Huawei invited the U.S. government to open an investigation into any security concerns it may have with the Chinese vendor in a bid to knock down what it deems are unsubstantiated claims that it poses a threat to U.S. national security.
In an extensive open letter posted on the company's website, Ken Hu, Huawei's deputy chairman, directly addressed questions over Huawei's ties to the Chinese government and military, which some U.S. politicians raised last year. Hu wrote that claims Huawei receives financial support from the Chinese government or has ties to the Chinese military are "falsehoods" that "have had significant and negative impact on our business activity."
Huawei has grown to become the world's second largest network equipment vendor, and raked in $28 billion in unaudited revenue in 2010, putting it behind only Ericsson (NASDAQ:ERIC).
"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," Hu wrote in the nearly 2,000-word letter. "We sincerely hope that the United States government will carry out a formal investigation on any concerns it may have."
Both Huawei and its smaller Chinese rival ZTE were in the running for a multibillion-dollar network modernization contract from Sprint Nextel (NYSE:S), which was ultimately awarded to Alcatel-Lucent (NASDAQ:ALU), Ericsson and Samsung. Sprint said that security concerns did not affect its vendor selections.
Hu wrote "the allegation of military ties rests on nothing but the fact that Huawei's founder and CEO, Mr. Ren Zhengfei, once served in the People's Liberation Army." Hu wrote that Ren was eventually promoted to a role in the army's Engineering Corps and did not have a military rank. He retired from the army in 1983 when the Chinese government disbanded the Engineering Corps.
"It is a matter of fact that Mr. Ren is just one of the many CEOs around the world who have served in the military, and ... it is also factual to say that no one has ever offered any evidence that Huawei has been involved in any military technologies at any time."
Hu noted that Huawei has more than 1,000 U.S. employees, and that in 2010 the company purchased products and services from American companies totaling some $6.1 billion. He also wrote that Huawei's investment in research and development activities in the United States has grown by an average of 66 percent per year, reaching $62 million in 2010.
"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," Hu wrote. "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."
- see this Huawei letter
- see this WSJ article (sub. req.)
- see this WSJ blog post (sub. req.)
- see this Bloomberg article
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