murder me without trial.


I am far less endangered by the Chinese government than the American one.

silverserfer's picture

spoken like someone who truly has no clue what is going on in the real world. Just thier rat hole doomseday bunker.

Arthur Borges's picture

The assumption seems to be that China is hellbent on becoming the next Roman Empire when NOTHING is further from their nature. Even the original Peace Prize Hawk, Dr. Henry Kissinger says as much in his "On China" published late last year.

kiwidor's picture

This meme is spreading in New Zealand as well;


and it looks like someone already beat me to the inevitable comment about 'israeli' equipment (like multiplexers for example) that might be a point of weakness in any network.

All big companies are intelligence gathering operations.  But what would they get?  endless converations between mothers and daughters about how baby jane is doing.  boring conversatiions about when to do lunch and where.  telephone orders for pizza.  good grief.  nothing of import is seriously discussed on the phone.

This looks like a media beatup of huawei because some shitty european or english or american company can't compete on price/performance.



sushi's picture

that might be a point of weakness in any network.

Are you referring to the NSA backdoor crypto key that showed up in early beta versions of MSFT's W2K? The denial was along the lines of "We employ a coder named Nathan Simon Armhole who created a folder using his initials."

All big companies are intelligence gathering operations

Are you referring to the one I worked for (one of the largest) where for each caller you clicked a button and the app pulled up a db link that showed if the "Mohammed Abdul" on the other end of the line was for us, or for them? You have no idea of the number of IT techs named Mohammed.

Oops! There goes the doorbell. Must be my morning bullet!

Marc_W's picture

Or the permanent liaisons that certain 3 letter agencies have stationed at Google, Facebook, etc.  Gotta have that "personal presence" for when something goes wrong.  Gotta make sure they can pull up everyone's email and facebook remotely with a few clicks after all.

Bazza McKenzie's picture

You might note that the Australian government has recently excluded Huawei on security grounds from participation in its National Broadband Network (another boondoggle, since Australia already has no shortage of broadband).

Marc_W's picture

Point the first, 99.9% of Zero Hedge readers are technologically illiterate and completely unqualified to discuss this topic.


Point the second, if the Anglo intelligence agencies are terrified of Chinese computer hardware there's a good reason for it.  That means that the Anglo intelligence agencies already have all kinds of hardware backdoors built into just about everything an American tech company has touched in the past 20 years.  They know it can be done because they've already done it.


I'll leave it at that, lest I "wake up" with a bullet in my brain.

kiwidor's picture

totally agree;  but worse, most techo's in the west have no idea of the backdoors in all kinds of things from software to hardware.  if i had a thousand bucks for each time i'd heard "but we're firewalled off from..." 

don't fear the bullet, btw. anyone who knows how weak the infrastructure is is usually dealt with by promotions, better job, and some of their problems go away.    merry slaves are happy slaves.





DeadFred's picture

Most Americans I've spoken with haven't any idea of the risks. When I talk about how it might not be a great idea for US politicians to thump on their chests and threaten Iran when China is their biggest ally I hear "What can they do? How many aircraft carriers do they have?" The winners of the last war tend to reuse the old, winning strategies in the next and are often caught by the innovations of their opponents. Many people were caught by surprise on 9/11 because who could have thought of flying a jetliner into a building as an act of war. Maybe anybody who read the end of Tom Clancy's best selling novel could have guessed. Do they remember that the same novel started out with an electronic attack aimed to destroy the US economy?

I know this is not a novel we live in, but we don't have Jack Ryan as President either. 

cowpieflapjack's picture

No surprise for Bush, Cheney and Rumsfeld though, on the jetliner into the building issue being an act of war.

Blue Horshoe Loves Annacott Steel's picture

I'm not some fancy eggheaded economist w/ a super fancy Phd. running a counterfeiting Ponzi scheme, but maybe sending all the USA's money, jobs, & manufacturing to China has something to do with the USA's economy sucking, unemployment being high, & the national debt being unpayable!

lasvegaspersona's picture

I am sensing a huge disturbance in the Force. The distrust of the USG is now severe and widespread, well beyond we few 'wackos' here at ZH. I do not see the USG being able to make a plea for unity to fight any foe that would be widely accepted. The failure of the USG to honestly deal with the currency problem is the one thing that most of the folks get. Over 100 trillion in debt...can never be paid, people understand that. NOT ONE (OK one) politician is honestly speaking about this major problem. How can this country survive with almost NO trust in Federal leadership?

