Clarifying an executive's highly quoted statement, "We are not interested in the U.S. market any more," China-based networking-gear company Huawei has insisted that it is, indeed, still interested in the United States. But it's more interested in serving emerging markets like Asia-Pacific East and Europe, according to Forbes -- that is, regions where government officials haven't deemed the company a national security threat.
Huawei executive VP Eric Xu uttered the aforementioned quote earlier this week at an analyst summit in Shenzhen, raising concerns among customers (and investors) that Huawei had pending plans to bail on them.
"Mr. Xu's statement reflects the realities of our carrier network business in the U.S.," said Huawei's spokesperson Scott Sykes. "The growth of Huawei's carrier network business is primarily from developed markets in other parts of the world.... Our U.S. employees remain committed to providing quality services for our customers."
The most lucrative markets for the company are Asia-Pacific East and Europe, which accounted for about 60 percent of Huawei's annual revenue mix in 2012, an undisclosed source told Forbes.
But the greener pastures of emerging markets aren't the only reason Huawei plans to concentrate less on the United States: "Considering the situation our company currently faces in the U.S., it would be very difficult for the U.S. market to become a primary revenue source or a key growth area for our carrier network business in the foreseeable future," Sykes said.
That "situation our company currently faces" presumably refers to the fact the late last year, a U.S. House Intelligence Committee released a damning report about Huawei (and ZTE), saying the companies posed a national security threat to the United States because of their potential to spy and steal data on behalf of the Chinese government.
"Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems," the report said.
The committee also "strongly encouraged [U.S. companies] to consider the long-term security risks associated with doing business with either ZTE or Huawei for equipment or services," and that "U.S. network providers and systems developers ... seek other vendors for their projects."
Security experts have criticized Huawei's gear for its lackluster security as well. Security researcher Felix "FX" Lindne, who runs security consultancy Recurity Labs in Berlin, discovered that Huawei's routers were rife with vulnerabilities, thanks to poor-quality, 1990s-era coding.
Huawei's "situation" spells opportunity for U.S.-based rivals, from well-established companies like Cisco and Juniper to up-and-comers like Range Networks, which has traditionally sold its low-cost, open source cellular system to operators of private industrial and government networks but has recently expanded into the public carrier market.
Range can build the core of a cellular network for less than $100,000, compared to about $350,000 for gear from the major mobile equipment vendors, according to the company's co-founder and CEO David Burgess. The cost of setting up each base station is about $30,000 to $40,000, compared to about $100,000 with conventional technology, he said.
In the context of Huawei, Range argues that its advantage over that likes of Huawei is that its gear is American-made. "The open source approach also answers concerns over the security of RAN and core network systems by allowing network operators to inspect the source code of their network software," he wrote in a recent post to his OpenBTS Chronicles blog.
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