Huawei's ZTE Counterattack threat: Chinese companies are the target of accidental injury

Li Na Ma Xiaofang Beddy Woodan

It was a confrontation that began last year and lasted until late last night in Beijing.

On one side are Huawei and ZTE, a telecoms equipment maker from China, and the 000063.sz,00763.hk, an aggressive U.S. House Intelligence Committee. The latter has launched a survey of two Chinese companies since last year and has thrown out the so-called "threat theory".

22 O'Clock last evening (Eastern Time 10 o'clock in the morning), US House Intelligence Committee issued an investigation report, "Warning and Huawei, ZTE cooperation of U.S. companies to find another supplier." In other words, it's a report of Chinese companies that have sung.

About 20 minutes later, Huawei issued a statement that responded to some speculation and attacks from the US side. Huawei has sent the English statement to the first financial daily, beginning with the fact that the United States is a country ruled by law and that all charges should be based on solid evidence and facts. The 11-month-long report, led by the US House Intelligence Committee, still fails to provide clear information or evidence that its concerns are justified.

This reporter browsing this 52-page PDF report found that the entire article on the assumption of two Chinese companies there is no conclusive evidence.

Earlier in the day, a senior Huawei executive on the phone told the reporter in an interview, said, "The U.S. market we still do how to do." ”

In fact, the survey report before the official release of some of the content, in this regard, ZTE Global spokesman Dai on the phone to the reporter said, "For this result, we are not surprised." "If the media report meets the report, he can only say that he is disappointed."

Huawei related people told our correspondent that over the past 11 months, the company has transparently presented information including the Board of Directors and Board of Supervisors in the past 10 years to match the survey, "because we believe we have been only deeply misunderstood." ”

It is noteworthy that the US House Intelligence Committee chairman Rogers is from the Republican Party, the investigation of two Chinese companies is the last year, after taking office to push. At a sensitive point in the run-up to the U.S. election, playing "China card" is the usual tactic of bipartisan campaigning in the United States. Chinese companies are the target of accidental injury.

It is hoped that the United States Congress will respect the facts, reject prejudices and do more to promote economic and trade cooperation between China and the United States rather than vice versa.

Tracing the source of investigation

In part of the findings, Huawei US spokesman Plummer said the report baseless claims that Huawei was vulnerable to cyber attacks, ignoring technological and commercial realities and damaging U.S. employment and innovation without any consequences.

ZTE's communications equipment will not pose any security threat to the US market, according to a statement issued to the newspaper. Today, almost all American telecoms equipment suppliers, including Western suppliers, are producing in China. As a result, ZTE urged the Commission to broaden its horizons to look at the entire telecoms industry supply chain, and all suppliers should provide a consistent, reliable delivery solution to US operators.

The same day, ZTE's H shares fell slightly, its performance in a shares is more strong, rising 2.6% to 11.45 yuan.

The US House Intelligence Committee intervened to investigate the background of a 2011 unsuccessful takeover of two Chinese companies. In February, Huawei's takeover of 3Leaf was vetoed by Cfius, the US Foreign investment committee and the U.S. Treasury Department's National Security Review Agency for overseas mergers and acquisitions. That month, Hu Hou Kun, vice chairman of Huawei, issued an open letter to the US market, saying it wanted the US to investigate Huawei publicly to clarify long-standing untrue rumors and assertions.

The survey shows that in early 2011, the "new government" Rogers and other people began to promote a Chinese company with business in the United States "endanger national security" of the investigation. Since the end of 2011, the survey has also expanded to ZTE, starting from April this year, ZTE and the investigation team began formal and frequent communication.

"In the process, we provided all the information the other requested, including the committees list." "Dai said.

The above-mentioned Huawei related Personage tells the newspaper reporter, "in the past year, we have been actively cooperating with the US investigation, providing a list of the Board of directors for the last decade, and annual Sales figures and financial information, including inviting U.S. personnel to visit Shenzhen headquarters, in the hope that they will know more about the real Huawei. ”

According to the disclosure document, the Committee visited Huawei and ZTE headquarters in Shenzhen in January and April this year, and exchanged with several executives from two companies. In May, the Committee met again with two executives in Hong Kong. During that meeting, they met the founder of Huawei, Ren.

This September, Huawei Senior vice President Ding and ZTE North America and Europe senior Vice President Zhu Jinyun also attended the U.S. House Intelligence Committee's public hearings, in the 3-hour debate, although Huawei and ZTE explicitly denied any espionage, but the other side still raised repeated questions and inquiries.

