Telecom giant says 'just investigation procedures' in the US will show truth

After it was again turned back in a bid to acquire a high-tech US firm or assets, telecommunications giant Huawei Technologies has for the first time questioned how the purchase threatened US security.

"We believe that fair and just investigation procedures in the United States will prove we are truly commercial (not government-backed) operations," Ken Hu, chairman of Huawei USA and deputy chairman of the parent company, Huawei Technologies, wrote in an open letter released on the company's website on Feb 25.

One of China's most successful high-tech companies, Huawei has now dropped its acquisition of insolvent California computer server firm 3Leaf Systems after the Committee on Foreign Investment in the US (CFIUS) ruled against the deal.

Before the federal watchdog that reviews national security implications of foreign investments in US companies and operations scuttled the deal, Huawei applied for approval from the US Bureau of Industry and Security and the acquisition was completed in May, Hu wrote in the letter.

The company received a reply from the US Department of Commerce that export of the technologies involved required no license.

Chaired by the US Treasury Department, CFIUS unwound the $2 million acquisition out of "national security concerns" in a subsequent review.

After it was aware of CFIUS interest in the takeover, Huawei filed an application with the organization and provided full cooperation, according to the company.

"We hoped to go through the entire procedure in a bid to show what Huawei is," Hu said in the letter, explaining why the company initially refused to withdraw as advised by CFIUS.

Yet "arousing such enormous attention is not what we wanted", so the company finally dropped the deal, he said.

Nancy McLernon, president and CEO of the Organization for International Investment, told China Daily in a written interview that security or political implications should be well investigated before a deal is pursued.

"It is critically important for the parties of any cross-border transaction to consider the political reaction to the deal and make a good attempt to inform key policymakers of their plans for the investment and the US company in question," McLernon said.

"The fewer surprises, the better," she said.

'Misconceptions'

Founded in 1987, Shenzhen-based Huawei has long eyed US cooperation and markets. It has more than 1,000 US employees and registered 66 percent growth in R&D spending in the nation last year.

In 2010 alone, Huawei bought products and services worth $6.1 billion from US providers.

But the company has been dogged by allegations it has links with the Chinese government and the military, which Hu termed "misconceptions".

Hu said claims of close links to the military apparently stem from the background of Huawei's founder and CEO Ren Zhengfei, who served in the army before his business venture.

It is not unusual for a CEO to have served the army, whether in China or in the United States, Hu said.

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Huawei has hired an independent third party to conduct a security study to clear doubt.

"It is understandable that the authorities can initiate review procedures for national security concerns," Mei Xinyu, a researcher of an international trade and economic cooperation research institution, affiliated with the Ministry of Commerce, told China Daily over a telephone interview.

"Yet the point is what the criteria are," he said, adding that the government should increase transparency for overseas companies.

Since its founding, Huawei has respected intellectual property rights (IPRs) and while valuing the protection of its own IPR, Ken Hu said.

With more than 49,000 patent filings worldwide - about 17,800 of which have been granted - Huawei is seen as an emerging tech powerhouse.

Through cross-licensing and authorized use of patents, the Chinese company has forged cooperation with most of the world's leading players in the industry.

It paid $222 million in patent licensing fees to Western companies in 2010 alone. Some $175 million went to US firms.

Huawei's 2009 combined revenue in North and South America accounted for only 12 percent of its total sales of $21.8 billion, Bloomberg cited its spokesman Ross Gan saying. China contributed 33 percent, other Asian markets 20 percent, and Europe, the Middle East and Africa together accounted for 35 percent.