Huawei and ZTE are familiar around these parts because they make some pretty good Android phones, but the bulk of their business comes from the networking equipment the two companies manufacture and sell. Worldwide, both Huawei and ZTE are known for providing equipment like network switches that perform well and aren't crazy expensive. Their gear is popular, with Huawei being the top seller of networking equipment and ZTE coming in at number five — both companies are very important to China's economy.
Past findings show a strong relationship between both companies and China's Communist Party.
Another thing both companies have in common is controversy when it comes to the very same equipment. A 2011 congressional investigation found that Huawei and ZTE were both "directly subject to direction by the Chinese Communist Party," and former NSA chief General Michael V. Hayden has said that Huawei shared "intimate and extensive knowledge of foreign telecommunications systems" with the Chinese state. These allegations led to bans and regulations against any government agencies buying equipment from either company.
A new bill introduced by Texas Republican Michael Conway dubbed "H.R. 4747 — 115th Congress: Defending U.S. Government Communications Act" aims to take things a step further and block any government agency from using a network service provider that has Huawei or ZTE equipment installed. Specifically, service providers with any of the following would be banned from government contracts should the bill pass:
- Telecommunications equipment produced by Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of such entities).
- Telecommunications services provided by such entities or using such equipment.
- Telecommunications equipment or services produced or provided by an entity that the head of the relevant agency reasonably believes to be an entity owned or controlled by, or otherwise connected to, the government of a covered foreign country.
Language in the bill references the past findings of Huawei and ZTE's relationship with the Chinese government, but many U.S. officials are also concerned with trade between both companies and other countries that aren't exactly allies, like Syria, Cuba, or Iran. Last year ZTE was fined over $1 billion for violating U.S.-Iran sanctions and a current investigation into Huawei's dealings with Syria, Cuba, Iran, and Sudan is underway by the U.S. Treasury Department.
This news comes on the heels of AT&T and Verizon dropping support for the Huawei Mate 10 after concerns were reportedly expressed from the Senate and House Intelligence Committees about the companies ties to China's Communist Party. It's also not unusual to see government officials calling for product bans when they think a hostile government may be involved with a company, as we're recently seen with Kaspersky Labs products and Russian spying concerns.
We're unsure how much effect this would have on U.S.-China relations or either company's bottom line, but it surely can't be good news. The bill is currently being considered by a committee and if approved would go before Congress.