[ISN] The company that spooked the world

http://www.economist.com/node/21559929

The Economist
SAN FRANCISCO AND SHENZHEN
from the print edition
Aug 4th 2012

BANBURY, a little English town best known for a walk-on part in a 
nursery rhyme and as the eponymous origin of a fruitcake, is an unlikely 
fulcrum for the balance of power in the world of telecoms. But the 
“Cyber Security Evaluation Centre” set up there by Huawei, a Chinese 
telecoms giant, in 2010 marks a new way of persuading purchasers, and 
the British government, that equipment from the manufacturer that runs 
it can be trusted. It operates in close co-operation with GCHQ, 
Britain’s signals-intelligence agency, located conveniently just over 
the Cotswolds in Cheltenham. Its security-cleared staff, some of whom 
used to work for GCHQ, are responsible for making sure that the 
networking equipment and software that the Chinese firm wishes to sell 
to British telecoms companies are reliable, will only do what customers 
want them to do and cannot be exploited by cybercriminals or foreign 
spies—including Chinese ones.

Over the past ten years or so, Chinese telecoms firms such as Huawei and 
ZTE, another telecoms-equipment provider, have expanded from their vast 
home market to become global players. This is a worry not just for the 
rich-world incumbents under threat but also for those responsible for 
the integrity of critical infrastructure such as phone systems. They 
fear that the companies’ networking gear and software could be used by 
China’s spooks to eavesdrop on sensitive communications, or that it 
might contain “kill switches” which would allow China to disable the 
systems involved in the event of a conflict. “I think it’s ridiculous to 
allow a Chinese company with connections to the Chinese government and 
the People’s Liberation Army (PLA) to have access to a network,” says 
Dmitri Alperovitch of CrowdStrike, a web-security outfit.

Several big Chinese firms, including ZTE and China Mobile, a giant 
mobile operator, have attracted scrutiny. But thanks to its size and its 
international reach it is Huawei that gets most attention. This July the 
firm’s revenues outstripped those of Ericsson, for some time the world’s 
largest supplier of telecoms equipment; Huawei clocked up 103 billion 
yuan ($16 billion) in the first half of 2012 (see chart 1) compared with 
the Swedish firm’s SKr106 billion ($15.5 billion). Because Huawei’s 
sales as one of the world’s ten largest mobile-phone manufacturers (a 
business Ericsson has left) account for about a quarter of that income, 
Ericsson is still the biggest supplier of network infrastructure. But 
probably not for long.

The question of whether to trust this new giant divides the world. In 
Africa Huawei is everywhere, and welcome almost everywhere; in India it 
has found itself under attack by government and media as both a security 
threat and an unfair competitor. In Canada and New Zealand it has won 
meaty contracts for work on big new networks; in Australia in March the 
government blocked it from taking part in a new national broadband 
system.

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