Huawei forges on with US plans despite security issues

PUBLISHED : Friday, 25 February, 2011, 12:00am
UPDATED : Friday, 25 February, 2011, 12:00am

Undeterred by lingering security concerns that have hurt its business in the United States, Huawei Technologies aims to push ahead with expansion plans in the country.

Shenzhen-based Huawei, the mainland's largest telecommunications equipment manufacturer, reaffirmed that commitment yesterday after a roller-coaster week that saw it lose an acquisition and, in another case, win a lawsuit against a former US partner. On Monday, the company reluctantly abandoned its US$2 million purchase of 3Leaf Systems, a bankrupt technology firm, after initially refusing to comply with a request by the Committee on Foreign Investment in the United States, an inter-agency group that reviews investments in US businesses, to withdraw from the deal because of national security concerns.

'This was a difficult decision,' Bill Plummer, vice-president of external affairs at Huawei USA, said. 'The significant impact and attention that this transaction has caused were not what we intended.'

On Wednesday, a US district court granted Huawei a preliminary injunction that prevents any of its trade secrets from being disclosed by former partner Motorola to rival Nokia Siemens Networks, which is buying the US firm's wireless network business.

'The order also requires Motorola to hire a qualified third party to ensure Huawei's confidential information is securely removed,' Huawei global spokesman Ross Gan said. 'It gives us the confidence to increase our investment in the US.'

Huawei had about 1,500 staff in the US at the end of last year. It has eight facilities in the US, including three research and development centres. In 2009, its investment in research and development in the country grew 66 per cent to US$62 million.

'Those investments, which included system design and product testing, were made to strengthen support to US operators,' Gan said.

Market research firm Ovum estimated that total telecommunications capital expenditure in North America would reach about US$402 billion over the next five years, which would be twice that of China's.

'Huawei's share of North American capex in 2009 was in the 1 per cent to 2 per cent range, which it clearly would like to grow,' Ovum analyst Matt Walker said.

Privately held Huawei, which will report its results next month, expects total contract sales in the US last year to reach US$800 million, almost double the US$408 million it generated in 2009.

After failing in its recent bid to become an infrastructure supplier to Sprint Nextel because of national security concerns, Huawei rebounded last week with a contract for an undisclosed amount to provide US carrier Northeast Wireless Networks with key equipment that would deliver broadband services to underserved rural regions in the country.

Charles Ding, the president of Huawei North America, said the project with Northeast Wireless was being undertaken 'in the spirit of President [Barack] Obama's recently reinforced commitment to extend wireless broadband to remote and rural areas' across the US.