Huawei, ZTE may be doing espionage for China

Huawei, ZTE may be doing espionage for China
Huawei and ZTE are the number 2 and number 5 telecom equipment makers in the world respectively. While they are most visible in the US market as wireless handset makers, they are also large manufacturers of carrier class telecommunications switching equipment and enterprise switchgear, competing with the likes of Ericsson, Alcatel-Lucent and Seimens-Nokia.

These two Chinese giants were founded in the 1980s and have risen rapidly to being global leaders through government subsidies common in China, where a significant number of their largest companies are government owned. ZTE was started by state-owned entities affiliated with the Ministry of Aerospace Industry. Its cross-town rival, Huawei was founded by an engineer in the People’s Liberation Army. ZTE has been publicly listed in Shenzhen since 1997 while Huawei is “privately” held.

The two companies are no strangers to controversy, in 2003 Cisco sued Huawei alleging illegally copying of its equipment. The companies are known to blur the lines of business ethics in their dealings in South America, backing clients into buying gear that was offered on “free” trials to outright bribery. ZTE was thought to have sold embargoed computer equipment to Iran in violation of a UN sanction.

In Europe and the US, there have been openly voiced concerns about the relationships these companies have with the Chinese government. The EU was considering tariff actions against the two companies on allegations of dumping their products below cost. In the end, no action was taken however.

Now in the US, a report is expected on October 8th, capping off a year-long Congressional investigation into the two companies. The House Permanent Select Committee on Intelligence has been looking into the companies’ business expansion in the US and whether it presents an espionage danger or threatens the telecommunications infrastructure in North America.

Congressman Mike Rogers (R-Michigan) told CBS News “60 Minutes” that US companies dealing with Huawei that also have a concern about national security or their intellectual property should “find another vendor.” Huawei obviously contests that assessment. The fears about the companies’ motives were not helped when ZTE admitted that on its ZTE Score smartphone, and possibly other models, the company had built in a hardwired backdoor which would allow anyone with knowledge the ability to control the handset. ZTE states that it was a means to push software updates, but in May 2012 when they acknowledged the issue, the company addressed it as a security flaw.

The two companies do not have a large presence in the US. United Wireless, a small wireless carrier based in Kansas did some business with Huawei and was subsequently visited by investigators. The president of the company told them that he was not aware of any American company that made the equipment he needed. While there may be few, if any American-only companies that make that type of gear, it is an ironic statement given how mature the telecom infrastructure is in the US.

We may learn more once the report is released, but if the demeanor of those that have been investigating the matter is any indication, the picture does not look rosy. When asked if Huawei was ordered by the Chinese government to spy on the US, former government foreign technology analyst Jim Lewis said, “the state tells them what to do and they do it.”

sources: Electronista (current), Businessweek (archived 2005), Strategic Studies Institute (reference)



1. someones4

Posts: 627; Member since: Sep 16, 2012

The down side of being a Chinese company with ties to the government and military which is operating in overseas regions.

26. PhoneLuver

Posts: 481; Member since: Jul 05, 2010

It's really a shame! Their equipment is world class! Plus nobody can argue with their price point! Nokia-Siemens and Ericcson just plain overcharge for their equipment! Huawei is messing with their overpriced business models. No wonder they're starting to point fingers and cry and in what better way than in the name of National Security!?!?

31. Augustine

Posts: 1043; Member since: Sep 28, 2013

Which is also true of American companies, as Snowden revealed.

2. darktranquillity

Posts: 285; Member since: Feb 28, 2012

Same goes in india, the indian govt is very suspicious of zte and huawei participating in network expansion programmes of indian carriers and implicitly trying to prevent indian carriers from buying equipments from them. It was also been rumored that intelligence bureau guys are after the chairman of Reliance, one of india's biggest mobile carrier after he tried to obtain funds from huawei for network expansion.

8. No_Nonsense unregistered

And Telenor, Unitech and quite a few others all also under the scanner.

3. Tsepz_GP

Posts: 1175; Member since: Apr 12, 2012

Wow, and i was just thinking about Huawei have come since i recently bought a Huawei wireless router. They and ZTE are the companies to watch in the next 5years if this whole situation doesn't affect them. I can tell you now that Apple are probably keeping a very close eye out on these two as they both have the power and economies of scale to eventually topple them and Samsung. What is a international Chinese company without any controversy though? Huawei and ZTE are on their way to the top whether the US Government likes it or not.

