China’s top telecoms gear makers should be shut out of the US market because potential Chinese state influence on them poses a security threat, the US House of Representatives’ Intelligence Committee said in a draft of a report to be released later on Monday.
US intelligence must stay focused on efforts by Huawei Technologies and ZTE to expand in the United States and tell the private sector as much as possible about the purported espionage threat, the panel leaders said, based on their 11-month investigation of the two firms.
Employee-owned and unlisted Huawei is the world’s second-biggest maker of routers, switches and telecoms equipment by revenue after Sweden’s Ericsson. ZTE ranks fifth. In the global mobile phone sector, ZTE is fourth and Huawei sixth.
Huawei has not and will not jeopardise our global commercial success nor the integrity of our customers’ networks for any third party, government or otherwise
Huawei generated around 4 per cent of its group sales from the United States, while ZTE’s US revenues made up 2 per cent to 3 per cent of its overall figure. The bulk of both companies’ US sales comes from selling handsets through US carriers such as Verizon, Sprint and T-Mobile USA.
“The impact will be quite limited if the report is referring just to telecoms equipment, but it’s another story if handsets are included as well,” said Huang Leping, an analyst at Nomura Securities. “Huawei and ZTE handsets have been consistently gaining market share in the United States.”
In the US handsets market where Apple and Samsung Electronics dominate, ZTE ranks sixth and Huawei eighth, according to industry figures.
The broadside comes as Huawei mulls a possible initial public offering, sources said, as part of its efforts to allay suspicions that have all but blocked its US ambitions, including business tie-ups. Huawei has been looking at the listing issue for years, but there has been little progress due to its complicated share structure and whether a listing would actually help, given that US lawmakers remain suspicious of ZTE even though it’s a listed company, analysts said.