China's Huawei Technologies Co. Ltd. has thrown down the gauntlet and bluntly told the US government to conduct an investigation of its operations in the country to put an end to allegations about its alleged activities as a tool in the hands of the Chinese military or as a spy organization.
Frustrated by repeated accusations of being considered a front for China's government, the communications equipment company has taken the unusual step of asking the US to conduct a thorough investigation of its operations to ensure it can continue to operate legally and without restrictions in the country.
Ken Hu, deputy chairman of Huawei, in an open letter charged the US government and rivals with placing obstacles to its operations and said allegations it is being controlled by China's government are not only false and without basis but also hurt its ability to make investments in the country. Hu's letter followed regulatory action earlier this month denying the company the chance to purchase assets of 3Leaf Systems, a failed US firm.
"We sincerely hope that the Unites States government will carry out a formal investigation on any concerns it may have about Huawei," Hu said in his letter...
Unfounded allegations have jeopardized our business activities, with many false claims driven by competitive interests, which we understand because competition can be difficult. Huawei's world-leading wireless broadband technologies can bring American telecom operators, as well as the general public, more advanced technologies and higher network speeds at a lower price.
Hu went even further by stating that Huawei had been repeatedly accused by unidentified rivals of being involved in activities that were not compatible with its role as a private enterprise. Those allegations, which the company hinted were shared by public officials, have constrained the company's expansion plans, since it has so far been unable to make major investments in the US despite employing thousands in the country and investing, so far, more than $6 billion in local R&D operations. It requested clarification from the US government on what it is legally able to do in the country.
While we can commit to not selling any products that concern American operators, we sincerely request guidance from the United States government on the scope of such restricted products and the duration of the related restrictions, as certain technologies that may seem crucial today will lose their leadership and sophistication over time. A full and permanent restriction is way too costly and unfair to any company.
I don't know whether this step will hurt Huawei by ticking off American officials, but one thing is clear: The company has obviously decided to take its case, not just directly to the government, but to the US public. Hu pointedly cited former Abraham Lincoln in his assertion that Huawei's reputation was being marred by repeated misrepresentation of its intentions, allegations the US government seems to have accepted without any substantive evidence:
Former American president Abraham Lincoln once said, "Character is like a tree and reputation like its shadow”. In recent years, misperceptions and rumors have been the shadow of Huawei, affecting Huawei's reputation and, we believe, the United States government's judgment of Huawei. We sincerely hope that the United States government will address this issue by carrying out a formal investigation of any doubts it may have about Huawei in an effort to reach a clear and accurate conclusion.
The US government and US-based rivals cannot hide behind vague and unsubstantiated allegations to deny Chinese companies the rights reserved for other private enterprises. If Huawei is really a threat to US security then the government must prove its case either publicly or lay it out to the company in private. Simply denying it and other Chinese companies the rights to invest in US companies on the basis of unproven allegations is illegal -- and damaging to the US. Now that Huawei has gone public, the US must respond.
Here are a few additional points from the letter:
Huawei's objective in the US:
Huawei is committed to being a long-term investor in the United States where we already have over 1,000 U.S. employees. In 2010, we purchased products and services from American companies totaling some US$6.1 billion. Our investment in research and development activities in the United States has grown by an average of 66% per annum and it reached US$62 million in 2010. We have long been offering innovative products and services to our customers in the United States and we have always been a responsible investor, employer, taxpayer and corporate citizen.
Alleged misperceptions about Huawei:
Over the past 10 years, as we have been investing in the United States, we have encountered a number of misperceptions that some hold about Huawei. These include unfounded and unproven claims of "close connections with the Chinese military," "disputes over intellectual property rights," "allegations of financial support from the Chinese government," and "threats to the national security of the United States". These falsehoods have had a significant and negative impact on our business activity and, as such, they must be addressed as part of our effort to correct the record.
Impact of allegations on Huawei:
Unfounded accusations have jeopardized our business activities, with many false claims driven by competitive interests. In recent years, misperceptions and rumors have been the shadow of Huawei, affecting Huawei's reputation and, we believe, the United States government's judgment of Huawei. We sincerely hope that the United States government will address this issue by carrying out a formal investigation of any doubts it may have about Huawei in an effort to reach a clear and accurate conclusion.
Request for US government investigation:
If the United States government has any real concerns of this nature about Huawei we would like to clearly understand those concerns, and whether they relate to the past or future development of our company .We believe we can work closely with the United States government to address any concerns and we will certainly comply with any additional security requirements. We also remain open to any investigation deemed necessary by American authorities and we will continue to cooperate transparently with all government agencies.
I agree that considering the level of frustration expressed by Hauwei, it should not only challenge the US Government in court of public opinion but to take the government to the civil court for violation of its rights. That will be using the existing justice system to force a response by the government.
