Accused of Cyberspying, Huawei Is ‘Exiting the U.S. Market’

The CEO of the world’s biggest telecommunications equipment maker, which for years has been labeled by U.S. officials as a proxy for Chinese military and intelligence agencies, says he’s giving up on America.

In a rare interview on Nov. 25 with French journalists, Ren Zhengfei, the 69-year-old founder and CEO of China-based Huawei, said he would no longer look for business in the United States, in the wake of accusations from lawmakers and government officials that the company is a de facto arm of the Chinese authorities. "If Huawei gets in the middle of U.S-China relations," and causes problems, "it’s not worth it," Ren reportedly said, according to a Chinese transcript of the interview. "Therefore, we have decided to exit the U.S. market, and not stay in the middle."

It wasn’t immediately clear what Ren meant by "exit" the market, but for the company, the U.S. market could easily be described as hostile. Lawmakers have exhorted U.S. firms to stop doing business with Huawei, and federal regulators have tried to block the spread of the company’s equipment in the United States

William Plummer, a Huawei vice president and the company’s point person in Washington, told Foreign Policy, "It is true that Huawei has adjusted our priority focus to markets that welcome competition and investment, like Europe," adding that Ren is "making a comment on the current market environment." The company’s overseas business is thriving. It has offices in 18 countries and has invested billions of dollars building communications networks in Africa.

Ren didn’t say that Huawei was shutting down its U.S. offices or entirely ending a particular line of business. And he claimed that the company’s mobile phone business was going strong. "Our handsets in the United States are still selling well," Ren said.

"For research and development, and retail handset provision, Huawei will likely stick around" the United States for a long time, said Dan Rosen, a partner and China practice leader at the Rhodium Group, an economic advisory firm.

But Ren’s comments were the highest level to date from inside Huawei about the international politics that it feels have unfairly kept it out of the U.S. market, among the largest and most important for any technology company.

The Ren interview, conducted in Paris with several French media outlets, has received wide coverage on Chinese financial and general news sites, but does not appear to have been picked up by U.S. or British media.

Some U.S. officials worry that Huawei’s telecommunications equipment, which includes routers and switches, could come preloaded with back doors and hidden surveillance devices, and that if it were installed in the United States, the Chinese government would have an easy avenue for espionage and potentially cyber attacks on U.S. infrastructure.

In 2012, Rep. Mike Rogers, the chairman of the House Intelligence Committee, said U.S. companies who were purchasing equipment from Huawei and another Chinese company, ZTE, should find other vendors. Rogers said that the installation of Chinese equipment in the United States could have disastrous consequences.

"We have to be certain that Chinese telecommunication companies working in the United States can be trusted with access to our critical infrastructure," Rogers said. "Any bug, beacon, or backdoor put into our critical systems could allow for a catastrophic and devastating domino effect of failures throughout our networks."

Dutch Ruppersberger, the intelligence committee’s ranking member, said the committee had "serious concerns about Huawei and ZTE…and their connection to the communist government of China. We warn U.S. government agencies and companies considering using Huawei and ZTE equipment in their networks to take into account the effect if could have on our national security."

The intelligence committee began an investigation of Huawei in 2011. A preliminary review "suggested that the threat to the supply chain [of telecommunications equipment] constitutes a rising national security concern of the highest priority," according to a committee statement.

In March 2013, Sprint Nextel and Japan’s Softbank told the committee they would try to phase out equipment from Huawei as part of a merger, the Wall Street Journal reported. The concession was seen as a successful play by U.S. regulators to keep Huawei equipment from being used in the United States, in exchange for official blessing of the merger by U.S. government officials.

In a post on his personal blog, Plummer, the Huawei vice president, called the committee’s investigation a "comedic sham," and said that Rogers’ comments about Huawei’s connection to the Chinese government "border on corporate defamation…"

Rogers "has made multiple claims about China-headquartered Huawei’s integrity," Plummer wrote. "Not once – not once – with a shred of demonstrable substance."

He added, "If the Chairman can factually and substantively explain why Huawei is somehow more susceptible to cyber-penetration than any and every other telecom vendor that relies on common global supply chains and is subject to common cyber challenges and vulnerabilities, then he should do so."

Ren’s comments appear to be only the second time he has given an interview to non-Chinese media. The first was when he spoke with four journalists from New Zealand, during a May 2013 trip to Wellington. "Huawei has no connection to the cyber-security issues the U.S. has encountered in the past, current and future," he said, according to the BBC.

Ren has a penchant for veering off corporate talking points, and his interview with the French press was at times digressive. According to a transcript posted on Huxiu.com, a Chinese news site, and widely republished on the Chinese internet, it includes a lengthy discourse on why Ren decided to go into the telecom business instead of raising pigs; the correct way to say the company’s name — "we should teach foreigners how to pronounce it, so they don’t always say ‘Hawaii’" (it’s Hwa-way); and why he only owns 1.4 percent of the company — "because one day I will get Alzheimers." The interview ends with Ren inviting the journalists for "afternoon tea" and an appeal for them to embrace of the French spirit of romance. "Why can’t you just pay attent
ion to my main ideas and ignore the details?" he asks.

Adam Segal, a senior fellow for China Studies at the Center for Foreign Relations, said he’s not sure why Ren doesn’t often give interviews, but "maybe he’s the type of CEO that the rest of the board is not comfortable with, because they’re afraid he’s going to say something he shouldn’t say."