Rogue Company

The Huawei threat is already here
BY GEOFFREY STARKS

Last week’s presidential executive order barred U.S. companies from buying foreign-made telecommunications equipment deemed a national security risk. 

Although the order does not name Huawei, Congress and our intelligence agencies have voiced concern that the company’s equipment contains vulnerabilities that the Chinese government and others could exploit to spy on or harm U.S. networks.
But the executive order misses a critical problem: our networks already contain equipment from Huawei — lots of it. 

The Federal Communications Commission must find this equipment and work with other policymakers to fix the security problems and fund a solution for affected carriers.
We must protect ourselves from Chinese espionage. 

Just two weeks ago, I voted to reject an application from China Mobile, China’s largest carrier, to operate in the U.S. because of concerns about Chinese government influence. 

The threat posed by Huawei equipment in our communications networks is real too. 

As one oversight body recently found, Huawei’s equipment contains software vulnerabilities that could seriously compromise our network security.
That’s why the administration, Congress and the FCC have all sought to prohibit or restrict equipment from companies like Huawei. 

But to date, any concrete federal actions have focused on how to deal with Huawei going forward — they don’t address the fact that some carriers already use this equipment.
Carriers bought this equipment because it had similar functionality at half or even one-quarter of the price of equipment from other manufacturers. 

In wireless networks, use of this equipment runs the gamut — antennas and radios, electronics that move data across networks, and routers, servers and switches that make up the network core.
Our interconnected networks are only as secure as their most vulnerable equipment. 

The risks of having insecure equipment in our networks are alarming — beyond the threat of foreign surveillance and hacking, it also means that our critical infrastructure, financial systems, healthcare, and transportation systems are exposed.
Given the stakes, policymakers must address this issue as soon as possible. 

But none of the actions of the administration or FCC so far have dealt with this problem. 

So, I’ve been working with national security experts and rural carrier groups to gather their perspective on the issues and develop a solution.
Here’s where I stand. 

First, we must understand the scope of our network exposure by identifying the equipment that poses a threat. 

The FCC needs to step up here. 

Congress has invested the FCC with the statutory responsibility and authority to gather this information, and the executive order directs agencies to take actions within their authority to implement the order.
This will be no small task, and the size of the problem is far from clear, but the FCC can and must begin its investigation. 

In addition to using its own authority, the FCC should also work with other federal agencies, including the Department of Homeland Security, the Justice Department, the Department of Defense, as well as the relevant intelligence agencies to bring as much expertise as possible to address the problem.

Second, where we find equipment that poses a security threat, we must fix it. 

Unfortunately, there are no easy answers. 

The White House, Congress and the intelligence community have spoken with one voice — equipment from Huawei and similar manufacturers presents an unacceptable security risk. 

The software embedded in the equipment is simply too vulnerable to exploitation. 

Therefore, we must help transition carriers with insecure equipment in their networks as rapidly as possible — “rip and replace” — but in a way that minimizes disruption to these carriers and their customers. 

Fixing the problem will take time, but we must act quickly to restore the security of our networks.

Finally, with the exigency of national security at stake, we must help the affected carriers with funding to offset the cost of purchasing and installing replacement equipment. 

This is a national problem that needs a national solution. 

Many of the affected carriers are small and will not easily withstand these sorts of replacement costs. It could be expensive — estimates of replacement costs range from $150 million to nearly $1 billion. Perhaps more. 

But protecting our national security should be a team effort.
All of these issues need to snap in place as quickly as practicable. 

The executive order is a good first step, but it’s not enough to prospectively ban future equipment from manufacturers like Huawei. 

Policymakers like the FCC need to figure out how to deal with the equipment that’s already in our network. 

Find it. Fix it. Fund it. 

Our security is at stake.

Rogue Company

U.S. officials and lawmakers say China is the problem not only Huawei
By Joseph Marks

Senate Judiciary Committee Chairman Lindsey Graham (R-S.C.)
Trump administration officials have warned for months that Huawei’s global expansion into next-generation 5G wireless networks would amplify the threat of Chinese digital spying.
But now they’re taking the gloves off, accusing the Chinese government of running roughshod over international norms and its own laws to steal Western innovations. 

