Should we trust in Chinese mobile vendors?

A few weeks ago I got a very peculiar phone call from a man introducing himself as an economic and political officer from the Embassy of the United States in Helsinki. He wanted to meet and discuss Chinese mobile device and network vendors. Great news for me: this blog has at least one reader.

Why me? I guess because I have covered Huawei and ZTE several times. They are bringing fierce competition for European and U.S. companies, especially with lower prices. But can we trust the data traffic of our public sector or companies to them?

At first a few words about what happened after his initial contact, because… umm…, nothing as special as this has happened to me lately. I mentioned this to my friends, and they were immediately joking he (let’s call him Mr. Smith) wants to recruit me as a spy for the USA, so we should meet at the Ateljee bar on the 14th floor of the Torni hotel. That’s where CIA agents supposedly used to meet Finnish people during the cold war. 😉

Well, Mr. Smith chose the place, and so we met at the Strindberg cafeteria in the centre of Helsinki. I had searched for his name online and cellular phone number to check if his contact details are real (well, you could fake them to some extend, but I didn’t see that as a likely option).

Then the boring reality: Our meeting was not secret in any way and I don’t now work for CIA. He asked me about stuff I could blog or write a news piece for work, and for many parts I’ve already written too. He had visited the office of Huawei in Finland and met their management too.

He was very interested in hearing my opinion of why Huawei is hiring so many technical and sales people here and other Nordic countries, especially Sweden (total of around 500 employees). Ericsson and Nokia Siemens Networks fire, Huawei hires, you could put in short. Good technical expertise is now available for the Chinese vendors.

Due to my journalist background, I wanted to learn about Mr. Smith as much as I could during our short meeting. I found out he has lived in China for some years (Guangzhou, I recall), returned to the U.S. for about six months, and studied a little bit Finnish language. He plans to go back to China after a few years in Helsinki. I understood he speaks Mandarin Chinese fluently.

I learnt he was born in Wisconsin, and thus felt the Finnish dark and cold fall and winter are quite tolerable. He also told he used to work as journalist, but currently he reports from Helsinki to the U.S. Department of the Treasury about once or twice a week. I asked are these reports public, he said they’re for government use only. I wonder if I will be cited as a source. 😉

We discussed how Huawei and ZTE have brought price competition to mobile USB modems and Android smartphones. I also mentioned how Huawei has announced they top priority goal is to challenge Cisco in SMBs and even enterprises.

I also mentioned the CEO of TeliaSonera Lars Nyberg has praised Huawei for some technical innovations. In a press meeting, Finnish journalists speculated they are just using Huawei to negotiate lower prices from Ericsson and Nokia Siemens Networks (NSN), but Nyberg denied this. However, even though Nordic operators have got requests for offers from Huawei too, they still seem to rely on Ericsson and NSN in the core components of they mobile networks.

I have had background discussions with technical staff of Finnish mobile operators. They have claimed Ericsson and NSN are still ahead of Huawei in some areas, but the Chinese have other benefits, such as often more flexible software licenses and upgrade options.

* * *

Now back to the title of this blog post. How about privacy and information security? Can we trust in Chinese terminal (smartphones, tablets) and network vendors? There does not seem to be pretty much any debate about this in Finland, even though I’ve heard off-the-record large companies are very cautious about this.

Most mobile USB modems (USB sticks, or ”mokkulat” in Finnish) sold through Finnish operators come from Huawei and ZTE. Finnish business and public sector organisations use them widely too. So they don’t seem to worry their data would go to China.

However, in the U.S. there has been a lot more discussion about this. For example, in October PC World reported Huawei was not allowed to deliver a wireless network, security reasons were cited.

There have been many reports about this in the American business and technlogy media, for example this Fortune story on CNN Money. Huawei already operates in over 130 countries and gets about a half of its revenues outside China. According to some reports it’s already the second largest network vendor after Cisco.

But is this resistance in the U.S. really about security and trust, or economic politics too?

Some years ago there were accusations Huawei would have stolen source code from Ericsson’s network devices. Ericsson engineers found exactly the same code, complete with spelling errors made by their own engineers. Nokia has also been worried about its IPR being stolen to China.

Huawei is scary, because the western world do not seem to believe it’s really privately held and 100% owned by emloyees, as they claim for example according to a U.S. government report (PDF).

I met the Finnish country manager of Huwei Hubert Hu in June, and he just told the same thing; the company has no ties to the Chinese army or government. According to Mr. Smith, someone else is nowadays heading their Finnish office, but I didn’t check that yet.

Of course, this is not only about Huawei. Another Chinese vendor ZTE wants to become one of the top three LTE networks providers by 2015, according to a report by research company iSuppli. ZTE is now most known for its very affordable Android smartphones.

Who knows, maybe the Chinese own Cisco in five or ten years from now? It’s no wonder they can be a bit worried in the U.S.

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