Monday, December 2, 2013

What Does Huawei's Announcement of Exiting the U.S. Market Really Mean?

Last night, my Google Alert for Huawei captured an intriguing headline: "Huawei exiting US market: CEO". The article appeared in Global Times, a Chinese paper that's part of Peoples Daily. Here's the opening paragraph:
Chinese telecommunications equipment maker Huawei Technologies Co Ltd has exited the US market in order not to affect Sino-US relations, Ren Zhengfei, founder and CEO of Huawei, said in an interview in Paris, news portal 163.com reported Sunday.
Upon first reading, this raised a lot of questions in my mind regarding Huawei's current U.S. operations. It has offices in a number of U.S. cities and has already sold quite a bit of equipment to both U.S. corporations and the U.S. government. What would happen there, I wondered?

Fortunately, I was able to reach Bill Plummer, Huawei's VP of External Affairs by email and received the following clarification:
Huawei has prioritized markets that welcome competition and investment, such as Europe.  
That said, we remain committed to our customers, employees, investments and operations and more than $1 billion in sales in the U.S., and we stand ready to deliver additional competition and innovative solutions as desired by customers and allowed by authorities.
So basically what seemed like a radical change of strategy is actually something very practical. Huawei isn't pulling out of the U.S. physically nor is it abandoning its current U.S. customers. It is simply re-allocating its resources to increase sales in those parts of the world where it is welcome to compete.

Personally, as someone who has been a frequent critic of Huawei, I think it's a smart strategy. They're already the world's largest telecommunications hardware manufacturer. Why should they risk engendering more controversy by continuing to battle against U.S. government resistance when it will do nothing to improve their bottom line? In my opinion, Huawei's combination of low prices and quality manufacturing will eventually force adoption by U.S. corporations and government agencies. It might take years but I think that will be the inevitable outcome.

In the meantime, instead of hoping that the U.S. government will keep potential adversary states from selling them risky devices, U.S. companies should incentivize cyber security researchers to find ways to automatically test firmware updates for exploits. Currently, whether the hardware is made by Huawei, ZTE, or Dell, firmware updates are loaded automatically with no testing. If, down the road, a foreign intelligence agency (Chinese or otherwise) wants to compromise a strategically placed router made by a company that it has legal authorities over by adding a bit of malicious code, a firmware update is one of the easiest ways to do it.

As a side note I'm happy to say that both Bill Plummer and Andy Purdy (Huawei's CSO) will be at Suits and Spooks DC. Andy will be speaking on a panel that I'm moderating which will explore cyber security risks in the supply chain. We still have about 28 seats available if you'd like an opportunity to discuss Huawei and related cyber security issues with a couple of the company's executives face-to-face.

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