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Huawei Withdraws from U.S. Market, Sort-Of - Channelnomics

Huawei CEO Ren Zhengfei

Huawei CEO Ren Zhengfei

There’s no news to report on American suspicions that China-based Huawei Technologies is an instrument of Beijing spying and a potential threat to U.S. national security.

And there’s no new news on Huawei saying it’s effectively withdrawing from the U.S. market — but CEO Ren Zhengfei is making headlines with an interview he gave in Paris, saying Huawei has withdrawn from the U.S. market. The motivation: keeping his company out of increasingly tense relations between Washington and Beijing.

“If Huawei gets in the middle of U.S-China relations … it’s not worth it,” Ren reportedly said in an interview with Les Echos. “Therefore, we have decided to exit the U.S. market, and not stay in the middle.”

Last April, Huawei said it was ceasing sales and operations of its telecommunications equipment, stating that the U.S. had become a hostile and difficult market in which to operate. In Oct. 2012, a U.S. congressional committee issued a report citing Huawei and fellow China company ZTE as security threats. The report expounded suspicions that the Chinese government and military could use backdoors to spy on U.S. companies and disable communications in a time of conflict.

The U.S. government also advised American telecom firms to not buy Huawei products and band government agencies — particularly the military — from using Huawei equipment. Other countries, including Australia, made similar declarations.

What makes Ren’s comments unclear, though, is the other business interest Huawei has in the U.S., which don’t appear to be slowing down.

For nearly two years, Huawei has been working to build a U.S. reseller channel to compete against domestic vendors, such as Cisco Systems Inc. and Juniper Networks. Huawei recently held a partner summit in California and remains actively engaged with distributor Synnex on channel development. And Huawei has made more than $6 billion in component sourcing commitments to U.S. companies.

Additionally, Ren said Huawei smartphones – a bestselling product in many non-U.S. markets – will continue to be made available in the U.S. He said Huawei handsets are not a security threat since they run American-made software, mostly Google’s Android operating system.

William Plumber, Huawei’s point executive in the U.S., told Foreign Policy magazine that Ren’s comments were more about current market conditions than a shift in strategy. He acknowledged previous changes in the U.S. strategy and deemphasizing of the U.S. market by Huawei.

Plumber told Channelnomics, “We remain committed to our customers, employees, investments and operations and more than $1 billion in sales in the U.S., and we stand ready to deliver additional competition and innovative solutions as desired by customers and allowed by authorities.”

Suspicious about Huawei are not entirely unfounded. Motorola and Cisco Systems have accused Huawei, which once manufactured equipment for them, of copying their technologies. The U.S. government also blocked Huawei’s acquisition of 3Leaf, a server technology vendor, in 2011 because it failed to follow proper procedures for foreign investments.

While the U.S. government and technology firms harbor suspicions about Huawei, other countries are not. Many countries in Europe and Asia are embracing Huawei. The United Kingdom, for instance, welcomed a $2 billion investment by Huawei as it would stimulate the economy and create new jobs. Huawei has ambitions of becoming a $100 billion global technology vendors, and is pursuing a localization strategy, in which it hires from host countries it enters.

Huawei isn’t the only technology company plagued by security concerns. Revelations that the U.S.’s National Security Agency has enlisted the support of American technology vendors to spy on foreign and domestic communications has riled many foreign governments. U.S. spying activities is seen as one of the reasons sales for Cisco, IBM and other U.S. vendors are falling in China.

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