Cisco behind Huawei, ZTE telecom case?
- By He Shan
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E-mail China.org.cn, October 11, 2012
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Cisco's market competition with Huawei has been laden with brawls over the past ten years. In 2003, Cisco even accused Huawei of stealing its source codes. |
With the U.S. report hurling accusations at Chinese telecom equipment makers Huawei and ZTE of posing a threat to U.S. national security, industrial analysts believe that U.S. telecom giant Cisco Systems Inc. will benefit most from the row which is now obvious to be about more than mere political concerns.
Prominent tech media website CNET commented that Cisco has been slinging mud at its rival Huawei, the world's second-largest manufacturer of wireless telecom gear, over the past ten years and will now possibly become the biggest beneficiary of the whole investigation.
On October 8, the U.S. House Permanent Select Committee on Intelligence issued a report based on a year-long investigation , accusing Huawei and ZTE of posing national security risks and recommending U.S. companies should avoid engaging in business with both Chinese telecom companies.
"Given that Cisco as a U.S. company may benefit most from the exclusion of Huawei and ZTE equipment from the U.S. market, it is very likely that Cisco has motives to play a role in advancing the investigation," said Xiang Ligang, a respected observer of the telecom industry.
Sun Kaiyou, a consultant with the Beijing-based consulting firm AdFaith, expressed his concerns that Huawei and ZTE's overseas sales are bound to be severely affected by the investigation as it will lead other countries, especially those siding with the U.S., to follow in Cisco's footsteps.
On October 10, Canada indicated that it will exclude Huawei from participation in a Canadian government telecoms network project on the grounds of national security concerns.
Australia took it one step further and barred the Chinese telecom giant from building the government's US$37.4 billion national broadband network.
In recent years, Huawei has established its reputation as a leader in the router market and with that a potential threat to Cisco's dominance in that same market.
When asked during an interview which company is of the greatest concern to Cisco , CEO John Chambers answered: "25 years ago, I knew that our most competitive rival would come from China. Now, that is Huawei. "
It is noteworthy that on October 9, Cisco announced the end to its seven-year sales cooperation with ZTE, citing ZET's alleged involvement in selling Cisco network equipment to Iran as the reason for doing so. The disruption came shortly after the U.S. report accused the two Chinese telecom equipment makers of posing a national security risk.
Although Cisco stressed that the move was made on the basis of an internal investigation, its timing raised suspicion among industrial analysts.
Cisco's market competition with Huawei has been laden with brawls over the past ten years. In 2003, Cisco even accused Huawei of stealing its source codes.
However, Nomura Securities struck a different note in a report. The firm holds that if the anti-Huawei, ZTE report trigger a trade war, Cisco will suffer more than Huawei, because the U.S. market only accounts for four percent of Huawei's revenues, whereas markets in Asia and the Pacific Rim, including China, make up for more than 16 percent of Cisco's business. Nomura Securities added that Chinais Cisco's second fast-growing market, following just right behind Japan.
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