Why are Huawei, ZTE facing so much scrutiny?

I’m beginning to think we might as well just consider Huawei and ZTE, given that they seem to pop up together constantly in the news. And, unfortunately for both companies, it’s never something good.

When we last checked in with the dynamic duo it was because they were (and still are) under investigation by Indian Intelligence authorities, and now there’s more bad news for the Chinese telecoms in the form of this Reuters report suggesting the European Union may levy trade duties against Huawei and ZTE over what it considers to be illegal subsidies from the Chinese government.

Needless to say, Huawei and ZTE don’t see it that way and deny any wrongdoing. Chinese foreign ministry spokesman Hong Lei told reporters on Wednesday:

We hope the EU can proceed from the standpoint of protecting the stable development of trade relations with China and not make promises to undertake protectionist measures or adopt restrictive measures.

I have a feeling that having an official government spokesperson step in to defend the companies is not going to help dissuade the EU or anyone else that Huawei and ZTE are entirely too closely tied with the Chinese government. And indeed, the EU is apparently as concerned about security as the US and India are:

An internal EU report last year recommended that the 27-member bloc should take action against Chinese telecoms equipment makers as their increasing dominance of mobile networks made them a threat to security as well as to home-grown companies.

The increased scrutiny bodes poorly for both Huawei and ZTE, as both companies do significant business overseas, although ZTE is probably worse off since it is already losing boatloads of money. But the concerns expressed by lawmakers in the US, India, and the E.U. should give the companies pause — if they’ve managed to scare three of the world’s biggest markets on three separate continents, perhaps there really is something wrong with the way they conduct business.

Or perhaps it’s just a PR problem. Certainly neither company could be accused of having mastered international public relations, and the occasional revelations that they’re doing things like working with the Iranian government on “big brother” domestic spy equipment haven’t helped.

As I pointed out above, it also isn’t helping when the Chinese government jumps to their defense — all that does is reinforce the perception that it’s a de facto state-run company, even though that’s not the case. Obviously Huawei and ZTE can’t really control what the government says, but if China wants its tech brands to succeed abroad, it might want to consider letting them sink or swim on their own, because the current method clearly isn’t working very well.

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This article by C.Custer originally appeared on Tech in Asia, a Burn Media publishing partner. Additional reporting by Memeburn.

Image: Str4nd (via Wikimedia Commons).