Huawei's US problem

30 Jul 2010

After years of trying, Huawei’s US business is still stalled.

Political and legal issues continue to dog its progress – the latest being a suit from Motorola alleging theft of company secrets.

The cloud that hangs over the Chinese vendor has become a business cost, forcing it to offer a premium in two recent unsuccessful bids for US assets, FT.compoints out in a revealing article.

Huawei lost out to Nokia Siemens Networks in its tilt at Motorola’s network unit and ceded broadband software top firm 2Wire to UK’s Pace.

Huawei came under heavy scrutiny when it jointly bid with Bain Capital to buy 3Com in 2008, withdrawing when it became clear it would not be approved.

It might be China’s most visible exporter and a standard-bearer for the country’s hi-tech ambitions, but US authorities are divided on how to deal with Huawei, the FT reports.

One camp wants to engage with Huawei on the grounds that this will enable it to set conditions and also “give the US valuable insight into the inner workings” of the firm, which is alleged to be linked to the PLA. Huawei’s CEO and co-founder Ren Zhengfei is an ex-PLA officer but the company has repeatedly denied the accusation.

The other view – from un-named security sources - is that such a deal would provide only a limited window into the highly-secretive firm and that it would be difficult to write and enforce those conditions.

So, Huawei’s US future depends on the outcome of that debate, says the FT, which has also reported that the company is pouring resources into its Washington lobbying effort.

On the other side of the coin, western firms are extremely anxious about China’s indigenous innovation program, which they see at best as a form of protectionism, at worst a plan to steal their know-how.

In other words, when it comes to hi-tech trade and investment across the Pacific, politics rules.

I’d suggest Huawei’s progress, if there is to be any, will depend on a high-level deal between Washington and Beijing. Just don’t hold your breath expecting one.

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