The stepped up rhetoric comes as President Trump imposed high tariffs on a wide range of Chinese imports, leading to a major escalation in trade hostilities between the two countries.
The move to 5G makes concerns about spying and sabotage significantly more pressing because its super-fast speeds will allow far more systems critical to public safety to run on wireless internet connections, such as high-tech medical equipment and driverless cars.
If Huawei gains a foothold in U.S. allies’ 5G networks, the Chinese government could force the company to send software updates to spy on Western companies or sabotage critical infrastructure, Chris Krebs, director of the Homeland Security Department’s Cybersecurity and Infrastructure Security Agency, warned lawmakers during a Senate Judiciary Committee hearing Tuesday.
Beijing could also exploit hidden vulnerabilities that already exist in Huawei products to hack adversaries or it could plant spies inside Huawei teams that work abroad servicing the company’s technology, Krebs said.
“It’s not about overseeing Huawei. It’s about overseeing China,” Judiciary Committee Chairman Lindsey Graham (S.C.) said during the hearing.
Administration officials formerly attributed their concerns about Huawei to a 2017 cybersecurity law they said would force the company to cooperate with Chinese intelligence requests. 

But Krebs abandoned that nicety Tuesday.
“This is a single-party government. Everything that flows from the central party is a manifestation of their philosophy,” he said. 

“The [cybersecurity] law is important because it is telling you what they want to do. But they’re going to get what they want anyway, law or not.”
The U.S. and China stepped away from trade negotiations last week amid recriminations, and the heightened rhetoric on digital spying probably will make tensions worse.
The White House, which has struggled to convince allies to restrict Huawei from their 5G networks, may also impose its own ban on Huawei as soon as this week, Reuters reported Tuesday.
Lawmakers are also taking a cue from the administration and moving to restrict China from access to U.S. technological innovations.
On Tuesday, Sen. Josh Hawley (R-Mo.) introduced a bill to bar exporting large categories of technologies to China including artificial intelligence, robotics, semiconductors and advanced construction equipment.
Hawley and five other Republicans also proposed another bill to bar Chinese students from science or engineering schools connected with the People’s Liberation Army from receiving U.S. visas.
“This is a strategy with multiple tentacles,” Sen. Thom Tillis (R-N.C.) said, describing Chinese digital spying efforts, “and we as members of Congress need to understand every one of those and chop them off.”

Spying Company

President Trump expected to sign order paving way for U.S. telecoms ban on Huawei
By David Shepardson

WASHINGTON -- President Donald Trump is expected to sign an executive order this week barring U.S. companies from using telecommunications equipment made by firms posing a national security risk, paving the way for a ban on doing business with China’s Huawei, three U.S. officials familiar with the plan told Reuters.
The order, which will not name specific countries or companies, has been under consideration for more than a year but has repeatedly been delayed, the sources said, asking not to be named because the preparations remain confidential. 

It could be delayed again, they said.
The executive order would invoke the International Emergency Economic Powers Act, which gives the president the authority to regulate commerce in response to a national emergency that threatens the United States. 

The order will direct the Commerce Department, working with other government agencies, to draw up a plan for enforcement, the sources said.
If signed, the executive order would come at a delicate time in relations between China and the United States as the world’s two largest economies ratchet up tariffs in a battle over what U.S. officials call China’s unfair trade practices.
Washington believes equipment made by Huawei Technologies Co Ltd, the world’s third largest smartphone maker, could be used by the Chinese state to spy. 

Huawei did not immediately comment.
The White House and Commerce Department declined to comment.
The United States has been actively pushing other countries not to use Huawei’s equipment in next-generation 5G networks that it calls “untrustworthy.” 

In August, Trump signed a bill that barred the U.S. government itself from using equipment from Huawei and another Chinese provider, ZTE Corp.
In January, U.S. prosecutors charged two Huawei units in Washington state saying they conspired to steal T-Mobile US Inc trade secrets, and also charged Huawei and its chief financial officer with bank and wire fraud on allegations that the company violated sanctions against Iran.
The Federal Communications Commission in April 2018 voted to advance a proposal to bar the use of funds from a $9 billion government fund to purchase equipment or services from companies that pose a security threat to U.S. communications networks.
Federal Communications Commission chairman Ajit Pai said last week he is waiting for the Commerce Department to express views on how to “define the list of companies” that would be prohibited under the FCC proposal.
The FCC voted unanimously to deny China Mobile Ltd’s bid to provide U.S. telecommunications services last week and said it was reviewing similar prior approvals held by China Unicom and China Telecom Corp.
The issue has taken on new urgency as U.S. wireless carriers look for partners as they rollout 5G networks.
While the big wireless companies have already cut ties with Huawei, small rural carriers continue to rely on both Huawei and ZTE switches and other equipment because they tend to be cheaper.
The Rural Wireless Association, which represents carriers with fewer than 100,000 subscribers, estimated that 25 percent of its members had Huawei or ZTE equipment in their networks, it said in an FCC filing in December.
At a hearing Tuesday, U.S. senators raised the alarm about allies using Chinese equipment in 5G networks.
The Wall Street Journal first reported in May 2018 that the executive order was under review. 

