Chinese company drops U.S. market

New restrictions on the government acquisition of Chinese technology may have played a role in a move by Huawei to look to the European market to expand.
 
"We are not interested in the U.S. market anymore," said Huawei executive vice president Eric Xu at an event for analysts on April 23, according to a report in the South China Morning Post. This sentiment was echoed by Li Sanqi, the chief technology officer of the company's carrier network division: "We are currently, for whatever geopolitical reasons, not focusing on the U.S market. Today we face reality and we focus on the rest of the world."

Those geopolitical reasons include a provision in the continuing resolution that funds government activities through the current fiscal year that puts restrictions on the ability of four government departments to acquire information technology that has supply-chain connections to state-owned or state-supported entities in the People's Republic of China. Rep. Frank Wolf (R-Va.), the driving force behind the legislative restrictions governing IT purchases by NASA, the National Science Foundation, and the Justice and Commerce departments, declined to comment.

Additionally, Huawei was called out in a pledge that potential telecom-merger partners Softbank and Sprint made to Rep. Mike Rogers (R-Mich.), a frequent critic of Chinese technology firms. Sprint and Softbank promised not to use Huawei gear in their U.S. network, should the merger go through. (This deal has since been complicated by the emergence of Dish Network as a potential acquirer of Sprint.)

These are just some of the troubles Huawei is facing in the U.S. market. The company was also cited as a threat to U.S. national security interests in a House Intelligence committee report that recommended the government scrutinize efforts by Huawei, along with Chinese IT manufacturer ZTE, to acquire or partner with U.S. companies. The report also called for efforts to ensure that equipment and component parts from the two firms do not wind up in government systems.

Two recent high-profile reports on cybersecurity, one from Mandiant and one from Verizon, have tagged China as the leading source of cyber breaches. The Mandiant report linked a specialized unit of the People's Liberation Army to cyber attacks. And despite some high-profile cyber-diplomacy, the attacks from China have not abated. "It's all the same, nothing has changed," Richard Bejtlich, Mandiant's chief security officer told the Wall Street Journal's China Real Time blog.