4. someones4

Posts: 627; Member since: Sep 16, 2012

really? they may be great service providers but i think its hard for their hardware to penetrate the global market.

14. crankyd00d

Posts: 191; Member since: Oct 17, 2011

I don't know about ZTE, but Huawei makes awful, really awful cheap useless phones, so unless they change that (while doing that also changing their image) they will not be at all relevant or "to watch for" for a few good years, and I just don't see them doing that anytime soon

5. djstammo

Posts: 16; Member since: Oct 01, 2012

So? It's politics job. The phone wont get worse because of it. As a consumer I don't see a reeson not to buy a phone from them.

6. Scorpion

Posts: 103; Member since: Apr 28, 2012

Excuse me, U.S comapnies don't spy or try to influence public opinion? I think it will be really naive to assume that. It's the ugly part of the buisness, up there the with patent wars. And they are connected: Spying and patent stealing.

7. shandesilva

Posts: 105; Member since: Mar 28, 2012

what is the whole big deal about spying & all that just bcos they are chinese companies? what has the us government being doing, in whatever countries they could reach? spying, manipulating the politcs & governments & invading. if they can spy, so can the chinese. spying or not, huawei and zte make great phones on par with samsung & htc. PA...why dont you people just concentrate on the quality of phones and stuff, which is your area...rather than dragging in some espionage political drama.

12. ggudino

Posts: 12; Member since: Aug 25, 2012

What is the big deal with spying you say? Well for one, they are not spying on you to know what games you are playing. They are spying on those that are involved with our national security. Those that have bigger roles in our government that have vital information. They don't care about the rest of us that may be working at Walmart or Burger King or wherever else you may work. This whole article and the whole investigation is about China threatening our national security, not your privacy. Although, that is more than likely being violated too.

15. shandesilva

Posts: 105; Member since: Mar 28, 2012

before you accuse another government of spying on you, you have to think about what your own government is doing. are the chinese doing something new? (if they are spying i mean, which is only a speculation at best)..who started spying on them first? the terrorist attacks, threats...etc all are repercussions of what the us government themselves did. its not like that the other countries started to spy on the most innocent government in the world you know. again i have to say that PA should restrict themselves to what they are supposed to do. we dont come here to read how countries spy on each other. next time if a terrorist is caught with a nokia phone they will say the finns are spying on us government too.

28. ggudino

Posts: 12; Member since: Aug 25, 2012

Thank you for proving my point. I never said that the US government is innocent when it comes to spying. I'm sure that most if not all countries spy to some extent, but that does not mean that just because the US spied on another country that the US should just say, oh, we spied on you so we will let you spy on us just this once. Just like if China knew about a foreign spy in China, they would get rid of them at once. And that is what the US is trying to prevent. Those two companies in the article have been to spy and do shady things so why should they be allowed to do business if it may threaten the security of the whole country. I agree with you that PA should stick with the topic of this site. In a way, this story is within the topic because both those companies main order of business is mobile and they are trying to get into the US to do mobile business.

9. Sharky

Posts: 259; Member since: Jun 24, 2008

I'm sure the Chinese really care about what version of Angry Birds I might be playing now.

10. Hammerfest

Posts: 384; Member since: May 12, 2012

"it is an ironic statement given how mature the telecom infrastructure is in the US" You should probably live in the EU first before you can say that... telecom infrastructure in the US is definitly not mature, control stunted growth yes, mature... most certianly not...

17. Gawain

Posts: 437; Member since: Apr 15, 2010

Seeing as how the infrastructure of Europe was turned to rubble in WWII, and that the majority of the Tier 1 backbones in the world are in the US, and that the majority of Europe does not have LTE and despite advances in GSM deployment is years behind North America, you might want to take a gander at the US market. He wasn't comparing EU to American anyway, simply observing that there are established, well known equipment makers (Ericsson, et al) make telecom gear and that the president of a wireless carrier apparently didn't know about.

11. Kan_wha

Posts: 88; Member since: Jun 25, 2012

Phonearena needs to stop posting this s**t as news, this is not news, this is pure political bulls**t.

