Is Cisco behind the U.S. Congressional attack on Huawei and ZTE?

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Is Cisco behind the U.S. Congressional attack on Huawei and ZTE?

Yesterday, a 47-time winner of the Pulitzer Prize, The Washington Post, revealed that a Cisco marketing campaign to discredit Huawei appears to have helped orchestrate the 60-page U.S. Congressional attack on two of Cisco's most lethal competitors, Huawei and ZTE.

Hershey, PA: Thu, 10/11/12 - 2:12pm View comments

Update: 10/17/2012

White House review finds no evidence of spying by Huawei

The Washington Post is reporting that a September 2011 marketing campaign by Cisco to discredit Huawei appears to have orchestrated the 60-page U.S. Congressional attack on two of Cisco's most lethal competitors, Huawei and ZTE:

Huawei's U.S. competitors among those pushing for scrutiny of Chinese tech firm

"Companies in the cutthroat field of telecommunications received a remarkable marketing document recently, one aimed at causing suspicion about one of their biggest competitors, the Chinese firm Huawei. 'Fear of Huawei spreads globally,' the report reads. 'Despite denials, Huawei has struggled to de-link itself from China's People's Liberation Army and the Chinese government.' The paper's author was Huawei's main U.S. rival, the California-based company Cisco Systems. The marketing campaign got a boost this week when a report from Congress said much the same thing...

"Huawei is our biggest 'long-term threat,' Cisco chief executive John Chambers said in media interviews earlier this year.

"U.S. suspicions surrounding Huawei have presented a business opportunity for Cisco and other firms in the hyper-competitive world of telecom. Senior Hill staffers at three separate congressional offices say an array of American tech firms have lobbied them to increase scrutiny of Huawei, using language similar to Cisco's campaign."

Additionally, Gartner Vice President and Distinguished Analyst, Mark Fabbi, stated in the Post article:

"Huawei has been extremely successful and disruptive around the world, but the one market it hasn't been able to penetrate is the U.S., and that's mainly because of politics and lobbyists pushing really, really hard to put up barriers."

Finally, the Post report concluded:

"For business rivals, the worrisome ascent of Huawei has fortuitously coincided with growing fears of China's economic clout, some analysts say. 'What happens is you get competitors who are able to gin up lawmakers who are already wound up about China,' said one Hill staffer who was not authorized to speak publicly about the matter. 'What they do is pull the string and see where the top spins.' But some experts say these concerns are exaggerated. These experts note that much of Cisco's own technology is manufactured in China."

View the entire 60-page U.S. Congressional Report:

Investigative Report on the U.S. National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE

In the following 3-minute video interview ZTE's director of global public affairs David Dai Shu gave:

ZTE's response to the U.S. Congressional report

Furthermore, in a ZTE press release Shu states:

ZTE's Equipment is Safe and Poses no Threat to US Telecommunications Infrastructure

"Given the severity of the Committee's recommendations, ZTE recommends that the Committee's investigation be extended to include every company making equipment in China, including the Western vendors. That is the only way to truly protect US equipment and US national security. Virtually all of the telecom infrastructure equipment now sold in the US and throughout the world contains components made, in whole or in part, in China. That includes the equipment manufactured and sold by every Western vendor in the United States, much of which is made by Chinese joint venture partners and suppliers."

In my opinion, the above statement made by ZTE's David Dai Shu makes even more sense when taking into consideration the following pronouncements made by Cisco CEO John Chambers to the China Press on June 17, 2005:

Cisco CEO John Chambers: If I wasn't American, I would be Chinese

"Addressing a group of Asian journalists early this month at the company's headquarters in San Jose, California, President and CEO of Cisco Systems John Chambers, 56, speaks very quickly:

Chambers thinks highly of the Asian Pacific region.

"The Asia Pacific region has been our fastest growing market year on year," he said.
A large part of Cisco's manufacturing comes from this area.

Chambers said many of his partners have said his behaviour and style are somewhat Asian.

At Cisco's headquarters, 60 per cent of the staff have Asian backgrounds.

In the Asia Pacific region, China, the most populous country in the world, has a great IT education system, indicating a huge potential for investment and personnel, Chambers said.

He has a special interest in China, doing business here for the past two decades.
"If I wasn't American, I would be Chinese," he said.

"The most important thing in IT is not technology, but the people, the process."
That is why Cisco has established around 200 networking academies around the country in co-operation with Chinese universities. These academies provide online and offline programmes which have trained thousands of Internet professionals.

"Our investment returns from China are better than those from America," Chambers said.

Cisco, with routers and switches as its core products, faces challenges from major Chinese companies like Huawei Technologies and ZTE Corporation, which are quickly expanding in both domestic and overseas markets, with cheaper products.

The company is expected to manufacture 40 per cent of its products in China in the coming years to cut costs. All Cisco's products are done through outsourcing.

Even more ironically on December 25, 2004, Cisco CEO John Chambers made the following now famous pronouncement in a Washington Times story:

"China will become the IT center of the world, and we can have a healthy discussion about whether that's in 2020 or 2040. What we're trying to do is outline an entire strategy of becoming a Chinese company."

ZTE's Washington D.C. based Director of Technical Solutions, Bernard McCargo, made the following communication to ZTE's customers that are based here in the United States:

"You may notice that HPSCI has issued a report on the U.S. national security issues posed by Chinese Vendors. ZTE recognizes and fully respects the Committee's obligation to protect US national security. In the investigation which has lasted one year, ZTE has set an unprecedented standard for cooperation by any Chinese company with a US congressional inquiry.

"If you dive into the report, you may find that 90 percent of the Committee Report consists of criticisms and charges against the other Chinese vendor. ZTE is not the focus of this report. The Committee rested its conclusions regarding ZTE on a finding that ZTE 'may not be free of State influence' — a finding that would be applied to any company operating in China, which is including partners or suppliers to Non-Chinese telecommunication vendors. The Committee credited ZTE with the fact that ZTE offers its US customers a state-of-the-art Trusted Delivery Model, which assures the safety of ZTE equipment through end-to-end evaluation by independent US threat assessment labs, with oversight by US government agencies. The Committee has raised technical questions regarding the effectiveness of Trusted Delivery Systems, but the Committee recommends continuing efforts to identify effective mitigation solutions.

"As the most independent, transparent, globally focused publicly traded company in China's telecom sector, ZTE has committed to work with its US customers and US government agencies to assure ZTE deploys the most effective solutions and assure ZTE equipment remains safe. Despite the current challenging political environment, ZTE remains committed to the US consumers, carriers and partners. We are optimistic about our future in the US market."

Related document:

U.S. Congressional Report

White House review finds no evidence of spying by Huawei

ZTE's Statement regarding HPSCI's report

Huawei and Cisco's Source Code: Correcting the Record

Huawei's Statement regarding HPSCI's report

Huawei, ZTE and the Slippery Slope of Excusing Protectionism on National Security Grounds

Will Huawei and ZTE terminate Cisco's robust gross margin?

Huawei voted 5th most innovative company in the world for 2010
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Cisco Underscores Continued Commitment to China

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