Reuters reported in December that Trump was still considering issuing the order and other media reported in February that the order was imminent.

Rogue Company

Meng Wanzhou’s lawsuit against Canadian authorities is a setback to the Chinese company’s PR campaign.

By Tim Culpan
Who sues Canada? Meng Wanzhou, for one.

Canada! Seriously, who sues Canada?
Meng Wanzhou, that’s who. 

The CFO of Huawei Technologies Co., and the daughter of its founder, feels wronged by Canadian authorities over her arrest and detention. 

“False imprisonment” is among the accusations made in a civil case filed March 1.
Huawei has gone on the offensive in recent months to try to prove it’s a good international citizen and can be trusted to supply networking equipment that won’t become a conduit for Chinese espionage. Founder Ren Zhengfei himself started fronting the media because, by the company’s own admission, it’s in the middle of a public-relations crisis.
In addition to attempting to recruit current and former journalists to its PR team, Huawei has started inviting journalists to its Shenzhen campus, as if a guided tour would prove anything. 

The result was a slew of articles in which the company made its case against charges of spying.
At trade show MWC Barcelona last week, rotating Chairman Guo Ping even invoked Edward Snowden’s name to take jabs at U.S. espionage programs:
“Prism, prism on the wall, who is the most trustworthy of them all? ... It is a very important question and if you don’t answer that, you can go and ask Edward Snowden.”
This new campaign appears to be having some success. 

New Zealand Prime Minister Jacinda Ardern last month left the door open for Huawei to sell its equipment for next-generation mobile networks, while the U.K. cybersecurity watchdog thinks it can manage any risks associated with deploying the company’s products in 5G systems.
But it’s also come off as ham-fisted. 

Huawei was reported as offering to pay for flights, hotel and food for overseas journalists such as Washington Post columnist Josh Rogin, spurring a backlash on social media. 

To clarify, such all-expenses-paid offers are quite common in the tech industry, but most outlets refuse to accept on ethical grounds, which makes that now-famous letter to Rogin (which he shared on Twitter) somewhat confounding.


Josh Rogin
✔@joshrogin
INBOX: #Huawei is inviting me on an all-expenses-paid junket to China? That's gonna be a hard pass. Any American journalist who takes Huawei money should be ashamed and shamed.

In 2017, a jury found the company liable in a civil case for stealing designs for T-Mobile US Inc.’s “Tappy” robot, but that’s not the kind of espionage U.S. authorities have in mind. 

The January arrest of a company executive alongside a former Polish security agent on charges of spying for China doesn’t look good for Huawei, but it’s no smoking gun.
Then there’s Ren himself. 

The 74-year old’s credibility evaporated when he told foreign media, including CBS and a separate gathering that included Bloomberg News, that his company would refuse to obey Chinese law if it was required to participate in espionage. 

That’s the founder of a Chinese company with 180,000 employees stating he would break Chinese law rather than infringe the law of any foreign nation.
Which is why the decision to sue Canada is a backward step in its PR campaign. 

It also reveals Huawei as a cornered tiger that lashes out when its purr fails to sedate the skeptics.
Whether Meng’s case has legal merit isn’t the point. 

Huawei needs to ask what it gains, even if victorious. 

The quest for justice is everyone’s right, yet Huawei risks coming off as belligerent instead of the calm and trustworthy partner it’s trying to portray. 

And the irony of appealing to Canada’s rule of law when no such option exists back home isn’t lost on the hordes of critics who were already wary of this new charm offensive.
Huawei was doing a pretty good job trying to convince people that it’s not their foe. 

Suing Canada shows that the company’s biggest enemy is probably itself.