16. johnbftl

Posts: 283; Member since: Jun 09, 2012

What do you mean this isn't news? Just because it isn't about what new phone comes out when doesn't mean it's not news. This has huge implications on our world. China is supposed to be a U.S. ally, and also holds a permanent seat on the U.N. Security Council. Being accused of espionage against another permanent seat holder on the Security Council can have dire effects. On top of that, they are accused of selling embargoed computer systems to Iran, a country which is currently being accused by most of the world of trying to develop a nuclear weapon, and is actively and openly calling for the destruction of the state of Israel. These two companies are funded and/or owned by the Chinese government. The findings of this report can have huge implications. The IDF just shot down a Hezbollah spy drone that was launched from Lebanon (they have been to war with each other a few years ago, and Hezbollah is backed by the Iranian government). The U.S. is fighting a war on two fronts in the same region. China is now being accused of espionage on the U.S. and supplying Iran with embargoed computer systems. Turkey is now at war with Syria. This all adds up to some really big news. This story wasn't meant to be about phones. Thank you PA for stepping out of the wireless industry to report something that may have a giant impact on our world soon.

20. Kan_wha

Posts: 88; Member since: Jun 25, 2012

I think you're mistaken. China will never be a true US ally. This is Phonearena, not CNN. Espionage is not in the category of phones. Besides, even if this is true, what can be done? Think about it, if US bans Huawei or ZTE, the People's Republic will retaliate and annul contracts with major american companies, such as, oh say... Boeing. Boeing takes a hit, lobbies the hill to reverse the ban. What happens then? Back at square one.

29. vicorama

Posts: 8; Member since: Oct 18, 2011

The above commenter is right. The US is only playing nice with China because China is buying up all of the US debt. Be more worried when China calls in the debt...

13. ryq24

Posts: 875; Member since: Oct 17, 2011

i believe all major companies in china like zte and hwawei are either partly owned by the government or are heavily financed by the it. they are a communist country after all where everything is owned by the state.

18. snowman

Posts: 11; Member since: Oct 07, 2012

How independent and impartial can a review be when conducted and controlled by US politicians. Not very, is the answer! The US is the biggest spying country on this planet! Google has connections to the US government and military, should Google be banned the world over? This is just another example of the US and its attitude of 'Do as we say, not as we do'.

19. MorePhonesThanNeeded

Posts: 645; Member since: Oct 23, 2011

What's your point? What connections to the U.S military does google have aside from giving them the open sourced android platform to use? Which country doesn't say do as we say and not as we do? Get serious, all adults are guilty of that. Case and point of do as I say and not as I do, in the U.S. the police and law states it's unlawful to drive the wrong way on a one way street, and to run red lights...even if you are law enforcement it's still against the law to do it, yet they still do that and many other things, which would get a civilian a ticket and or arrested. This is how the world rolls, those in power tell everyone else what they can and can't do, follow or pay the price.

23. snowman

Posts: 11; Member since: Oct 07, 2012

What's your point too! You went off on a tangent! People are so touchy! The point is is that the US government openly and vocally criticises everyone, Western media laps it up and feeds it to the masses. Everyone knows how Western media loves a China bashing story! Yet the US spies, hacks and plants viruses itself! And their excuse is that it's all in the name of freedom and democracy, and so justified, and Western media agrees with them, yet for anyone else to spy or hack it's regarded as a criminal act or espionage! So in respect to your response, you should have no complaints against China, as it's how the world rolls! Plus you yourself should never write or speak out against governments ,authorities, police, someone holding a gun, the rich, or anyone who has this thing you call 'power', as they have it and you don't, as that's how the world rolls according to you! Are you a closet commie?

21. Kan_wha

Posts: 88; Member since: Jun 25, 2012

The funny thing is that ALL Google products are banned in the PRC.

22. snowman

Posts: 11; Member since: Oct 07, 2012

You can still access Google Search and use Google's Android in the PRC!

24. snowman

Posts: 11; Member since: Oct 07, 2012

I agree with some of the other comments on here, that Phone Arena should stick to the technology and not the politics! Otherwise you'll end up with something like CNN comments sections! Which is what this is turning into! Over and out!

25. DSmithee unregistered

I don't know what's scarier--network infrastructure put in place in the States that China has a backdoor into, or the hypocritical nature of the US govt, which uses drones and software to spy on its own citizens.

27. hinz10

Posts: 15; Member since: Sep 12, 2012

Who cares.

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