TELECOMS EQUIPMENT MAKERS Huawei and ZTE have been labeled as threats to US national security in an investigation by the US House of Representatives.
The House intelligence committee conducted a year long investigation of Huawei and ZTE as the two firms try to gain a foothold in the lucrative US telecoms equipment market. The committee concluded its investigation by claiming the two firms pose a threat to national security because the equipment they provide could be used to spy on the US.
The committee not only called the two firms threats but the Wall Street Journal claims the final report to be published later today will recommend that the US block any purchases or merger attempts made by Huawei or ZTE. Not surprisingly, the committee is also recommending that the US government avoid using equipment made by the two Chinese firms and seek alternative vendors, presumably such as American outfit Cisco, which makes a lot of its equipment in Chinese factories.
With Huawei pondering an initial public offering in a bid to distance itself from the persistent rumours that it is effectively a branch of the Chinese military, the intelligence committee's report comes as another blow to future sales. Both Huawei and ZTE have been facing increasing resistance from governments around the world, with Australia and the US previously barring Huawei from bidding on infrastructure contracts citing potential links with the Chinese government.
ZTE claimed the fact that it is a publicly traded company provides transparency and said it had cooperated with the intelligence committee's investigation. However the firm's cooperation wasn't enough to convince the committee and leaves it and Huawei all but blocked from access to the valuable US telecoms equipment market. µ