Rogue Company

Canada approves Huawei extradition proceedings

By David Ljunggren

OTTAWA -- The Canadian government, as expected, on Friday approved extradition proceedings against the chief financial officer of Huawei Technologies Co Ltd.
Meng Wanzhou, the daughter of Huawei’s founder, was detained in Vancouver last December and is under house arrest. 

In late January the U.S. Justice Department charged Meng and Huawei with conspiring to violate U.S. sanctions on Iran.
Meng is due to appear in a Vancouver court at 10 a.m. Pacific time (1800 GMT) on March 6, when a date will be set for her extradition hearing.
“Today, department of Justice Canada officials issued an authority to proceed, formally commencing an extradition process in the case of Meng Wanzhou,” the government said in a statement.
China, whose relations with Canada have deteriorated badly over the affair, denounced the decision and repeated previous demands for Meng’s release.
U.S. Justice Department spokeswoman Nicole Navas Oxman said Washington thanked the Canadian government for its assistance. 

“We greatly appreciate Canada’s steadfast commitment to the rule of law,” she said in a statement.
Legal experts had predicted the Liberal government of Prime Minister Justin Trudeau would give the go-ahead for extradition proceedings, given the close judicial relationship between Canada and the United States.
But it could be years before Meng is sent to the United States, since Canada’s slow-moving justice system allows many decisions to be appealed.
A final decision will likely come down to the federal justice minister, who will face the choice of angering the United States by rejecting the extradition bid, or China by accepting it.
Professor Wesley Wark of the University of Ottawa’s Graduate School of Public and International Affairs said “the Canadians will take a beating throughout this whole process” from China.
“I suspect the Trudeau government is desperately hoping that the Americans reach a deal with the Chinese,” he said by phone.
Donald Trump told Reuters in December he would intervene if it served national security interests or helped close a trade deal with China, prompting Ottawa to stress the extradition process should not be politicized. 

Last week Trump played down the idea of dropping the charges.
After Meng’s detention, China arrested two Canadians on national security grounds, and a Chinese court later sentenced to death a Canadian man who previously had only been jailed for drug smuggling.
Brock University professor Charles Burton, a former Canadian diplomat who served two postings in China, said Beijing was likely to retaliate further.
“They’re not going to take this lying down ... one shudders to think what the consequences could be,” he told the Canadian Broadcasting Corp, saying Beijing might crack down on Canadian canola shipments or stop Chinese students from going to Canada.
Ottawa rejects Chinese calls to release Meng, saying it cannot interfere with the judiciary.
Beijing had earlier questioned the state of judicial independence in Canada, noting the government faces accusations that it tried to intervene to stop a corruption trial.
Canadian Justice Minister David Lametti declined to comment.
Huawei was not immediately available for comment.

Rogue Company: Huawei Sinks Deeper As The World Turns Its Back

Governments worldwide have started to view Huawei's expansion as a serious threat
By David Volodzko

In this Jan. 9, 2019, photo, a security guard stands near the Huawei company logo during a new product launching event in Beijing. The Chinese Foreign Ministry said late Friday, Jan. 11, 2019, it is "closely following the detention of Huawei employee Wang Weijing" on charges of spying for China.

Huawei Technologies now faces shocking new charges, in addition to a growing litany of scandals, suggesting the world's second-largest smartphone maker is working with the Chinese military to steal our technology, defraud our institutions and spy on us using our own devices.
The company, its chief financial officer Meng Wanzhou and subsidiaries Skycom Tech and Huawei Device USA now face criminal charges for bank fraud, wire fraud, violating U.S. sanctions against Iran and conspiring to obstruct justice. 

Governments worldwide have started to view its expansion as a serious threat.
"It's been a longstanding concern of the U.S. intelligence community," former Director of National Intelligence James Clapper said, "that any of the Chinese IT and telecommunications companies like Huawei, like ZTE, for example, have to be considered as extensions of Chinese intelligence service — in fact, Chinese law encourages, if not mandates, that when called upon, these companies will cooperate with the Chinese government."
The latest charges claim Meng delivered a presentation to a bank executive in 2013, during which she repeatedly lied about Huawei's relationship with Skycom, which tried to sell U.S. technology to Iran despite sanctions. 

