You may not have heard much about China’s Huawei, but last year the Shenzhen-based company overtook Ericsson to become the world’s largest manufacturer of telecom equipments. Not only that, it now controls a quarter of the EU market in telecoms infrastructure and has won more than half of the contracts for 4G technology awarded in Europe. After years of solid growth, the company has also muscled its way to become the third biggest smartphone manufacturer, behind Samsung and Apple.
Shenzhen-based Huawei is now the world’s biggest telecom equipment maker
With an annual revenue of more than $32 billion, a workforce of 140,000 people and a customer base across 140 countries, Huawei is one of the most extraordinary technological creations of modern China. As of now, approximately 80% of the world’s top 50 telecoms companies work with Huawei, which include BT, Vodafone, Motorola, France Telecom, T-Mobile, Talk Talk, Portugal Telecom, Cox Communications, Bell Canada, Clearwire and more. Huawei components are installed in telecom networks serving one-third of the world’s population.
But here comes the issue: Huawei’s founder Ren Zhengfei is an ex-military officer in the Chinese People’s Liberation Army (PLA), who was responsible for a number of technological achievements for the Chinese army. Many believe the company is helping the Chinese government to spy on the rest of the world by designing equipment with the so-called “back door” that allows it to be penetrated by Chinese military intelligence. Security analysts alleged that in event of conflict, the Chinese could disable many networks which render a country’s high tech weapons ineffective.
Geopolitical experts claim that China is now widely recognized as an emerging superpower, and a far greater threat to the United States than the USSR due to its robust economy. It has the world’s largest ground force, totaling some 1.6 million personnel, the second largest naval force only behind the US Navy with a personnel strength of 290,000, and the biggest airforce in Asia at 330,000 personnel. It is ranked third in nuclear force, after Russia and the United States, with an estimated 240 to as many as 3,000 nuclear warheads operated by 90,000-120,000 personnel.
The US government repeatedly accused China as the source of vast cyber hacking, for purposes of commercial intellectual property theft, traditional espionage and the capability to paralyze or disable critical networks. Reports from the US asserted that the Chinese are aware of the fact their technological capabilities remain well behind that of the United States and Europe, and hence resorted cyberhacking.
The Commission on the Theft of American Intellectual Property, in a newly released report compiled by high-ranking government, military and industry officials, claimed that intellectual property theft by Chinese computer hackers costs the US economy $300 billion a year and must be treated as seriously as terrorism. “The scale of international theft of American intellectual property (IP) is unprecedented - hundreds of billions of dollars per year, two million American jobs a year.” said the report.
“The national industrial policy goals in China, which aspires it to become a global industrial superpower within the shortest time via any means, encourage IP theft, and an extraordinary number of Chinese in business and government entities are engaged in this practice,” the report added. In addition to cyber crime, less technologically advanced methods such as bribing employees of high-tech firms are also used. The stolen technologies are then distributed to Chinese industrial firms to help them maintain their competitive edge against the rest of the world.
Interview Street, who create customized programming tests and evaluate candidates for leading technology companies such as Facebook, Amazon, Microsoft and others, said China, in a bid to surpass the United States, had dumped an astronomical amount of money in recent years to invest in and prop up the country’s programming and hacking skills. As a result, China’s computer hackers have become renown for their persistence and their ability to seemingly strike anywhere. They are now believed to be the best in the world.
Evidence suggested that the Chinese hacking and stealing of data from the computers of strategic American companies, research labs and government departments have become increasingly pervasive. “They came into one site. They found the data that they were looking for. They tarted it up. They hid it in areas of the disk that aren’t easily found, so if they got knocked off they could come back and get it without leaving any evidence. They cleaned up the logs, so there was no record of their having been there. And they did all of that in 30 minutes with no keystroke errors. And they were doing that 24 hours, 7 days a week,” Alan Paller, the director of research at the SANS Institute in Washington DC, said.
A classified FBI report says that China has built up an army of 180,000 cyberspies that “poses the largest single threat to the United States for cyber-terrorism and has the potential to destroy vital infrastructure, interrupt banking and commerce, and compromise sensitive military and defense databases anywhere in the world.” These spies launched 90,000 attacks a year just against the US Defense Department computers, according to a senior FBI analyst.
One of China’s most powerful weapons, according to the FBI report, is what Pentagon security investigators called Titan Rain; it is a Chinese scanner program that probes national defense and high-tech industrial computer networks thousands of times every minute looking for weakness and vulnerabilities. The Chinese military hackers, FBI said, then penetrate the weakness, obtain the data, and create a clean backdoor exit in just under 20 minutes.
Richard Clarke, a former special adviser on cybersecurity to US President George W. Bush, says, “every corporation in the US, every corporation in Asia, every corporation in Germany. They are using a vacuum cleaner to suck every data out in terabytes and petabytes. I don’t think you can overstate the damage to this country that has already been done. We’re talking about stealing entire industries,” he added. “This may be the biggest transfer of wealth in a short period of time that the world has ever seen and it explained why China is rising so fast.”
