Such implants would be “a potent espionage tool for penetrating sensitive U.S. national security systems,” the report said. The panel urged the U.S. government and U.S. companies to exclude the firms’ equipment from sensitive systems.
The panel focused on reviewing the companies’ ties to the Chinese state, including support by the government and state-owned banks, connections to the Chinese Communist Party and work done on behalf of the military and intelligence services. It sought to learn, for example, the extent to which the government or Communist Party exert control or influence over the companies’ operations and strategies.
The committee was dissatisfied with the firms’ answers. Huawei, for instance, failed to give the committee sufficient answers about founder Ren Zhengfei’s role in the military, and in some cases said it could not provide internal documents that were not first approved by the government, the report said.
The report stated that one former Huawei employee shared documents showing that the firm provided special network services to an entity the employee believed to be an elite cyberwarfare unit within the People’s Liberation Army.
In answers to the committee, Huawei stated that it “has never managed any of the PLA’s networks” and “has never been financed by the Chinese government for R&D projects for military systems.” It also asserted that it develops “transport network products, data products” for the Chinese military, but that it develops “communications equipment for civilian purposes only.”
The two companies advocate a model in which an independent third-party assesses the security of equipment bound for telecom providers. But, the report stated, the model is inadequate given the breadth and scale of the U.S. telecommunications market.
Both firms operate in at least 140 countries. ZTE’s sales in the United States drew less than $30 million in revenue last year, while Huawei’s took in $1.3 billion from customers including Level 3, Comcast and Cox TMI Wireless.
The committee also received information from current and former Huawei employees suggesting that the firm may be violating U.S. laws. The allegations include immigration violations, bribery and corruption, discriminatory personnel practices and copyright infringement. The committee is referring the allegations to executive branch agencies.
A classified annex to the report was not released, but “adds to the committee’s concerns about the risk to the United States,” the report said.