Then in 2017, when Huawei became aware of the U.S. investigation, Huawei Device USA tried to obstruct justice by attempting to move witnesses who knew about its operations in Iran back to China, where FBI agents couldn't interview them.
On December 1, Canadian officials arrested Meng for extradition to the United States. 

But Meng is the daughter of Ren Zhengfei, who formerly worked as a technology engineer for the Chinese military before founding Huawei, which makes her Chinese corporate royalty — and Chinese officials made no attempt to mask their outrage.
Days later, Chinese Vice Foreign Minister Le Yucheng summoned Canadian Ambassador to China John McCallum to protest Meng's arrest, calling it "vile in nature" and threatening Canada with "grave consequences."
China then arrested consultant Michael Spavor and former diplomat Michael Kovrig, both Canadian nationals, on charges of endangering state security. 

This past weekend, another Canadian national was arrested on fraud charges.
The pressure was enough to force some Canadian officials to openly question the government's move. “From Canada’s point of view," McCallum said at a charity lunch in Vancouver, "if [the U.S.] drops the extradition request, that would be great for Canada."
McCallum, an outspoken critic of his government's decision to arrest Meng, has previously said she has “strong arguments” to fight extradition. 

Canadian Prime Minister Justin Trudeau fired him after these recent remarks.
Meng remains detained in Vancouver, but the fraud allegations involving her are only part of Huawei's problems. 

The U.S. Justice Department has separately accused two Huawei affiliates of stealing trade secrets, wire fraud and obstruction of justice over violating agreements with T-Mobile in 2012 by secretly taking photos of its Tappy robot technology, which mimics human fingers to test smartphones, and stealing a piece so Huawei engineers could reverse engineer it.
North America isn't the only place turning its back on the company, either. 

Earlier this month, the Huawei sales director for Poland was arrested for espionage.
Australia's TPG Telecom has abandoned plans to build a new mobile telephone network that would have relied on Huawei technology. 

French European Affairs Minister Nathalie Loiseau said last week European states must stand united when dealing with Huawei.
And Vodafone has announced it is halting the purchase of Huawei technology for its new 5G networks in Europe.
But some are wondering why this awakening didn't take place sooner, since Huawei has for years been mired in scandal. 

In July 2012, vulnerabilities were found in its routers that could allow remote access to the devices. In early 2015, German cybersecurity company G Data reported it had found malware pre-installed on Lenovo, Xiaomi and Huawei smartphones enabling audio surveillance and location tracking. 

In January 2018, African Union officials accused China of hacking the computer system at its headquarters every night for the past five years. 

The building, located in Addis Ababa, Ethiopia, had been built by Chinese contractors — including Huawei.
Then there's a slew of accusations, such as that Huawei has provided surveillance equipment to the Taliban. 

Or the case of Shane Todd, the American engineer who apparently committed "suicide" in Singapore in June 2012 under suspicious circumstances, in connection with work he had been doing involving a semiconductor amplifying device purportedly for Huawei, with potential military applications.
Todd had evidently told his family the project could endanger U.S. national security, and that he felt he was in danger.
China continues to respond with denial and threats. 

Nation of Thieves

The Huawei indictment tells a story of deceit and corporate espionage
The Washington Post

Huawei chief financial officer Meng Wanzhou in Vancouver, British Columbia, on Dec. 12. 

HUAWEI, THE Chinese telecom giant, has insisted in recent years that it operates within the bounds of local and international laws and norms. 

When a former employee filed a legal claim alleging that he was directed by Huawei to steal rivals’ trade secrets, the firm declared, “Every employee is expected to adhere to applicable laws, regulations and business ethics in the countries where we operate.” 

But a new U.S. federal indictment issued this week alleges this was far from true.
Huawei, which makes smartphones as well as gear for connectivity, including the forthcoming super-fast 5G networks, has been largely barred from business in the United States for some time, partly over suspicions that it could build “back doors” into its equipment for spying or network mischief. Chinese companies are closely intertwined with, and required to be subservient to, the state. 

Concerns voiced in recent years about Huawei’s behavior now look prescient. 

Huawei’s approach resembles that of the Chinese state: It is unbound by a rules-based, law-governed international order, and it is determined to succeed by using theft and duplicity.
In one case described in the indictment unveiled Monday by the Justice Department, Huawei headquarters in China instructed its employees in the United States to steal the design of a mobile-phone-testing robot developed by T-Mobile. 

