Huawei: U.S. market a 'commercial disappointment'

Huawei: U.S. market a 'commercial disappointment'

Summary: Chinese telecoms equipment maker cites trade protectionism and sinophobia from the U.S. government as reasons for its reduced market focus, adding these will not benefit broadband users in the country.

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SHENZHEN--Trade protectionism and sinophobia pushed Huawei to reduce its focus on the U.S. market earlier this year, which has proven to be a "commercial disappointment" for the Chinese telecoms equipment manufacturer. 

According to Scott Sykes, Huawei's vice president of international media affairs, the decision to move away was not a reflection of the company's changing commitment to the U.S. market, but of a commercial reality that there were no opportunities for the Chinese telecoms equipment manufacturer in the foreseeable future.  

Sykes was commenting on an April announcement by Eric Xu, the companys executive vice president, who declared Huawei was "not interested" in the U.S. market anymore and had decided to shift its focus to Europe.

"Despite the fact we have done our best to communicate about our company, and have been in business for 26 years with telecom operators around the world, the challenges we face in the U.S. are not about Huawei or the security of our equipment," Sykes said, speaking to ZDNet Asia in an interview here Tuesday. 

He attributed the reduced focus in the country to trade protectionism, sinophobia, and politics on the part of the U.S. government. He added that moves to ban Huawei from participating in the U.S. market would not benefit U.S. consumers, who pay two to three times more for broadband services compared to other consumers in other parts of the world.  

This has led to less competition in the U.S. market for broadband services and consumers have to pay more for lower quality broadband services, he noted. 

This does not mean, however, the Chinese telecoms equipment manufacturer is pulling out of the U.S. market, Du Juan, branding and marketing operations director at Huawei's enterprise business group told ZDNet, in a separate interview on Tuesday. Its enterprise business division, for example, is still active in the market, she pointed out.

Huawei just finished exhibiting at Interop, a U.S.-based IT conference and expo, while its network switches and storages are still being deployed in some universities and retail stores, Du noted. 

"The U.S. is still a big market, and we continue to deploy our company's strategy and focus on the basics in the market," she said. 

U.S cybersecurity issues not related to Huawei

Sykes pointed out that cybersecurity issues in the U.S. had "nothing to do" with Huawei, since its market share in the country is zero. He noted it was "impossible" that Huawei could be associated with security issues as it worked with 500 operators worldwide, ranked 315 among Fortune 500 companies, and was generating US$35 billion worth of revenue

"It would be impossible to get to that point if people didn't trust our technology and products," he said, adding that since Huawei has already been barred in the U.S., logically, there should not be security issues prevalent in the country but that is not the case.

Last October, the U.S. House of Representatives Intelligence Committee stated Huawei, along with fellow Chinese vendor ZTE, should not be allowed to do business with US businesses and government because the Chinese telecoms equipment manufacturers posed a security threat.

"We agree cybersecurity and protecting networks are important, but not the application of different standards and rules to a vendor based on where its headquarters is located."
-- Scott Sykes,
vice president of international media affairs, Huawei

Huawei agrees cybersecurity and protecting networks are important, but disagrees that different standards and rules should be imposed on a vendor based on where its headquarters is located, Sykes added. 

"All vendors should be held to the same standards and rules, otherwise it's just protectionism and discrimination. It does nothing to improve security," he said. 

Focus on public, government communication

Pranabesh Nath, research manager for ICT at Frost & Sullivan Asia-Pacific, said Huawei cannot afford to ignore the U.S. as a market, but noted the Chinese vendor would have increasingly limited options as sentiments against the company continue to grow. 

"The best strategy for Huawei at this stage, over the next one to two years, is to continue to lobby the government and industry groups, as well as try to improve its image among average citizens through community outreach programs," Nath said. 

Sykes also acknowledged the misunderstanding and misinformation surrounding Huawei, as the company did not focus efforts on "talking and telling [its] own story" for many years.

Moving forward, he said the company has decided to commit to being open and transparent to gain the understanding and trust of the public and governments. 

