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Despite ties to China's PLA, Chinese company did not actively engage in spying, yet

fiery Congressional report singled out two top Chinese equipment manufacturers -- ZTE Corp. (SHE:000063) and Huawei Technologies Comp. (SHE:002502) -- as a national security threats. However, new details are emerging which suggest that the worst case scenario -- China leveraging its influence on the telecoms to steal U.S. commercial secrets -- has not yet happened.

I. White House Probe: No Spying by Huawei, but Lots of Security Holes

In Huawei's case, suspicion is heightened by the fact the company's founder and chief executive Ren Zhengfei is a former PLA officer, and subject to contractual relations between Huawei and China's People's Liberation Army.

But according to two sources which spoke with Reuters, an 18-month U.S Intelligence review on behalf of the White House found no evidence that Huawei had spied on U.S. companies.  White House National Security Council spokeswoman Caitlin Hayden released a carefully worded comment, remarking, "The White House has not conducted any classified inquiry that resulted in clearing any telecom equipment supplier."

But the Reuters sources concurred -- Huawei was not cleared of being considered a security risk, but critically it was not for the spying question.  According to the sources Huawei was instead considered to risky for the government to use as a contractor due to vulnerabilities in its firmware and software, which could leave its telecommunication equipment vulnerable to hacker intrusions.

Describes one source of Huawei's code, "We found it riddled with holes."

Huawei router
Huawei's routers are reportedly riddled with security holes -- some of which some analyst claim are deliberate back doors. [Image Source: The Hacker News]

Networking expert Felix Lindner agrees, saying that Huawei's problems appear to be more than likely due to sloppy coding rather than deliberate sabotage.  He reveals, "I'd say it was five times easier to find one in a Huawei router than in a Cisco one."

The supposed classified investigation involved interviewing over 1,000 telecommunications equipment buyers asking them questions regarding Huawei and other top Chinese OEMs.  

China's government, as well as Huawei and ZTE, attacked the Congressional report and the suggestion that the Chinese OEMs should be banned from the U.S. market.  A ZTE spokesperson pointed out that most American electronics firms also manufacture their electronics in China.  Huawei's U.S. spokesperson Bill Plummer commented, "Huawei is a $32 billion independent multinational that would not jeopardize its success or the integrity of its customers' networks for any government or third party. Ever."

The Congressional report suggests its recommendations were based partially on a "classified annex", a source Reuters suggests is likely the 18-month intelligence probe.

II. Possibility for Future Spying is Still Strong

It's important to note that the report does not completely clear Huawei.  One source, who investigated Huawei's products between 4 and 6 years ago on behalf of the intelligence community, claimed to Reuters that he had observed code snippets that appeared to be so-called "back-doors" -- deliberately inserted security flaws that would allow later exploitation.  Huawei has repeatedly denied such holes exist, amid rumors.

Chris Johnson, a form China analyst for the U.S. Central Intelligence Agency tells Reuters that even if the unconfirmed classified report did clear Huawei of any obvious deliberate spying, that it still represents a major threat in the future tense. 

Ren Zhengfei
Ren Zhengfei, founder and CEO of Huawei, is a former PLA officer. [Image Source: CFP]

That line of logic has led Canada and Australia to join the U.S. in banning Huawei's telecommunications equipment from government networks.  However, Britain recently offered up a dissenting take when its government security experts declared Huawei fully vetted and capable of bidding on government contracts.

Source: Reuters

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RE: What?
By bug77 on 10/19/2012 4:15:12 AM , Rating: 2
I can take a look at F22. And then take a look at J5.

RE: What?
By hankw on 10/19/2012 8:18:37 AM , Rating: 2
That's not what you said. You said you "saw a bunch of thieves parked outside your house" but have not seen anything stolen. How can they be thieves if nothing was stolen. How do you know they aren't just there for other reasons? Plumbers? It's not a crime to park outside of your house.
And let's not get into the debate about things "looking" alike. This is the problem with most people's thinking; they let their emotions do the talking instead of using logic.

RE: What?
By bug77 on 10/19/2012 8:40:50 AM , Rating: 2
I don't get it.
You're saying it's ok when chinese planes start looking like US planes and the US should just chill?
If designs were making their way out of my vaults, I'd be damn sure to scramble to plug any possible security hole.

RE: What?
By hankw on 10/19/2012 8:48:19 AM , Rating: 2
Um no. I'm saying your analogy is bad. You're identifying people as thieves without any evidence besides them parking in front of your house. I'm not sure why this is hard to understand.

But again on things "looking alike". Plenty of products China made or not look alike. Didn't we just go through the whole Apple vs Samsung thing recently? Not to say nothing was stolen, but you're using gut feel here rather than facts. You have no idea how both planes work internally either.

RE: What?
By tamalero on 10/19/2012 9:10:16 AM , Rating: 2
They found inspiration in Steve Jobs ;)

I wonder if the chinese feel "artistic" now.

RE: What?
By Brainling on 10/19/2012 5:29:11 PM , Rating: 2
You mean the J5 that can't even fly yet and has a radar cross section 15 times as big as the F-22, has no super cruise, or vectored thrust, and internal ammo bays who's doors stick? THAT J5?

If they are stealing the F-22, they are doing a terrible job of it. It's not doubt they looked at the F-22 for inspiration, just like the Mig-29 and it's descendants look an awful lot like an F-15, but have never lived up to it's capabilities.

RE: What?
By Brainling on 10/19/2012 5:35:04 PM , Rating: 2
I hate to double reply, but I wanted to point out how silly this is in relative terms: By the time the J5 is at the operational level of the F-22, hell even the F-35, we will be flying a majority unmanned Air Force.

The EuroFighter is MUCH closer to the F-22's capability level (some would say even higher in heavy maneuvering), so I guess the EuroFightern nations "stole" the F-22 as well.

"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il

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