U.S. bomb-complex search urged over Huawei, ZTE fear

A congressional panel has approved a measure designed to search and clear the U.S. nuclear-weapons complex of technology produced by Chinese telecommunications companies that have been accused of working closely with China's government and military. If passed into law, the measure adopted Thursday could be a fresh blow to Huawei Technologies Co Ltd and ZTE Corp in their efforts to overcome national-security concerns that have stymied them in the lucrative U.S. market.

Security concerns from Huawei?

Huawei and ZTE were singled out by name in the measure, adopted by the Republican-led House of Representatives' Armed Services Strategic Forces subcommittee, as part of the 2013 defense authorization bill.The full House Armed Services Committee is to consider the legislation on May 9. It will have to be reconciled with a companion bill expected to be taken up next month by the Armed Services Committee in the Democratic-led Senate.

The Senate panel is not known to be mulling a similar provision. It was not immediately clear whether the Obama administration would support the proposed action. The Energy Department will "continue to work with Congress and other federal agencies on this important national security issue," said a department official who asked not to be named. The House panel's measure would order the secretary of energy, in consultation with U.S. counter-intelligence, to report to congressional committees that oversee defense issues by August 31 on risks to the department's information-technology supply chain.

The measure calls for special attention to the department's bomb-building enterprise and a determination whether the department or any of its big contractors has "a supply chain that includes technology produced by Huawei or ZTE Corp." It also calls for procedures to curb supply-chain risks, as recommended last month by the Government Accountability Office, Congress's investigative and audit arm.

The panel cited work by the congressionally created U.S.-China Economic and Security Review Commission that raised concerns about such threats in a report last month.

Huawei is the world's largest maker of telecommunications equipment after Sweden's Ericsson . ZTE, a Shenzhen, China-based crosstown rival, is the fifth-ranking provider. A document drafted for the House panel maintained that Huawei and ZTE had been and were likely to continue to be provided "billions of dollars in Chinese government support," a charge the companies deny. Huawei spokesman William Plummer said the measure's intent was "unclear."

Virtually all major information-technology venders - including Ericsson, Alcatel-Lucent , Nokia Siemens NOKI.UL and Cisco Systems Inc - rely on common global supply chains and globalized operations, he said by email. This entails significant research and development, software-coding and manufacturing in China. "If the intent is to address supply-chain concerns based on geography, then it would seem that any meaningful report or effective solution would have to be as broadly and globally crafted as the industry is transnational, which would in turn demonstrate that such geography-based approaches are illusory," Plummer said. ZTE did not respond to a query from Reuters.

A partnership between Huawei and Symantec Corp , the only major linkup of a large U.S. information security firm with a Chinese high-technology entity, fizzled last year amid concerns voiced by U.S. lawmakers including Rep. Frank Wolf, a fierce critic of China's human-rights record. Symantec said last month it had completed the sale of its 49 percent stake in Huawei Symantec Technologies Co to Huawei for $530 million. The sale gave Huawei sole ownership of the former joint venture. U.S. Commerce Secretary John Bryson dealt Huawei another blow in March 20 testimony to the House Appropriations Commerce-Justice-Science subcommittee.

"It appears that Huawei has capabilities that we may not fully detect to divert information," Bryson said. "It's a challenge to our country."

Reuters