Bloomberg News

Huawei Calls for ‘Accountability’ as U.S. Blocks Network Bid

October 12, 2011

(Adds founder’s military service in sixth paragraph.)

Oct. 12 (Bloomberg) -- Huawei Technologies Co., China’s largest phone-network equipment maker, asked the U.S. government to explain why it was barred from participating in a nationwide emergency network.

Huawei won’t be taking part in the program “due to U.S. Government national security concerns,” U.S. Commerce Department spokesman Kevin Griffis said in an e-mail to Bloomberg News today. He declined to elaborate on the nature of those concerns or how the decision was reached.

The company, which established its U.S. headquarters in Plano, Texas in 2001, has repeatedly seen efforts to expand in the country run into opposition from American lawmakers, who raise concerns about alleged links to China’s military that Huawei has denied. The latest decision could jeopardize its investment in the U.S., where it employs 1,500 workers and spent $6.1 billion last year on goods and services, said William Plummer, a Washington-based spokesman for Huawei.

“Notwithstanding that it is an ill-founded, ungrounded determination, it could have a chilling effect on our greater U.S. business activities and accountability needs to be defined appropriately,” Plummer said.

The company wants to know the statutory authority and regulatory regime under which the latest decision was made, Plummer said.

National Security

Huawei was founded in 1988 by Ren Zhengfei, who retired from the Chinese military in 1984. At the time of his retirement, Ren was deputy director of the Science Research Institute of the Engineering Army Corps, according to a biography supplied by the company. Ren hasn’t maintained any ties with the military since then, according to the company.

Ren, 66, remains Huawei’s chief executive officer.

The Committee on Foreign Investment in the United States forced the company in February to unwind its purchase of Santa Clara, California-based 3Leaf Systems’s patents after U.S. lawmakers said the acquisition could pose “a serious risk” to U.S. computer networks.

Huawei failed in bids to acquire 2Wire and Motorola’s wireless business last year and 3Com Corp. in 2008.

“Corporate Independence”

“Huawei has repeatedly and factually demonstrated its corporate independence,” Plummer said. “No one has ever factually demonstrated otherwise and playing Huawei as a pawn in some geopolitical game of chess is doing nothing more than threatening U.S. jobs, investment, competition and innovation.”

Huawei is employee-owned, and the Chinese government holds no shares, according to its website. The company employs 110,000 people worldwide, its annual report said.

The program from which Huawei was excluded is known as the Public Safety 700-MHz Demonstration Network, which is run by the National Institute of Standards and Technology, along with the National Telecommunications and Information Administration, a part of the Commerce Department. The network allows communication between first responders to an emergency, including firefighters and police officers.

Huawei said in a July 6 filing to the Federal Communications Commission that its effort to enter the equipment assessment portion of the program was being delayed “for reasons unknown.”

--Edmond Lococo, with assistance from Eric Martin in Washington. Editors: Nicholas Wadhams, Frank Longid

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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