Huawei Technologies Ascends Despite 2008 CFIUS Turndown
In the U.S. press, almost all mention of Huawei Technologies recites like a mantra the 2008 refusal by the Committee on Foreign Investment in the United States (CFIUS) to permit it to participate with Bain Capital’s in Bain's proposed acquisition of 3Com Corporation. The consensus line is that CFIUS determined that Huawei’s connections with the government of the People’s Republic of China might have been too strong and therefore refused to approve the deal. The failed transaction is often cited as evidence that the U.S. government will not permit Chinese investment in or acquisition of U.S. high technology businesses. Experts contend that the outcome continues to dissuade Chinese investors from acquisitions of U.S. businesses.
According to an article by Kevin J. O’Brien in the New York Times on November 30, however, Huawei has in a remarkably short timeframe become a communications equipment powerhouse without the 3Com acquisition and now wields significant market power both with China's mobile networks and around the globe.
According to the article, Huawei now is established as a serious competitor, winning contracts from major phone networks in Europe and elsewhere on the globe, beating the likes of Ericsson and Nokia Siemens Networks. Huawei has a 20.1% market share of the global equipment market. It ranks as the number 2 supplier of mobile phone systems in the world. Its quarterly sales now are greater than Alcatel-Lucent and Nokia Siemens. It supplies 36 of the top 50 mobile operators, including Cox Communications, Leap and Clearwire in the U.S. The article reports that customers have investigated the ownership of Huwaei, said to be a private company, and concluded that its ownership would not be a factor.
It seems likely that U.S. companies will increasingly become customers of Huawei because of its versatile products and their low cost of operation. Huawei has obviously found a way to prosper here and elsewhere–even if the U.S. government did not think it a suitable owner for a U.S. business. It’s not clear whether the CFIUS decision produced any long-term benefit here at all. And it’s certainly not clear from what national security risk CFIUS protected the U.S.
The ascension of Huawei to prime global competitor status illustrates that a robust multinational high technology enterprise does not need a U.S. base, whether bought or built. Regrettably, it also demonstrates that as a result of the CFIUS decision, the U.S. has lost out on direct contributions to its economy through jobs, purchases from local U.S. vendors and the use of U.S-created R&D.
