Chinese telecom firms' problems multiply

Oct. 11, 2012 at 7:26 AM
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WASHINGTON, Oct. 11 (UPI) -- The global dimensions of difficulties faced by state-controlled Chinese telecommunications firms Huawei Ltd. and ZTE Corp. are becoming known amid layoffs in the United States, India, China and elsewhere the businesses are active.

U.S. congressional moves to blacklist Huawei Ltd. and ZTE Corp. gained momentum this week despite denials by senior company officials but less publicity was given news of job losses at operations of the two companies.

Earlier in the week U.S. Rep. Frank Wolf, R-Va., warned U.S. businesses and consumers not to do business with the companies after reports of their close links with Beijing.

A House Intelligence Committee report concluded Huawei Ltd. and ZTE Corp. were "too opaque" about their relationship with the Chinese People's Liberation Army and, therefore, couldn't be trusted.

"Their obstruction of the committee's investigation further demonstrates that they are not trusted partners for the U.S. government and business community," Wolf said.

The companies insist they have cooperated fully with congressional committee probes into their operations.

The report recommends the government deny Huawei and ZTE access to "command and control U.S. telecom networks."

"It would be unwise for any American company or government agency to use Huawei or ZTE products," Wolf said, advising "in the interest of their customers and their country" that firms divest of any interest in the telecommunications firms.

"I encourage everyone who cares about our national and economic security to heed the report's findings," Wolf said.

Huawei is a $32 billion networking and data center infrastructure company while ZTE provides telecommunications infrastructure and cellular handsets. Both have been accused of intellectual property theft -- charges they have denied -- and secrecy extending to their U.S. subsidiary operations and lack of transparency in their corporate reporting.

Huawei was earlier banned from bidding on Australia's national broadband project and problems arose in India leading to extensive job losses.

In China, too, thousands of job losses at the two companies' manufacturing interests were reported but dismissed by senior executives as normal.

Aside from the congressional investigation, the biggest setback this week came after a row involving Cisco and ZTE.

Cisco announced it ended a sales partnership with ZTE, accusing the Chinese technology firm of selling Cisco networking equipment to Iran despite U.S. sanctions against the country. Cisco also alleged Huawei copied its patented technology to push its own products.

Cisco's partnership with ZTE began as part of a Cisco effort to compete against Huawei in China. Cisco licensed its technology to ZTE to manufacture products for the Chinese market. However, some of the products were aimed at competing against Huawei products.

Huawei and ZTE say the congressional moves against them are aimed at removing their competitive products and services from the U.S. market.

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