Perception is reality for Chinese vendors

Perception can become reality in unique ways. So much of our world is predicated on how things are perceived. On at least some level, this factor is impacting Chinese vendors Huawei Technologies Co. Ltd. and ZTE Corp. in their aims to break deeper into the U.S. market. We may never know if the companies were indeed blocked from their latest attempts with Sprint Nextel Corp. or just dismissed for political or business pressures. Regardless, the perception that security might be somehow less secure on their equipment is there.

There is an overall theme emerging wherein “national security concerns” continue to be raised against the Chinese vendors in one forum or another. Almost any negative activity that perpetuates this trend, whether perceived or real, will continue to derail the Chinese vendors’ hopes of grabbing a bigger share of the global wireless infrastructure market. Bad news isn’t always better than no news at all. And that’s particularly true for heavily regulated (and leveraged) industries like wireless telecom. Huawei is particularly dogged by reported ties to the Chinese military and subsidies or financial incentives that it is rumored to be receiving from the Chinese government. The company has also been accused of stealing intellectual property from its competitors. Huawei, which was founded by a former Chinese military officer, and ZTE, which was founded by a group of state-run companies that now own a minority share in the business, have consistently denied any collusion with the Chinese government or military. Whether it’s formal policy or not, it’s regularly suggested that most deals involving Chinese vendors would be blocked by the U.S. government anyway, although Huawei already supplies equipment to Clearwire Corp., Cox Communications Inc. and Leap Wireless International Inc. Perhaps just the mere possibility of regulatory hold-ups is enough to keep most companies looking elsewhere for partners and potential suitors. It’s happened before. Huawei’s attempts to buy in to Harbinger Capital L.L.C.’s LTE network, Motorola Inc.’s network business and 2Wire were stymied by security concerns. The Committee on Foreign Investment in the U.S. blocked Huawei from acquiring 3Com because of national security concerns and now the group is investigating Huawei’s acquisition of 3Leaf Systems because the deal wasn’t pre-approved. Whether the company’s overall success is really defined by its position in the United States or not, Huawei is showing no signs of relenting in its quest for more big contract business here. But as long as even the perception of nefarious intent is present in the United States, Chinese vendors will have to overcome much more than simply one-upping their competitors on pricing and technology.

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