Why India worried about telecom vendors Huawei and ZTE

Telecom Lead India: Connection of Huawei and ZTE – telecom equipment vendors from China – with a Chinese Army project called PLA-863 worries Indian government.

The Army connection has prompted the National Security Council (NSC) Secretariat to warn against Chinese telecom equipment makers, especially Huawei and ZTE.

NSC wants India government to take steps to overhaul its domestic telecom manufacturing capabilities to check, investigate and ultimately replace risks that come with foreign equipment, Economic Times reported today.

As per the Chinese Army project, Huawei focused on switches and routers, while ZTE on mobile and fiber networks, Julong on switchboards and Legend on computers with the objective of dominating world telecom scene and strengthening its electronic warfare capabilities.

The NSC note has the potential to damage business of both Huawei and ZTE. Both companies work with several private and public wireless and wireline operators in the country.

NSC is the apex agency looking into India’s political, economic, energy and strategic security concerns.

The NSC, in an April 15 report, said Huawei, the second largest telecom equipment maker in the world, still imports key telecom components it supplied to both private and state-owned mobile phone companies. This is despite 12 years of presence in India employing around 6,000 people.

NSC is concerned about Chinese telecom equipment makers’ aggressive bidding strategies.

For instance, ZTE won an enterprise solutions contract from the Power Grid Corporation of India to offer fixed-network transmission services across the country. NSC says Power Grid selected ZTE based on its price and not other strategic benefits.

NSC says a Chinese company was the lowest and highest bidder for the same equipment for two Power Grid tenders for different regions, thereby implying that a pricing policy motivated by strategic considerations rather than purely commercial factors.

NSC pointed out that demand for telecom equipment in India constituted 6.2 percent of the global demand (Rs 1,638,255 crore) in 2012-13. Failure to initiate domestic manufacturing will force India to import $150 billion worth of equipment during the next ten years.

According to UN data, China exported more than $7 billion worth of telecom equipment and $2 billion in computers to India in 2011. This represented 55 percent of total imports in these two product categories.

“Malicious hardware or software implants could be a potent espionage tool for penetrating sensitive and strategic Indian national security sectors which could be exploited in any future conflict with India,” the NSC warned in its report.

It is interesting to note that India government is yet to officially announce its policies or action plan against both Huawei and ZTE. In the past several years, several agencies have pointed out the possible security threats as Huawei and ZTE supplies critical telecom equipments to Indian mobile operators. The Indian telecom industry expects final and more transparent action from the government so that it will assist mobile operators to take right decisions.

Also, Indian employees of Huawei and ZTE will get a clarity on the involvement of these two Chinese telecom equipment makers in the India’s security issues. It is unfortunate that India government is yet to share its official response to both Huawei and ZTE. It is time for transparency.

Billions worth wireless equipments have been used by domestic operators. Some of the Indian operators are more profitable or running viable operations due to cost effective Chinese products. Huawei and ZTE would like to know the official response from India’s telecom ministry headed by Kapil Sibal.

If any of the Chinese equipment makers are doing wrong business or creating security issues in India, the government should be able to voice their concerns now. There should be no compromise on security.

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