This was a valuable piece of intellectual property that Huawei wanted for its own robot. 

Huawei engineers were repeatedly encouraged to carry out theft, and on May 29, 2013, a Huawei engineer visiting T-Mobile slipped a robot arm into his bag and walked out of the laboratory. 

Overnight, he photographed the device and took critical measurements before returning it the next day, apologizing that it was taken by “mistake.” 

Later, Huawei responded to T-Mobile about the incident with gross deception, saying the thefts were “a moment of indiscretion” and did not reflect company policy when, in fact, the data had been sent to headquarters. 

Huawei even created a bonus program for workers who stole information from competitors.
This corporate deception is also behind the separate indictment of Huawei and its chief financial officer, Meng Wanzhou, the founder’s daughter, for bank and wire fraud. 

The indictment charges that Huawei misled the U.S. government and banks about business that violated Western sanctions against Iran. 

The legal proceedings against Meng, who is being held under house arrest in Canada pending an extradition request by the United States, should not be politicized in the current Sino-American trade dispute. 

It is clear Huawei intentionally snubbed its nose at international norms and laws, which in turn means it could pose a potentially large national security risk to the West.
Doubts about Huawei are now being heard elsewhere, including in Australia, Poland, Britain and Germany. 

The next generation of connectivity — 5G networks — is far too important to put in the hands of a company that may work by lies and coverups.

Rogue Company

The Trouble With Huawei Will Spread
By Jacky Wong

Rogue female: Huawei's Meng Wanzhou

Just when Chinese were hoping to take a breather following the weekend’s trade truce between the U.S. and China, the arrest of Chinese telecom-equipment company Huawei’s chief financial officer at the behest of the American authorities has served a warning that they shouldn’t get too complacent.
Sabrina Meng Wanzhou, who is also the daughter and successor of Huawei’s founder Ren Zhengfei, was arrested Saturday in Canada in connection with the company’s violation of Iran sanctions. 

It is unclear whether Washington plans to take further action against Huawei. 

But the U.S. has effectively barred major carriers from using Huawei and has launched a campaign to persuade its allies to do the same. 

Australia, New Zealand and Britain’s BT Group have heeded the call so far.

Huawei’s headquarters in Shenzhen. 

What happened to ZTE, Huawei’s Chinese peer, could offer a taste of what comes next. 

The Trump administration banned American companies from selling to ZTE in April due to its violations of sanctions against Iran and North Korea, a move that could have killed the company given the difficulty of sourcing crucial components from elsewhere. 

The U.S. later lifted the restriction, but ZTE’s Hong Kong-listed stock is still around 40% lower than where it traded before the ban. 

Huawei isn’t listed, but its suppliers in Asia are already taking a hit: Lens-maker Sunny Optical dropped 5% Thursday while optical-component manufacturer Accelink Technologies fell 8%, with investors assuming more moves against rogue Huawei are coming.
The bad news could now spread to small American suppliers to Huawei. 

Optical component maker Neophotonics, for example, generates almost half its revenue from the Chinese company, according to Goldman Sachs. 

Other U.S.-listed companies such as Lumentum, Oclaro, Qorvo and Finisar have around 10% of their revenue tied to Huawei, the bank estimates.
Bigger players could get hit too. 

Chip makers Qualcomm and Broadcom , which are already grappling with the global smartphone sales slowdown, are the most likely victims. 

While both generate only around 5%-6% of annual revenue from Huawei directly, that number rises to over 50% when broadened to all Chinese companies.
No matter which country wins the technological battle in the end, those companies that have hitherto benefited from rogue Chinese companies will be the biggest losers.

Death of a Gangster

Rogue Company ZTE is First Victim of the China-U.S. Trade War

By Raymond Zhong

ZTE's logo on a building in Shanghai. The firm said it had ceased “major operating activities” after the Trump administration banned it from using components made in the United States.

SHENZHEN, China — Not Apple. Not Huawei. 

The first casualty of the high-tech cold war between the United States and China might be the biggest electronics maker you’ve never heard of.
The Chinese firm ZTE said on Wednesday it had ceased “major operating activities” after the Trump administration banned the company last month from using components made in the United States. With manufacturing halted at the ZTE plant in Shenzhen, factory workers have been getting called in for training sessions every other day or so — a snooze, they say. 

