Inside The Chinese Company America Can't Trust

Huawei is a global telecom giant with eyes on the U.S. market. Is it also a hidden channel for China's spies and saboteurs?

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Dominic Nahr / Magnum for TIME

Huawei's headquarters in Shenzhen, a designated special economic zone that was the laboratory for China's experiments in economic liberalization.

At lunchtime in a company restaurant in Shenzhen, young engineers and programmers lounge over plates of grilled salmon, tap on their smartphones and chat in several languages. Like their counterparts in Silicon Valley and Bangalore, these ambitious Chinese 20-somethings, with degrees from top universities, are trying to build lucrative careers at one of their nation's biggest private companies, the telecommunications giant Huawei Technologies. In their sedate jackets and open-necked shirts, they don't look like a mortal threat to the U.S. But to politicians and cybersecurity experts in Washington, these kids are potential spies and saboteurs, and the telecom equipment they design is too dangerous to install in American communications networks.

These experts worry that allowing Huawei equipment to plug into the networks would give the Chinese government or the People's Liberation Army (PLA) backdoor access to sensitive computer systems or telephone lines, potentially allowing them to disrupt communications or pilfer valuable economic and military secrets. The danger, the company's detractors say, isn't just theoretical. "We believe that China has the means, opportunity and motive to use their telecommunications company against the U.S.," says Congressman Dutch Ruppersberger, the ranking Democrat on the House Permanent Select Committee on Intelligence. He says the committee wants "to put our citizens on notice" about "how serious this is and that the Chinese government is working with them and is involved." Fears over Huawei also reflect the growing concern about the vulnerability of American communications networks, which have recently come under repeated attacks by Chinese hackers.

Largely unknown to U.S. consumers, Huawei not too long ago was barely known to the Chinese. But the telecommunications behemoth is the chief rival to Sweden's Ericsson for top share in the global market for telecom infrastructure--the plumbing for the world's mobile-phone networks. With $35.4 billion in sales last year, more than Goldman Sachs or McDonald's, Huawei likes to brag that a third of the world's population is hooked up to networks featuring its gear. Huawei is also the world's third largest smartphone company, behind Samsung and Apple, and made a splashy display of its handsets at January's Consumer Electronics Show in Las Vegas.

Huawei's rapid rise and global reach is making U.S. lawmakers extremely nervous. Last October, Ruppersberger's committee concluded that Huawei's equipment "could undermine core U.S. national-security interests." Huawei hasn't been shut out of the American market entirely: U.S. sales of its products topped $1.3 billion in 2011. But that represents a mere 4% of the firm's total revenue, and no major U.S. service provider uses Huawei-made hardware in its networks. To get approval to buy a controlling stake in Sprint Nextel in late March, Japan's Softbank had to pledge to strip out any Huawei equipment being used in the U.S. and not buy any more.

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