China's Huawei Overcomes Opposition in India

In the U.S., Chinese telecom equipment manufacturer Huawei Technologies is encountering new opposition from Republican senators. Huawei has had its share of political problems in India, too, with New Delhi putting Huawei and Chinese rival ZTE on a blacklist earlier this year because security officials worried about the risk of Chinese infiltration. “The Indians are incredibly paranoid about China,” David Zweig, a professor of politics at Hong Kong University of Science & Technology, told me at the time. (Read that story here.)

But the Chinese company is making progress in overcoming opposition in that market, with the Indian government easing up on its ban. On Monday, Indian operator Tata Teleservices said it is buying 3G equipment from Huawei. This comes just a few weeks after Huawei announced an earlier deal with the Indian operator to provide CDMA equipment in Mumbai.

Indian security concerns aren’t limited to Huawei and other Chinese companies, of course. Look at what RIM has had to go through in order to keep New Delhi from kicking the BlackBerry out of India. http://www.bloomberg.com/news/2010-09-01/india-asks-rim-google-skype-to-set-up-local-servers-update1-.html Huawei’s breakthrough is probably a sign that the company made enough concessions to satisfy India’s security officials. It’s also a sign, though, that for all the rhetoric about the threat from China, Indian companies can’t afford not to do business with Chinese suppliers. As Insead professor (and sometimes Businessweek.com columnist) Anil Gupta told me a few months ago, Chinese equipment makers like Huawei enjoy a big price advantage over Western competitors. “We are talking about very competitive tech at 30% lower price; in a very capital intensive biz, that is important,” he said. As Indians look to spend to fix their woeful infrastructure, “India as market becomes the most attractive for capital goods from China. And because of China’s cost advantage, China becomes the most attractive supplier base.” For the two Asian giants, that co-dependence could help both countries put aside their past hostilities and work together.

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GOP Senators Go After China's Huawei

China’s biggest maker of telecom equipment is the subject of a new campaign by a group of Republican senators demanding the Obama administration investigate the company, which wants to sell equipment to Sprint Nextel. “Huawei has a concerning history,” write the senators (Bond, Bunning, Burr, Collins, Inhofe, Kyle, Sessions and Shelby), who go on to cite old reports about Huawei selling equipment to the regimes of Saddam Hussein and the Taliban. Oddly, the senators make just a passing reference to a dispute between Huawei and Motorola, writing that alleged Huawei violations of intellectual property rights “appear to have led Motorola to refuse to enter into a deeper business relationship with Huawei.” That’s a strange understatement by the GOP senators: Motorola and Huawei are now slugging it out in court; the U.S. company just last month sued Huawei for allegedly conspiring with former Motorola employees. Huawei says the complaint is “groundless and utterly without merit.”

How serious is this latest salvo from Washington? No Democrats signed the letter, and with the midterms approaching it’s easy to dismiss this call by Republican senators as a stunt to embarrass the Obama administration. For the GOP, it’s win-win: If Obama does nothing, Republicans can hammer the Democrats for being soft on China; if Obama intervenes, the Republicans can claim credit.

The company has been burned in the past. See its failed attempt to take over 3Com after politicians raised security concerns. Here’s a suggestion for Huawei, one I’ve made before: Open up. The senators write in their letter that the company’s founder and CEO, Ren Zhengfei, “was a member of the PLA” (the People’s Liberation Army, China’s military). Huawei says the company isn’t connected to the PLA, but clearly people in the U.S. have their doubts. Ren, who doesn’t give interviews, doesn’t help matters by being so secretive. If Huawei really wants to allay security concerns and make headway in the U.S., Ren needs to take some tips from experts in crisis PR, who generally coach execs to tackle problems like these head on. CEO Ren, you need to talk to the media. (Your PR folks know my number.)

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