Huawei Quits U.S. Market

Huawei is getting out of the U.S. market, says a story by the Financial Times (registration required). According to the FT story, Eric Xu, executive VP, said, "We are not interested in the U.S. market any more." Xu's remarks came during a gathering of analysts on Tuesday. Huawei will service existing accounts, but isn't actively looking to grow its business in the United States.

Huawei, the second largest telecom equipment provider In the world, has had its sights on the United States for both carrier and enterprise networking gear for more than a decade. But after an inauspicious start, which saw the company selling enterprise gear built on questionable intellectual property, and more recent efforts by competitors and the U.S. government to keep the company out of key backbone and government accounts, the company is giving up on the United States.

It's not hard to see why Huawei will turn its attention elsewhere. In the enterprise market, Huawei's debut was a misstep of epic proportions. As it entered the market, Huawei showed products that matched up almost one-for-one with Cisco offerings, and even included the much-copied Cisco IOS command language.

But where other vendors have merely copied Cisco commands, the Huawei engineers had gone one better. They'd allegedly stolen Cisco code and implemented it verbatim, even replicating bugs. The dispute was eventually settled out of court.

On the carrier equipment side, Huawei's management pedigree attracted the attention of security experts inside and outside the U.S. government. The company's founder, Ren Zhengfei, had been a high-ranking official within the People's Liberation Army. Whether justified or not, Ren's background raised suspicions in the U.S. that persist today.

From the Chinese point of view, it makes perfect sense that an ex-army officer would head a quasi-private company building anything as important as core communications infrastructure. The Communist party wouldn't allow such a plum function to go to anyone less trusted. Whatever the genesis of the company, it has been a fierce competitor in the global telecom space, with revenues exceeding $30 billion.

In the United States, the company has faced down a variety of criticism, including a "60 Minutes" piece in October 2012. In that interview, experts pointed the fact that China was known to be involved in cyber espionage, and so "why wouldn't they" leverage Huawei's presence in certain networks for espionage purposes? While no smoking gun has been shown to exist, the possibility of secret back doors to networks using Huawei gear has been enough for the U.S. government to forbid the company from participating in core infrastructure bids in the United States.

More recently, in a continuing resolution to fund the federal government, language was added that required Commerce, Justice, NASA and the National Science Foundation to get a risk analysis from the FBI or other appropriate agency for any potential purchases of data infrastructure gear from China. Intelligence committee members said, in part, "[Products from] firms like Huawei and ZTE can't be trusted to be free of foreign state influences."

Whether these efforts amount to a smear campaign or an airing and enforcement of legitimate concerns, the effect has been significant. A recent InformationWeek poll of 454 business technology professionals found that 71% of respondents felt that the government's actions against Huawei where either a deal breaker or major concern for doing business with the company. (The full report will be out in May.)

There are also concerns with how Huawei deals with security threats and bug fixes. The company doesn't operate with anything approaching the transparency that U.S. companies such as Cisco and Microsoft do. The resulting lack of trust would make success in the US market almost impossible. As a result, the company has wisely chosen to lower its profile--at least for now.