In fact, Huawei and ZTE have not changed the positions and attitudes of the US House Intelligence Committee, despite their efforts to co-ordinate investigations and communications.

The survey, released last night, even suggested that the U.S. government take measures to disable the equipment and components of two companies in sensitive sectors.

At present, although the United States is the world's largest single telecommunications market, but also the only Huawei has not been able to conquer the mainstream telecommunications market.

The above Huawei executives said to this reporter, in fact, the report on the impact of Huawei Limited, "the original government agencies do not buy our equipment, as well as the large operators, including AT&T, also basic procurement, the impact can be how much?" Business customers will not be affected, and may even resent the survey's impact on their business choices. ”

Earlier in the industry said that from 2006-2011, Huawei's U.S. revenue growth of 26 times times.

In the first half of 2012, ZTE realized operating income of 42.642 billion yuan, international market revenue of 21.757 billion yuan, accounting for 51.02%.

Earnings from two companies showed that Huawei, ZTE's overseas revenue (sales) for nearly five years peaked in 2008. In that year, Huawei's overseas sales accounted for 75%, compared with 67.8% in 2011. In 2011, Huawei's overseas sales revenue exceeded 138.3 billion yuan. Also in 2008, ZTE's international revenues accounted for 60.57%, and 2011 was 54.21% (46.758 billion yuan).

"The nature and purpose of the report is to thwart Chinese companies ' access to the U.S. ICT (ICT) market and hinder competition. From the past to now, Chinese enterprises to expand the international market is difficult, the process is very difficult. The above-mentioned Huawei related Personage says to this newspaper reporter.

It turns out that the survey report was just unfounded, and ZTE announced in September this year that its wireless module products are entering the U.S. market, working with U.S. power insights. ZTE said it was using a wireless communication module from ZTE to achieve real-time communication with the remote region under the network of Sprint, the US's mainstream operator.

Earlier, analysts at the Bellenberg Bank of Hamburg, Germany, had issued a report saying that the introduction of new technology made it a "scarier" competitor after Huawei entered the European market and had a strong bid, as new technology could slash costs for consumers.

"Until the end of 2004, when Huawei entered the European market, Ericsson and Alcatel-Lucent had a gross profit margin of 45% to 50% per cent, and it was true that rivals were trying to squeeze Huawei out of the bidding for big contracts. "A former Huawei related business director told reporters.

The pseudo proposition of self-protection

The U.S. market is very closed. In telecoms equipment, for example, from the early Motorola, Nortel, Lucent, to the current acquisition of Nortel Ericsson, the U.S. telecom market players are European and American manufacturers, before the acquisition of Nortel, even as a European company, the world's largest equipment maker Ericsson has not made a significant breakthrough.

"Generally not the problems brought by the market factors such as tendering, price and contract, more or false propositions based on network security." "But as we all know, the US has mastered the global GPS satellite positioning system, and if there are security problems, some American companies will be more threatening, so this is not a reason," said the former head of Huawei related business to the correspondent. ”

The United States House of Representatives under a number of committees, has a number of functions, including bills reconsideration and supervision. The committee's affairs were mainly carried out by 20 standing committees, but there was also a permanent committee of the House of Representatives, the United States House of Representatives. The Committee is the House of Representatives primarily responsible for overseeing the implementation of U.S. government intelligence activities and authorizing the raising of funds for oversight actions.

As a Republican senator from Michigan, Rogers is very concerned about the threat of American national interests. Given that the U.S. election is entering a sprint, the "China card" is the Republican tactic to sprint for the race.

Just on October 3, during the first presidential debate in the U.S. election, the aggressive Romney three-degree card in the debate played a Chinese hand against Mr Obama.

Huawei and other Chinese companies are not the first encounter with the US side "plot".

Huawei's joint Bain Capital was scheduled to buy 3Com of US companies in 2008, after Cfius announced the launch of a national security investigation, which was eventually shelved. 3Com Company was later bought by HP.

In August 2010, the US mobile phone operator, Splinter Corporation, launched a bid for a network upgrade that Huawei offers to save operators at least $800 million in cost. But eight of US Republican senators wrote to President Obama and Treasury Secretary Timothy Geithner, the 5 billion-dollar big cake was shared by Ericsson, Alcatel-Lucent and Samsung after a full investigation into Huawei's supply of equipment to the US telecom operator, to assess possible "national security threats", was requested. At the time, ZTE had tried to get a part of the sprint (US mainstream operator) contract, but failed. ZTE's leaders complained afterwards that they had been unfairly treated in the United States, saying the company had a better offer than the final winner, Ericsson.