Last week, the US Defense Department said Chinese hackers successfully compromised its systems, and that designs for the advanced Patriot missile system, the Navy’s Aegis ballistic missile defense systems, the F/A-18 fighter jet, the V-22 Osprey, the Black Hawk helicopter and the F-35 Joint Strike Fighter have all been stolen. In Australia, a news report said Chinese hackers stole the blueprints for Australia’s new spy headquarters, and now not only its building layouts, but also the location of its communication and computer networks have been exposed. China dismissed the accusations as groundless.
At the center of attention is Huawei. The US Congress last year recommends that the government avoid using equipment from the firm, and that American companies seek alternative vendors for telecommunications equipment. House intelligence committee chairman Mike Rogers said of US telecommunications networks: “We simply cannot trust such vital systems to companies with known ties to the Chinese state, a country that is the largest perpetrator of cyber-espionage against the US.”
Huawei was last year barred from bidding for construction contracts on a new Australian high-speed national broadband network amid fears of cyber espionage. Amid the congressional report, businesses is also suffering in the US. Huawei denied the allegations, saying that for it to design an equipment that can be compromised would be commercial suicide. It added that if anything like that were discovered, the loss of trust in Huawei would be instant and total, and its business could collapse overnight.
Huawei vehemently refuted any connection with the Chinese military. It says it is a highly reputable international company which supplies many governments in many countries, and that it receives no financial support from the Chinese government. The company added that shutting out Chinese telecom equipment suppliers from the US market won’t solve any cyber security problems in America, and it only gives the impression of protectionism that the US is trying to shield its own equipment makers such as Cisco, whose CEO John Chambers said Huawei is now its biggest rival.
US-based Cisco says Huawei is now its biggest threat
Founder Ren Zhengfei ridiculed the US accusation, “Huawei has no connection to the cyber-security issues the US has encountered. Our presence remains relatively small in the US, in fact we are still trying to advertise ourselves in the market there,” he told reporters in New Zealand. “Huawei equipment is almost non-existent in networks running in the US. We have never sold any key equipment to major US carriers, nor have we sold any equipment to any US government agency. Cisco is currently dominant in the US networking equipment market.”
“Even before we set ground in the US, the congressional report effectively eliminated any business opportunities we might have had in the US network infrastructure market.” But despite the decisive setback in the US, Huawei is thriving in Europe, triumphing European rivals like Ericsson, NSN (Nokia Siemen Networks) and Alcatel-Lucent. What’s more, Huawei has snatched the crown from Swedish-based Ericsson as the world’s leading supplier of telecom hardware and software.
As the new market leader, Huawei is again suffering from backlash in Europe. The EU accused Huawei of “dumping their products on the European market”, saying that subsidized credit for the mobile equipment maker has created “distorted playing field.” Huawei rejected the EU charge, “our products may have a price advantage, but it was gained via technological innovation, rather than through subsidies or dumping,” company advisor Tian Tao said.
“We have come a long way, including the opening of 13 research centers in Europe and a $2 billion investment plan to expand our operations in Britain last year. Technological breakthroughs have allowed them to cut costs by up to 50 percent in some cases,” said Tian.
Lyu Benfu, a professor from the Chinese Academy of Sciences, said the telecom sector has been a bright spot of the EU economy amid its continued economic slump. “European companies currently occupy 50% of China’s telecom market, while Huawei only account for 25% of the market share in Europe. Both sides should open the market and allow competition, rather than creating barriers,” Lyu said.
In Britain, the Intelligence and Security Committee (ISC) this week expressed “shock” at how Huawei, started by a former Chinese military officer, established a huge presence in the UK. The committee spoke of the grave danger of national security being traded for financial gain and warned that “a lack of clarity” concerning procedures means that “national security issues are being overlooked.”
British prime minister David Cameron meeting Huawei founder Ren Zhengfei
British MPs claimed that in 2003, when BT (British Telecom) wanted to upgrade its network, it chose Huawei among others due to its lower cost. Ministers were only told about this after the contract had been signed. The ISC report states: “The MI5 had already told us in early 2008 that, theoretically, the Chinese State may be able to exploit any vulnerabilities in Huawei’s equipment in order to gain some access to the BT network, which would provide them with an attractive espionage opportunity.”
Ten years ago, when the deal was done, the concern over Chinese espionage was limited to a tiny number of people. But more recently, concern has grown amid accusations that the Chinese state is stealing intellectual property to support Chinese companies and carrying out other forms of espionage and reconnaissance of western computer networks. Huawei insisted it has no connection to the Chinese military, but many analysts believe that if the Chinese government wanted a Chinese company’s help, refusal would be impossible.
BT is the biggest telecommunication company in the United Kingdom. Since then Huawei has entered into deals with other leading British telco companies like EE (formerly Orange and T-Mobile), O2 and 3UK.
US: China made $300 billion a year hacking us