Nath noted that this is a "tough" position for Huawei since IT vendors are aware of the importance of the U.S. market for short-term growth strategy. The analyst said he expects Huawei to continue to insist on the quality of its products and services in meeting the needs of American customers.

How much effect this will have on the company, however, remains to be seen, he noted. 

Ellyne Phneah of ZDNet Asia reported from Huawei's headquarters in Shenzhen, China, on the vendor's invitation.

Topics: Huawei, Networking, Security, China

Ellyne Phneah

About Ellyne Phneah

Elly grew up on the adrenaline of crime fiction and it spurred her interest in cybercrime, privacy and the terror on the dark side of IT. At ZDNet Asia, she has made it her mission to warn readers of upcoming security threats, while also covering other tech issues.

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10 comments
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  • Difficult to say

    It's difficult to say how much of this is actual protectionism and how much of it is a legitimate fear of digital eavesdropping facilitated by a company that is very closely associated with the Chinese military. I suspect there's a bit of both going on.
    dsf3g
    • The Masters of Hypocrisy

      What moral basis has the USA to block chinese (or any other country's) companies from entering their market because of possible cyber security issues after the world being astonished at finding we have been hacked and spied for decades in our most secret, private and critical information?

      Hypocrisy rules the USA!!
      Luiz d'Almeida
      • The basis of security

        How many of you have actually worked for a company installing a network from them? I have and our IT people found the systems imbedded in their hardware that would allow them to pull information from our system and send it back to china. It was so deeply imbedded that you couldn't deactivate it. I mean when the owner of such a huge company is an ex Chinese general with no history of having the personal capital to launch such a huge business this also sends at least a couple warning signs.
        Ryan LeBlanc
  • My hope is ...

    ... that the NSA scandal will rebalance the position.
    jacksonjohn
  • if the US administration wanted to protect itself, it did the right thing

    Buried in a lot of the noise you see about this subject is that there have been a couple of hardware experts have come out and said that Huawei could hand over the source code for their routers without affecting any surveillance capability in their equipment at all. If the capability is embedded in the hardware itself, it would never be detected - you would have to be able to dissemble a chip to do it, and then work out what every functional block does. Basically, this is impossible - this functionality wouldn't take much space and you wouldn't even know where to start looking for it.

    If you look at the likes of guys like Felix Lindner who highlighted massive security flaws in their software, he said this hardware layer capability is not even needed - their coding methods date from the 1990's and that in itself is another easy vector to gain control over this gear.

    Is the threat real - of course it is. Means, motive, opportunity. It is inconceivable to think that with the CP's backing of any big business there, that every company that wants to succeed does their bidding.
    youcangetholdofjules@...
  • Horseshit

    The US broadband industry and government have been colluding to screw customers as hard as they can for as long as there's been a broadband market here.

    Unless Huawei is trying to come in and actually operate a network, their presence or absence would do little to change that, as the problem with the US market isn't with the hardware, it's deliberate regulatory barriers and market consolidation with the ISPs.

    They're right to piss and moan about this (although with the recent revelations about NSA's cooperation with internet companies, perhaps the US's paranoia re: Huawei makes more sense now), but acting like they're some kind of white knight riding in to save US consumers is a load of crap. Having them in the US might help a little (maybe put Netgear out of everyone's misery), but it's not going to matter in terms of any serious problems.
    Ian Finnesey
  • Dear Huawei

    Build and sell a product that solves the Chinese hacker exploit problem and the world will beat a path to your door.
    Sincerely,
    Victims of, and those concerned about, Chinese hackers
    JMnetworks
  • Globalization

    China is a major factor in the worlds future whether we want to admit it or not and the potential solutions they bring to the table shouldn't be dismissed out of fear of something that doesn't exist. The rest of the world seems to be doing just fine utilizing their technology. They are a main stream technology company even if you don't want to believe it.
    JRMilano
    • stroyde

      >dismissed out of fear of something that doesn't exist

      You don't know that, numskull.
      Stroyde
  • Google and Facebook were saying the same thing....

    ... that it is so unfair for Huawei in the USA, that the government should get off their backs and allow the market to work, just like in China.
    OldMayfield