Threat from Chinese vendors Strength: Huawei Technologies Co. Ltd.

is the largest networking and telecommunications equipment supplier in the People's Republic of China. It is headquartered in Longgang District, Shenzhen, Guangdong. Huawei is a privately held company that serves 45 of the top 50 telecoms operators. In Q3 of 2009, Huawei surpassed Nokia Siemens to become the No. 2 supplier of global mobile network gear after market leader Ericsson. The two characters combined (Huawei) can be variously translated as "achievement", "magnificent act", "splendid act", or "China can". On July 9, 2010, Huawei reached Global Fortune 500 2010 published by the U.S. magazine "Fortune" for the first time with the annual sales of 21.8 billion U.S. dollars and net profit of 2.67 billion U.S. dollars. Huawei has many first to their credits; High Speed Downlink (to mobiles) Packet Access technology (HSDPA), Multi carrier Power Amp (more radio network capacity at same electrical and Radio frequency power) Gramin Phone, Bangladesh and Huawei were honored by Green mobile award for their efforts in rolling out urban telecom networks and also keeping ecological interests intact. Vodafone (Worlds largest operator- baring China mobile) awarded Huawei 2007 Global Supplier Award for Outstanding Performance Weakness: Technology theft, unfair practices In February 2003 Cisco Systems filed motion for preliminary injunction against Huawei Technologies, quoting the defendant to be "engaged in blatant and systematic copying of Cisco's router technology". Huawei router was developed using reverse engineering of Cisco's source code US government's Strategic Studies Institute report on Argentina published in September 2007 describes Huawei as "known to bribe and trap clients". The report further details unfair business practices, such as customers framed by "full-paid trips" to China and monetary "presents" to be offered and later used by Huawei as "a form of extortion". Huawei Technologies became the focus of a major intellectual property scandal again later in 2004, when Yi Bin Zhu, a Huawei employee, was caught afterhours in a competitor's booth at the SuperComm tradeshow, "examining circuit boards taken from the vendor's displayed gear and taking photographs" In February 2009, President of Indonesian mobile carrier Excelcomindo Pratama confirmed a data theft attempt by visiting Huawei employee who "snuck in to General Manager's Network Planning Office". Opportunity: India at an advantage In a bid to become number one, Huawei is offering free and higher capacity of MSC and Radio Networks as a replacement to India operators to swap Ericson, In this mode their payout would start as AMC contracts only after three years. Huawei is planning to invest around $500 million (Rs 2,200 crore) in setting up a telecom equipment manufacturing facility in Tamil Nadu, India. Like most states, Tamilnadu state has 456 colleges and 130,000 engineering students are graduating from these colleges every year. "Whether they are

employable is the issue. To fill this gap and to support the industry, we have decided to take up this program" CM mentions. The government has identified 15 sectors like (mainly sub sectors of manufacturing), leather, automotive, Telecom and chemical. TN govt. would welcome any such gesture with open arms. The cost of service has come down from INR 16 per minute to 30 paise per minute. Most of the mobile phones which are branded with mobile service providers (Vodafone, Tata indicom, Virgin, RIM) are all manufactured by ZTE. Most new Indian handsets Micromax, Karbonn, Videocon, Onida, Lava uses Chinese chipsets.

Threat: Where is the threat from: The threat emanates from the inherent nature of the technology. All cell-phones world over can be easily tapped and hacked by Law and order agencies. Infact LI (Lawful Interception), is an important feature of any Mobile Switching Centre. If there is a provision for interception from 8 different agencies (CBl, RAW, MHA, Police, Income Tax etc) , there could be a secret code to enable and tap calls towards 9th agency, China. USA: 3COM an American company and Huawei merger was thwarted by USA Admin stating that this merger would undermine the USA security In a letter to FCC chairman sent on Oct 20 2010, a group of U.S. senators expressed an opinion that Huawei "would pose a threat to national security if there was manipulation of switches, routers or software embedded in American telecommunications network". The letter became the second such request lawmakers have made to the Obama administration within just two months. UK: In March, 2010 this year, senior British intelligence official said China's Huawei supplying to British Telecom (BT) may have the ability to cut off the United Kingdom through blacking out (Denial of services of DoS attack) of the communications and public utilities, and bring the UK to a standstill. India: In October 2009, Indian Department of Telecommunications reportedly requested national telecom operators to "self-regulate" the use of Chinese-made equipment (including ZTE and Huawei), quoting security concerns. Earlier, in 2005, Huawei was blocked from supplying equipment to India's national network BSNL. The Indian home ministry since 2005 has warned that foreign telecom equipment vendors may install spyware and malware able to monitor voice and data traffic and bring down networks, and recently mandated that foreign manufacturers make core telecom equipment locally or transfer technology to Indian manufacturers. In 2010, Indian security intelligence (CBI) insisted on canceling the rest of the Huawei contract with BSNL and pressed charges against several top BSNL officers regarding their "doubtful integrity and dubious links with Chinese firms". In April 2010, Sistema Shyam Teleservices Ltd., the Indian unit of Russia's AFK Sistema, didn't get clearance to buy Huawei equipment.

As on today there are Huawei equipments like SGSN (Useful node offering Blackberry services, EDGE and GPRS to mobiles) ordered by operators and lying at customs for the want of clearance, that Indian regulators are willing to grant. When BSNL wanted to expand; Huawei was awarded India West, South and Eastern projects and Ericsson was awarded the North and Eastern India contract. This was even though the Huawei was the lowest bidder everywhere, as the North and Eastern borders were considered too sensitive to be awarded a Chinese vendor. Damage control by Huawei: In a letter to the prime minister's principal secretary, the company pointed out it is "not just a Chinese company," as 85 percent of its staff and nearly all research and development workforce are Indians. The company is also restructuring operations to put Indian residents into positions of its local arm, including the chairman and the board of directors. It is willing to offer networks for periodic audits. It is also willing to consider putting source code in the ESCROW account. (Seller Huawei gives in source code to a third party and buyer i.e. Indian Govt. can open up, review and modify the source code and designs in case of any security lapses from seller) Huawei and ZTE are now talking about a new world order with India and China as superpowers, and state that such perceived threats are coined to prevent this New world order. The latest offer to open up Source code by these Chinese vendors to comply with Indias new rules could give the Indian government an upper hand in its negotiations with European and US vendors. It could also blunt the lobbying efforts by Western industry associations. It was the recent missive from the Prime Ministers Office (PMO) urging the communications and home ministries to review the new stringent security standards that had been labeled too tough by foreign telecom gear makers that have prompted the DoT and the home ministry to clear telecom gear imports from Chinese vendors. Questions to discuss: 1. Is threat from Chinese telecom equipment manufacturer real or is it a perception? 2. Operators love lower cost products to bring down the per-minute cost of airtime and ARPU in the highly competitive telecom market. Who would win Operators or regulators? The confusion over the equipment import guidelines resulted in almost 6-7 months' delay in infrastructure rollout. 3. Is The threat a mere hype created by Ericsson to create an entry barrier for Huawei, which it cant compete with on cost and technology innovations? Note: As part of a broader electronic security crackdown, the government is also demanding access to intercept communications sent through highly secure BlackBerry devices of Canadian smartphone maker Research In Motion. Officials have said Google and Skype would also be sent notices to set up local servers to allow full monitoring of email and messenger communications. India, which had threatened RIM with a ban if denied access to the data, gave a 60-day reprieve to the company at the end of August after being offered a solution to access some BlackBerry data, a move yet to be confirmed by the Canadian firm.