As suspicion falls on Chinese top telco vendor Huawei over strong ties to Chinese banks and governments – and whether these would be exploited and used against the US government, now ZTE, sixth largest telco manufacturer in the world and Chinese handset champion, is in the firing line.
ZTE, which has been rolling out networks with little trouble or worried response globally, including across Europe, has just signed purchase agreements with five American chipmakers lasting three years and at a cost of $3 billion. Qualcomm, Texas Instruments, Freescale Semiconductor, Altera and Broadcom will all be supplying semiconductors.
The Chinese giant has aggressive plans for expansion and the money is there on the back of a long run of exceptional performance in East Asian territories. It has fingers in many pies, including its own LTE-Advanced system and supporting ultra-wide bandwidth networks along with consumer kit like tablets and smartphones – the latter produced cheap and cheerful with a view to maintain user experience but at lower cost. It surpassed Sony Ericcson in growth rates this year.
The concerns find their route at the company’s origins. The Wall Street Journal, which reports ZTE as “hardly a household name” – maybe not on Wall Street but give it time – mentions its founding in 1985 by a group of Chinese state owned companies which still hold 17 percent.
ZTE is quick to dismiss any security allegations, but then it would be – we have learned from ZTE that its main MO at the moment is an aggressive push in all segments. Pockets of Europe enjoyed relative success, particularly France and Spain, but the US is a vital market to establish in the long term. They say that ZTE isn’t a security threat and that measures are being taken to calm down the US.
Its US arm is seeking the help of a law firm to allay fears. Execs will be meeting with Senate staff as well as the Departments of Treasury, Justice and Defense. Unlike Huawei, ZTE is technically publicly traded. Huawei was in hot water last month.
Huawei was accused of strong ties to the Chinese military. Some in North America have moved to block a deal between it and Sprint as a security issue – and also accused Huawei of receiving subsidies from the Chinese government which could violate international trade rules. ZTE also received subsidies.
There’s an air of prejudice, says former AT&T man Bruce Reisenauer: “There is a little bit of treating all Chinese enterprises with a broad brush stroke – the story is a bit more nuanced than that,” he told the WSJ. Meanwhile Lixin Cheng, president at ZTE North America, says: “We feel we are unfairly criticised. My biggest challenge in this marketplace is to make sure people understand who we are.”