Why Does Taiwan Fear for Use of Huawei’s Equipment?

16 May

A subsidiary of the Hon Hai Group plans to purchase the 4G base station equipment from China’s Huawei Technologies, which has aroused the information security concern for the use of Chinese equipment in the telecommunications sector even though the National Communications Commission (NCC) has not approved it.

Hon Hai’s subsidiary Ambit Microsystems plans to buy Huawei’s equipment to operate its 4G telecom services. Hon Hai Chairman Terry Gou threatened to move his company’s headquarters overseas if the NCC fails to give a clear answer.

The NCC appeared inefficient in handling the matter and apologized to Gou. But it is undeniable that the use of Huawei’s equipment raises the concern of information security.

Additionally, there is a history behind Huawei and the United States government.

Huawei, which was founded by ex-People’s Liberation Army officer Ren Zhengfei in 1987, focuses on the core technology for telecom devices and its initial registered capital is 21,000 yuan (US$3,370.7).

The company gradually emerges as a telecom equipment supplier based on its large capital and solid technology. It has not only successfully competed with Ericsson during the recent years but also overtook the Swedish firm to become the world’s largest telecom equipment supplier in 2014.

In 2013, it achieved sales of 239 billion yuan (US$38.35 billion), beating Ericsson’s US$35.3 billion.

However, it has suffered setbacks while tapping the U.S. and Australian markets.

The governments of the U.S., Australia and Canada do not trust Huawei and are reluctant to use its equipment because Ren’s experience in the People’s Liberation Army.

Huawei decided to quit the U.S. market this year as it is fully banned in the U.S.

Even though Huawei disclosed its financial reports audited by accounting firms every year, the U.S. government still showed no trust toward the company’s cash flow because Huawei has never been listed on exchange.

According to the Washington Times, Huawei received financial aid of at least US$228 million from the Chinese government between 2008 and 2011.

The U.S. government believes that Huawei is able to use its low-cost equipment to earn the market share at a fast pace because of the financial support from the government.

In addition, Huawei was allegedly involved in several bribery cases, which further raises concern toward the use of Huawei equipment among many governments worldwide.

After the Iranian Green Movement, a political movement that arose after the 2009 presidential election, Ericsson and Siemens exited the Western Asian country, allowing Huawei to dominate the Iranian market. But the Chinese firm was also accused of helping Iranian government surveil its people.

Huawei rebutted the accusation, but threatened by the U.S. government, it has gradually downsized its business in Iran.

In an interview with CNNMoney in October 2012, Huawei said that it attended a congressional hearing and provided the list of its shareholders, but the U.S. government still pressured on it on the basis of nothing and overlooked the fact that its acquirement of materials and semiconductor components had no difference compared to other multinational companies.

The U.S. has never given up the surveillance of Huawei.

According to documents leaked by Edward Snowden, the National Security Agency (NSA) of the U.S. launched its large-scale surveillance of Huawei since 2007 where it attempted to steal data by invading Huawei’s network and conducted surveillance of Ren’s Internet use and telecom devices.

Huawei’s relatively low prices have attracted many telecom operators worldwide to use its equipment.

However, given the unique political situation between Taiwan and China, Taiwan’s National Security Bureau bans the use of Huawei’s equipment entirely. Further, it is an “open secret” that Taiwan’s telecom operators avoid buying Huawei’s equipment.

In addition to the concern toward Ren’s background, the NCC may be pressured by the U.S., which has taken a firm stand against Huawei.

The South Korean government replaced its entire telecom equipment that was used to contact the U.S. with non-Huawei-made ones in the beginning of 2014.

But the U.S. denied putting pressure on other countries and pointed out again the security breach in Huawei’s equipment.

If the Ambit Microsystems is granted the green light to purchase Huawei’s equipment, other telecom operators may follow suit to lower their procurement cost.

Does the approval for the use of Huawei’s equipment indicate that Taiwan’s information security is in danger? Or is Taiwan going to be safe from the security threats because the risks can be prevented in manufacturing process, as being claimed by Gou?

It is hard to believe that Huawei does not add backdoors in its equipment to allow the Chinese government access as it comes from a country that conducts full surveillance of the Internet, and its founder is a former officer of the People’s Liberation Army.

On the other hand, many people no longer trust the U.S. government following the PRISM surveillance program launched by the NSA in 2007.

It is difficult to determine who tells the truth and who does not.