The rest of the time, they loaf around in nearby dorms.
Trading in the company’s shares has been suspended for weeks. 

Staff members have been instructed, in new guidelines reviewed by The New York Times, to reassure anxious clients, while being sure to avoid discussing with them the American technology from which the firm is cut off for the next seven years.
One of China’s most internationally successful technology suppliers, with about $17 billion in annual revenue, ZTE is facing a death sentence. 

The Commerce Department has blocked its access to American-made components until 2025, the company failing to punish employees who violated trade controls against Iran and North Korea.
American microchips power ZTE’s wireless stations. 

American optical components go into its optical fiber networks. 

Google’s Android operating system runs its smartphones. 

ZTE’s moment of crisis, if it leads to the company’s collapse, could also show how the tech war might ripple around the world.
The company has 75,000 employees and does business in more than 160 countries. 

It is the No. 4 smartphone vendor in the United States. 

And its telecommunications gear supports the digital backbone of a great swath of the developing world.
The wireless carrier MTN, which serves 220 million people in 22 nations in Africa and the Middle East, said last week that it was assessing contingency plans, “given our exposure to ZTE in our networks.” 

The chief executive of the Norwegian carrier Telenor, which has large operations in Asia, said the company was “following the situation closely.”
Several employees described the situation inside ZTE on condition of anonymity, fearing reprisals from their employer. 

A company spokeswoman declined to comment.
The United States has for years deemed ZTE and Huawei, its much larger rival in network gear, to be national security threats. 

Large American mobile carriers already shun the companies’ telecom equipment. 

The White House is mulling an executive order that would make it harder for government agencies to buy from them.
In response to the sanctions issued last month, ZTE said it had worked to improve its compliance practices. 

It has requested a stay on the export ban and has sent additional information to the Commerce Department in support of its argument.
Zhongxing Telecommunications Equipment’s corporate predecessor was established in 1985, as a joint venture between a state-owned aerospace factory and two other firms. 

Within a few years, the company was producing equipment for phone operators in the Chinese countryside, before expanding into cities and then overseas.
“Zhongxing” means “China Prospers.” 

The company’s controlling shareholder is Shenzhen Zhongxingxin Telecommunications Equipment, which is nearly half-owned by two Chinese state entities. 

Several members of the firm’s board also have leadership roles at Zhongxingxin. 

ZTE says Zhongxingxin does not interfere in its business decisions. 

Working on a circuit board at a ZTE plant in Shenzhen, China.

The electronics maker released its first smartphone for the American market in 2011. 

Within two years, it was a top-five vendor in the United States, largely targeting people who wanted a phone but not a long contract with a cell carrier. 

Even in China, the company has not had great success selling smartphones.
“It’s extraordinarily impressive, what they’ve done in the U.S.,” said Avi Greengart, a consumer tech analyst with the research firm GlobalData. 

“So many Asian companies either said they would come to the U.S. and then had to pull back — like Xiaomi, like Huawei. Or they invested in the U.S. and weren’t able to make it work.”
ZTE’s secret, Mr. Greengart said, was a light touch. 

The company’s American managers have had significant leeway in tailoring their products to the local market. 

“That’s not the way many of its competitors work,” he said.
The company was, for instance, quick to spot that Americans were gravitating toward larger phones. It offered inexpensive devices with big screens — if not those with the highest resolution — and fingerprint readers at a time when such features were considered premium.
To build its brand, ZTE has sponsored several National Basketball Association teams. 

In February, the company and the Cleveland Cavaliers celebrated Chinese New Year at a game against the Brooklyn Nets. 

The Quicken Loans Arena in Cleveland was decorated with Chinese lanterns. 

An acrobat rode around the court on a unicycle at halftime.
In Africa, ZTE and Huawei have helped connect many of the continent’s fast-growing economies, often with the help of generous export financing from Chinese state banks. 

ZTE has laid thousands of miles of fiber optic cable in Ethiopia and it recently signed an agreement with MTN of South Africa to test fifth-generation wireless, or 5G.
Some of the company’s deals with cash-stricken governments have attracted accusations of corruption and overbilling. 

