Chinese networking equipment vendor Huawei has challenged US authorities to investigate the company after regulators scuppered its latest attempt to buy into the US market.
Earlier this week, Huawei pulled out of a $2 million deal to acquire US-based enterprise virtualisation vendor 3Leaf Systems after the US government raised security concerns. Shenzhen-based Huawei, the world’s second largest networking vendor, may have used the purchase of 3Leaf as a route to providing cloud-based IT services.
Before the deal was thrown out, top US lawmakers accused Huawei of having ties with the Taliban, executed Iraqi despot Saddam Hussein and the Iranian Revolutionary Guard. In a letter addressed to the US government, they claimed that if Huawei were to gain entrance into the US market it could attack the country’s computer networks.
Following that decision, Huawei has posted an open letter on its website inviting US authorities to audit the company. "The allegation that Huawei somehow poses a threat to the national security of the US has centred on a mistaken belief that our company can use our technology to steal confidential information… or launch network attacks," deputy chairman Ken Hu wrote in the letter. "We sincerely hope that the United States government will carry out a formal investigation on any concerns it may have about Huawei."
The 3Leaf deal is not the first time US regulators have derailed Huawei’s efforts to acquire in the US. In 2008, the business pulled out of a proposed $2.2 billion purchase of network infrastructure company 3Com. The Committee on Foreign Investment in the United States informed Huawei that it would block any deal for 3Com, which at the time provided intrusion detection software to the US government.
Hu wrote on Huawei’s website that there are "a number of misperceptions" surrounding the company.
Some of these stem from the background of CEO Ren Zhengfei. Prior to founding Huawei in 1988, Ren had served as an officer in China’s People’s Liberation Army. "Mr Ren is just one of the many CEOs around the world who have served in the military," Hu wrote. "No one has ever offered any evidence that Huawei has been involved in any military technologies at any time," he added.
Huawei’s secretive and complex ownership structure is also a point of contention. The company, whose revenue is estimated to be $23 billion, is officially owned by 95,000 or so employees.
The Indian government has also expressed concerns about Huawei. In May 2010, it banned imports of telecommunications equipment made by the company, claiming that it could contain spying apparatus and was therefore a threat to national security.
At the time, the Indians insisted that the embargo would not be lifted until Huawei and fellow Chinese equipment maker ZTE disclosed further details on their corporate structure and ownership. "We have evidence that the two companies are owned by the PLA (People’s Liberation Army) of China, and India’s security concerns are well-founded," an anonymous source was quoted as a saying. It is not clear whether this ban is still in place.
Earlier this week, the Financial Times reported that Huawei was close to clinching a deal that would see it provide £50 million worth of communications equipment for the London Underground.