In February 2011, it was also under pressure from the US Foreign Investment Commission, which had to abandon a 2 million dollar deal to buy 3Leaf.

In China's private enterprise industry, according to operating income to arrange, Huawei after Jiangsu Sand Steel Group Co., Ltd. According to the 2012 China private enterprises 500 strong, Huawei's operating income of more than 203.9 billion yuan (Sha Steel group more than 207.5 billion yuan). In 2012 of the top 500 Chinese companies, Huawei, the leader of private enterprises, ranked 46th. In addition, ZTE has a revenue ranking of more than 86.2 billion yuan of 124.

When did the United States discriminate against Chinese telecom companies?

The US House Intelligence Committee reported October 8 local time that Huawei and ZTE could threaten U.S. national communications security. That was the conclusion of a nearly one-year survey of two Chinese companies. This conclusion has hurt Huawei and ZTE. It can be expected that two companies will continue to fight for their innocence.

In the view of Congress, Huawei and ZTE have been funded by the Chinese government and may be greatly influenced by the Chinese military. As a result, the expansion of these companies in the United States may result in the manipulation of converters, routers, and built-in software in the US communications network, which can interfere with communications or deliberately change routes.

It is not new to accuse Chinese telecoms companies of hurting U.S. national communications. Over the years, Huawei, ZTE in the United States, India and other countries market expansion, has been subjected to discriminatory treatment. The local government often on the basis of security review, obstruct the development of Chinese telecom enterprises. Huawei and ZTE have repeatedly been stymied in market practices such as mergers and acquisitions and the acquisition of orders.

The crackdown on Huawei and ZTE by discriminatory treatment is self-evident. The conclusions of the US Congress will continue to hinder two of companies from getting ahead in the U.S. market. Huawei, the world's second-largest telecoms equipment producer, has 70% of its revenues from overseas, and 45 of the world's top 50 telecom service providers use Huawei products, which show that Huawei has become a globally influential multinational company in the communications sector. Huawei has entered a lot of countries and markets. However, as long as the United States such a mature market door is not really open, Huawei's internationalization of the road is still only halfway.

Do Huawei and ZTE really threaten the security of U.S. national communications? This question has been asked for several years. So far, the United States with the "threat" can only be a plausible argument, vague speculation, but do not have any evidence. For example, some people like to accuse Huawei of having a military background, but ask whether there is a CEO who has served in the military, must have a military background? In the United States, there were many business elites with a military background. The famous West Point military Academy has trained a large number of business people over the years. If the "military background" to speculate that the United States multinational companies, the United States military-installed "spy" is really everywhere.

Stop chasing ghosts, and stop talking about conspiracy theories. An American executive at Huawei's US company has said a very loud word, "no more artificial fear." If you have something to say, take the evidence. "Yes, what could be more convincing than the evidence?" he asked. If we can "convict" by chasing a few ghosts, can China also think that Apple threatens China's national security?

The Economist has a point of view on discrimination against Huawei. In the famous magazine's view, if there is any threat to the west by Chinese companies such as Huawei, the real threat is nothing else, and Huawei is already leading the way in innovation when it competes with Western companies. In other words, to Huawei and other enterprises discriminatory treatment, security threats is only an excuse, the key is the underlying interest factors.

The United States has always been a favorite place to talk about free trade, but there are a lot of duplicity. This can be seen clearly in the trade protection practices that have been visible from times to time since the 2008 financial crisis. In recent years, there has been a growing trade friction between China and the United States, and it is not uncommon for Chinese multinationals to be discriminated against in the US. The experience of Huawei and ZTE is the result of the interests of some groups.

The attitude of Chinese companies has always been to welcome impartial investigations. In business, Huawei and ZTE want to enter the U.S. market, its efforts are clearly visible. Including actively cooperate with the investigation, increase the lobbying strength and so on, all reflect the desire that these telecom companies want to work deeply in the American market. However, discriminatory treatment has blocked the normal development of Chinese enterprises. It is not an excessive requirement for the US to abandon discrimination against companies such as Huawei.

Some say such discrimination, in a sense, also reflects the growing strength of Chinese companies and the fear of rivals. This is certainly true. Chinese enterprises in the internationalization of the road, will encounter a variety of stumbling. The dilemma for Huawei and ZTE is that some people have blocked their market expansion by threatening security. Other enterprises may encounter other different blocking. In any case, an aspiring enterprise should be optimistic about all kinds of challenges and learn how to cope with the challenges.