Part of the cost of doing business in China for American companies is procuring the services of firms that facilitate operation of the companies on the mainland. For instance, if a American-made movie is to be released in China, the studio has to deal with China Film to navigate the regulatory process there. Unclear that there's something available for a company like Huawei to do business here in the States, though one would think a free market economy would be more straightforward to do business in. A company like Huawei, which has PRC's best and brightest, should be able to figure out how to harmonize with the rest of the industry, both domestic and foreign companies doing business in the US.
As for Huawei being a military operation, one would think the highly beefed-up immigration department, which presumably issues visas for each one of Huawei's employees in the US, would have determined whether that's the case long before the company came ashore.
Bolaji, as you said the fight has just begun. Huawei will try to get more public but the question is what will be the reaction of US governemt and congress. Lets think if Huawei is denied to sell their products in USA for next 5 years by governement it will damage the investment options that Huawei is planning to do. Their American workforce also will be at risk. I think soon US governement will start looking into the case and provide exception for few products atleast with certain conditions.
There has been a gradual shift in the tolerance levels within the United States as the world economic balance has shifted eastwards. This is expected as the government is first and foremost charged with protection of the nations interest. Having said that, I dont think there was anything outrageously out of line with what has been happening between the govt. and Huaweii. And this invitation by the company would be seen as a challenge in most circles. At least to me it seems likely to irritate the authorities and lets face it, you can not get away with such things. Not good for business!
While Huawei might be amongst the top Chinese companies supplying goods to US, there are also several other Chinese vendors who are supplying to US. Does this mean that US will start the investigation on them as well? I think this act start creating a rift between China and US relationship.
Ashish, The US Congress is charged with defending the interest of the United States and by extension American companies. They are, therefore, highly partial and we should not expect them to be pro-Huawei. What we do expect Congress and American government institutions to be, however, is fair and balanced. They can show preference -- that is normal -- but they cannot, as Huawei points out, be illogical and unreasonable.
If Huawei is indeed a tool in the hands of China's military then the US must prove this in a way that demonstrates its fairness. While we may suspect Huawei's motives, we cannot at the same time condemn the company, destroy its reputation and hint that it is involved in illegal activities without proving this in court.
Will Huawei get the justice it seeks? I don't know. Personally, I think the company made a mistake in going public with this letter. A direct request for a meeting with regulatory authorities and Congressional officials would have been more appropriate. I don't know if Huawei already tried this approach -- it doesn't seem this was the case with regard to the 3Leaf transaction -- but the company's intention with this letter was to embarrass the US government and put it on the defence. I think it has achieved that goal. If it was also aiming at having the cloud over it lifted, that battle has only just started.
The US is a fair nation and it's also a lawful nation. While I am impressed with the letter Huawei's vice chairman has written I wonder though why the company has not taken the step of taking its case also to the judiciary. This is the way it's done here. The government has the rights to object to the acquisition of an American company by a foreign firm based on its perception of US security.
The government does not have the last say, though. Huawei could have also gone to court to enforce its rights. This letter puts the US government in a box but if Huawei really wants to move ahead with other potential acquisitions it may have to seek court enforcement of its rights. That's the way to go. It chose to embarrass the government and I am not sure this will work.
Reading through the entire Ken Hu letter I must say I was most impressed with the detailed approach and thoughtprocess the Chairman put into the points he was trying to make.
What remains to be seen is whether or not these will have any impact on US Congress officials(especially those who are in the pockets of Lobbyists from Alcatel-Lucent).
My feeling is no,Congress won't change their attitude towards this company.I am talking here from the experience of looking at what Indian IT outsourcing companies are also saying-The US is actually a very restrictive/oppressive market for them today.Today its all a battle of jobs.The more unemployment a country has to deal with,the more restrictive it becomes with respect to how it views outsiders..
What happened to the notion of "innocent until proven guilty"?
The onus is now on the US govt to either investigate or state known facts and let Huawei answer to the appropriate departments if found guilt of any trade laws.
This is quite unusual indeed. There are a lot of allegations here so I wonder if all of them are untrue and if so why? Why would the US have these beliefs if there is absolutely no truths to them.
My guess is that one or more are true, they were indeed hurting Huawei's business and maybe now they are reversing strategy and trying to operate differently. In their plea to the US gov't to investigate, they maybe at this point confident that whatever issues they had are in the past and none would be evident in an investigation.
With that being said, can they really be trusted moving forward? I know this is all conjecture on my part, but experience tells me, this many allegations do not come out of thin air. We have to assume that there is some truth to some of the allegations.
By moving to the core of the industry and offerings services that keep the system humming, a group within the electronics market has rendered irrelevant the question of ownership and control of the supply chain.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
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Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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