Chinese Tech Giant a Panda or Wolf?

Huawei is an emerging telecom giant with the patents to prove it, but the company’s ties to the Chinese military and ongoing espionage concerns have spurred near constant investigations by national security agencies.

Despite those concerns, Huawei has been welcomed in Canada, with a $6.5 million grant from Ontario last year to invest in its Canadian research and development centre. Federal Industry Minister Tony Clement paid a visit that year to the company’s Canadian headquarters in Markham, Ontario.

Among other things, Huawei provides the technology behind cellular networks, with Wind Mobile and Mobilicity also offering Huawei handsets.

Huawei has earned a name for itself by offering rock-bottom prices and customer service that left Wind Mobile CEO Anthony Lacavera gushing in a recent Report on Business article.

But there are unanswered questions and persistent doubts about the company due to its country of origin, or rather the communist regime that maintains a viral presence in every cell of the Chinese economy.

According to the CIA-based Open Source Center, Beijing has given Huawei some $228 million for R&D over the past three years.

Former Chinese spy Fengzhi Li told security experts at a recent anti-espionage conference in Gatineau, Quebec, that he expected Huawei would be called on by the regime to do more than pay taxes.

“China’s current political system is communism. It means the government can control life, and are able to control everything, every business in China. And the government intends to do this.”

And with a company as high-profile as Huawei, that means paying especially close attention, said Li, formerly an agent for the China’s equivalent to the CIA, the Ministry of State Security (MSS) .

Huawei has faced investigation by security agencies in several countries including Australia, Great Britain, the U.S., and India. CSIS published an analysis of the Chinese regime’s military industrial complex in 2003 that pointed to Huawei’s ties with the People’s Liberation Army and sales of components used for both military and civilian purposes.

“Huawei has been a major supplier of dual-use telecom equipment. In 2001, its Indian subsidiary was accused of tailoring a commercial order for the Taliban regime in Afghanistan. Also in 2001, Huawei supplied Iraq with fibre optics to link its radar and anti-aircraft systems, triggering U.S. and U.K. bombings,” notes the report.

Access to Intelligence

The concern now is that Huawei’s cellular networks and other technologies could provide the Chinese regime effortless access to intelligence without the messy controversies that erupt after Chinese cyber attacks like those that targeted the Finance Department and Treasury Board early this year.

Huawei has never been proven to redirect data to China and the company fiercely denies allegations that it holds any intelligence function. Despite that, the U.S. House Permanent Select Committee on Intelligence is currently investigating the company.

Concerns about Huawei are bolstered in the minds of its critics by the fact that its founder, Ren Zhengfei, was an engineer for the PLA, and chairwoman Sun Yafang used to work for the Ministry of State Security (MSS).

The Open Source Center report says Yafang used her MSS connections to help Huawei get through rough times in its early years following 1987. The Pentagon’s latest annual report also notes close ties between Chinese tech companies and the PLA.

The possibility that Huawei is planting backdoor vulnerabilities in its products that allow for China’s communist rulers to pilfer data is not beyond the realm of possibility, says Iain Grant, head of SeaBoard Group, a telecom consultancy.

“Even a paranoid is right part of the time,” he said.

“In a million lines of code, unless you go through the code line by line and understand how it works, there could be a vulnerability.”

Such vulnerability could give remote access to data or shut the entire network down, he said.

Grant wasn’t suggesting Huawei has done that, but that those are the concerns of the security establishment in the U.S. That concern has prompted the U.S. Committee on Foreign Investment to block Huawei’s attempts to partner with U.S.-based 3Com and purchase 3Leaf Systems.

Grant echoed Li’s observation that Chinese companies, especially large successful ones, tend to be much closer to the regime.

“In so far as you are close to the Chinese government, it may in fact be a worry.”

Grant said the best way for Huawei to overcome those concerns was to hire non-Chinese into top positions and do more R&D overseas, something the company has been doing for a few years now.

“They are doing all the right things,” noted Grant.

Suspicions Remain

American engineers with the freedom to comb through Huawei’s code could offer the security establishment a bit of comfort, said Grant. Recent events, however, point in the opposite direction.

In April, the U.S. Commerce Department invoked cold-war era measures to force American telecoms to disclose reams of data and sources of equipment so that authorities can map who created which parts of the nation’s networks, reports Bloomberg news. The Commerce Department was unable to provide details to The Epoch Times by press time.

CSIS refused to answer questions about Huawei, either about the previous analysis or rumours of a current investigation. Ontario’s Ministry of Economic Development and Innovation was also unable to respond by press time to questions about the $6.5 million it gave Huawei and if there were any security concerns raised with the ministry about Huawei.

Huawei combined its Ontario grant with $60.5 million of its own money to open an R&D centre in Ottawa which has gone on to hire 120 people, with a total staff of 164 projected in five years.

Huawei announced the investment during an Ontario trade mission to Shanghai where Premier Dalton McGuinty and Tourism Minister Michael Chan did their best to round up investment.

Michel Juneau-Katsuya, formerly head of the Asia desk for CSIS, said giving Huawei money to set up shop in Canada was a sign of naivety.

“You are inviting the wolf into the barn when you do such a thing.”

“The Canadian industry, particularly the Canadian IT industry, has been extremely naive and extremely negligent in doing its due diligence.”

Juneau-Katsuya said long-standing security concerns about Huawei are combined with concerns it is engaged in industrial espionage. In 2003, Huawei was sued successfully by Cisco for stealing source code used in its routers and switches.

Despite some bad press, Huawei has grown with incredible speed, rising to become one of the largest network equipment providers in the world. While Ericsson and Nokia Siemens have been in the business much longer, their dominance is no longer assured.

According to the Report on Businesses (ROB) report, Bell and Telus use significant amounts of Huawei gear with Wind Mobile using Huawei gear even for sensitive information. Rogers does not use Huawei technology according to ROB.

Huawei employs some 120,000 around the world, with around 55,000 in R&D. The company’s Canadian headquarters in Markham, Ontario, features a 46,000-square-foot facility focused on sales and marketing.

Huawei scooped up former Nortel chief technology officer John Roese to serve as the company’s senior vice-president and general manager of North America R&D.