Huawei engineers working at the company headquarters in Shenzhen, Guangdong province. The Chinese phone-network equipment maker said it's not a threat to US national security. [Photo / Bloomberg]

Company urges probe into claims it has military and government links

BEIJING - Huawei Technologies Co said perceptions that the Chinese phone-network equipment maker threatens US national security are unfounded and has invited the US government to probe the company about any concerns it may have.

"Over the past 10 years, as we have been investing in the United States, we have encountered a number of misperceptions that some hold about Huawei," Ken Hu, chairman of Huawei's US operations, wrote in an open letter on the company's website. "We sincerely hope that the US government will carry out a formal investigation into any concerns it may have."

The comments came a week after the company withdrew from its proposed purchase of patents from the California-based 3Leaf Systems Inc, in compliance with a recommendation by the Committee on Foreign Investment in the United States.

China's Ministry of Commerce said last week that the move was regrettable and that US intervention in Chinese companies' investments in recent years has affected trade cooperation between the two sides.

Unfounded perceptions about Huawei include claims of close ties with the Chinese military, allegations of financial support from the government, and threats to US national security, Hu wrote.

Huawei has been trying to expand in the US for the past three years and has been thwarted repeatedly as lawmakers raised concerns about security risks from the Chinese company. Prior to 3Leaf, Huawei failed in bids to acquire companies including 3Com Corp in 2008, and 2Wire Inc and Motorola Inc's wireless business last year.

Huawei's possession of 3Leaf's technology "could pose a serious risk" to US computer networks, five US lawmakers wrote to President Obama this month.

The repeated rejection of investment by Huawei in cases from 3Com to 3Leaf shows that the US is using security concerns as a pretext to reject investment by Chinese companies, according to Yao Jian, a spokesman for China's Ministry of Commerce, on Feb 17. This "has influenced Sino-US cooperation", Yao said.

"As far as the investment activities of Chinese enterprises in the United States is concerned, it's clear that there are many cases where the United States is using a security review to refuse investment by Chinese companies," Yao said.

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The US should increase the transparency of the approval process and give Chinese companies investing in the US "fair treatment", Yao said.

3Leaf, founded in 2004, has developed technology for cloud-computing operations that enable businesses and government agencies to move applications and programs to remote networks owned and operated by a third-party.

Huawei is China's largest maker of phone-networking equipment, and ranks second globally only to Sweden's Ericsson AB, according to the California-based market information provider, Dell'Oro Group. Huawei's share of the global market for mobile phone-network equipment almost doubled to 21 percent in the third quarter of 2010, from 11 percent in the same quarter in 2008, said Dell'Oro Group.

Huawei has had difficulty penetrating the US market. Its 2009 combined revenue in North and South America accounted for only 12 percent of its total sales of $21.8 billion, said spokesman Ross Gan in November. China accounted for about 33 percent, other Asian markets 20 percent, and Europe, the Middle East and Africa accounted for 35 percent.

Bloomberg News