On the whole, though, ZTE is known in Africa for good service, said Dobek Pater, a telecom expert at the research firm Africa Analysis.
“The initial perception — of Chinese companies coming in and being very secretive and not wanting to have much to do with the locals — has changed over the past decade,” he said.
In Iran, it was secrecy of another kind that got ZTE into trouble.
The company used an elaborate system to sell American-made goods there, and then lied and deleted emails when the Commerce Department began to investigate. 

It even made plans to resume shipments to Iran while the investigation was ongoing, according to the Commerce Department.
“At home, they might have been doing some things not according to standards, and then, when it came time to internationalize, they might not have done so entirely properly,” said Gu Wenjun, chief analyst at ICwise, a semiconductor market research firm in Shanghai.
“For other companies thinking about how to follow the rules and manage internal risks, I think this is going to serve as a wakeup call,” Mr. Gu said.
Late last Friday, ZTE management sent an email to staff members updating them on the company’s efforts to reconcile with Washington.
“Even the longest road has an end,” the email concluded. 

“Even the longest night ends in day. Let us stay resolute and confident, and, full of hope, greet the coming dawn!”

Rogue Company

U.S. Probing Huawei for Iran Sanctions Violations
BY KAREN FREIFELD and Eric Auchard

Beijing's eyes and ears

NEW YORK/LONDON -- U.S. prosecutors in New York have been investigating whether Chinese tech company Huawei violated U.S. sanctions in relation to Iran, according to sources familiar with the situation.
Since at least 2016, U.S. authorities have been probing Huawei's alleged shipping of U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws, two of the sources said.
News of the Justice Department probe follows a series of U.S. actions aimed at stopping or reducing access by Huawei and Chinese smartphone maker ZTE Corp to the U.S. economy amid allegations the companies could be using their technology to spy on Americans.
The Justice Department probe is being run out of the U.S. attorney's office in Brooklyn, the sources said. 

John Marzulli, a spokesman for the prosecutor's office, would neither confirm nor deny the existence of the investigation. 

The probe was first reported by the Wall Street Journal on Wednesday.
The probe of Huawei is similar to one that China's ZTE Corp says is now threatening its survival. 

The United States last week banned American firms from selling parts and software to ZTE for seven years. 

Washington accused ZTE of violating an agreement on punishing employees after the company illegally shipped U.S. goods to Iran.
ZTE, which sells smartphones in the United States, paid $890 million in fines and penalties, with an additional penalty of $300 million that could be imposed.
U.S. authorities have subpoenaed Huawei seeking information related to export and sanctions violations, two sources said. 

The New York Times last April reported the U.S. Treasury's Office of Foreign Assets Control subpoena, issued in December 2016, following a Commerce Department subpoena that summer.
Both companies also have been under scrutiny by U.S. lawmakers over cybersecurity concerns.
In February, Senator Richard Burr, the Republican chairman of the U.S. Senate Intelligence Committee, cited concerns about the spread of Chinese technologies in the United States, which he called "counterintelligence and information security risks that come prepackaged with the goods and services of certain overseas vendors."
Huawei and ZTE have denied these allegations.
Republican Senators Marco Rubio and Tom Cotton have introduced legislation that would block the U.S. government from buying or leasing telecommunications equipment from Huawei or ZTE, citing concern that the Chinese companies would use their access to spy on U.S. officials.
In 2016, the Commerce Department made documents public that showed ZTE's misconduct and also revealed how a second company, identified only as F7, had successfully evaded U.S. export controls.
In a 2016 letter to the Commerce Department, 10 U.S. lawmakers said F7 was believed to be Huawei, citing media reports.
In April 2017, lawmakers sent another letter to Commerce Secretary Wilbur Ross asking for F7 to be publicly identified and fully investigated.
The U.S. government’s investigation into sanctions violations by ZTE followed reports by Reuters https://reut.rs/2H3p0Vl in 2012 that the company had signed contracts to ship millions of dollars’ worth of hardware and software from some of the best known U.S. technology companies to Iran’s largest telecoms carrier.
Reuters also previously reported on suspicious activity related to Huawei. 

In January 2013, Reuters reported https://www.reuters.com/article/uk-huawei-skycom/exclusive-huawei-cfo-linked-to-firm-that-offered-hp-gear-to-iran-idUKBRE90U0CA20130131 that a Hong Kong-based firm that attempted to sell embargoed Hewlett-Packard computer equipment to Iran's largest mobile-phone operator has much closer ties to China's Huawei Technologies than was previously known.