I suspect a security breach with China would be the least of our problems.

Dburn's picture

If and this is a big IF, we ever get back to when it was just bad, we will need technological innovation for everything from consumer goods to industrial manufacturing. In the short-term where most Americans live, it may not matter that innovative companies are not only handing their technology to China on a silver platter they are also giving them the money to build exact copies and sometimes pay for them when Chinese manufacturers deliberately do overruns of an order and sell them out the back door.


This was and probably still is big in Korea. One could go to a market where all the brand name clothing we bought in the US was 30-40% of the 50% off prices we would see in the US. These were the classic overruns that had the labels ripped before selling them. It wasn't too bad then. Now it's a fucking nightmare with China. Perhaps Apple will be the wake up call people need when their iPads can no longer be shipped out of China because some shitty little tech company claims it is trademark infringement for sales inside and outside China. This happens much more frequently than we hear in the news , especially to mid-size companies. They go over there and everything is cool for awhile. All are happy until one day they get a email;" we can no longer acccept orders from you. We have seized all your assets and trademarks and will begin distribution of your products in the US ourselves. "


Got 100s of millions for international attorneys? Apple does , but China wants something else from Apple. They know if Steve Jobs were still alive, they would have heard a "FUCK EM" all the way across the pacific. "SET-UP Manufacturing here. Fuck these bastards. Get it done in 5 days."

Marc_W's picture

Many Americans have come to realize that foreign policy is a game played by the elite with little relevance to our lives.  Foreign governments are no threat to us personally while the U.S. government is a grave threat to our very lives.  The American police state murders, kidnaps, tortures, and imprisons far more Americans than any foreign government EVER has.

cowpieflapjack's picture

Most Americans don't even understand that the foreign policy pursued is viewed as a game.

Blue Horshoe Loves Annacott Steel's picture

That 1 would be? lol.

Of course it's Dr. No aka Ron Paul.

Vendetta's picture

Letting so much manufacturing go to china is a national security issue but no politican is doing anything about but if the chinese can retrieve what they are saying or typing behind closed doors.... that's a problm apparently.  How dumb and/or corrupt can the gov get?  Never mind, don't answer that.

Elmer Fudd's picture

Those who constantly wail about letting manufacturing jobs "go" to China dont seem to mind that we also exported our pollution problem.  Cant have one without the other, greenie weenies.

Arthur Borges's picture

Yep, lots of US and EU started operations here with plant & equipment too toxic for US laws to tolerate any longer.

Doubleguns's picture

If and thats a big IF, china held thier pollution standards to the EPA's then yes we exported our pollution but if china just pollutes without any standards then I would say they just imported a pollution problem.

There is a difference, subtle but different.

dumbengineer's picture

totally agree. Nimby greenie weenies ship out  silicon manufacturing  to taiwan. labour cost is only secondary.

And guess where are the  backdoors ? silicon. Be it Apple's or Huawei's

Marc_W's picture

Most of the hardware backdoors are literally undetectable even by P.hd Electrical Engineers.  But they're there just the same.


That's the source of this fear.  They know what CAN be done because they've already DONE it.  You know, securing the global supply chain and all that.

xela2200's picture

Hard to tell anymore who is the bad guy.

Doubleguns's picture

China wants your jobs, US govt wants your food and water. Hmmmm, Seems there are NO Good guys left--all of them are bad.  

LawsofPhysics's picture

My father said the same thing in the 1980's when his law firm was prosecuting the S&L bankers, but hey, at least they would actually fucking prosecute someone back then.

Marc_W's picture

Everything is legal now.  There's no crime to prosecute.

Bananamerican's picture

"Everything is legal now.  There's no white collar crime to prosecute" (fixed)

Vendetta's picture

Let me know if you find the answer, I can't tell the difference either.