Huawei probed for security, espionage risk

Chinese telecom giant's pursuit of building the next generation of digital networks in the U.S. prompts outcry in Washington

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(CBS News) U.S. companies have largely left the telecommunications business to foreigners, but can we trust the Chinese to build and maintain the critical data infrastructure that government and industry rely on without spying on us? Steve Kroft investigates.

The following is a script from "Huawei" which aired on Oct. 7, 2012. Steve Kroft is the correspondent. Graham Messick, producer.

If you're concerned about the decline of American economic power and the rise of China, then there is no better case study than Huawei. Chances are you've never heard of this Chinese technology giant, but in the space of 25 years it's become the largest manufacturer of telecommunications equipment in the world; everything from smart phones to switchers and routers that form the backbone of the global communications network. It's an industry the U.S. invented and once dominated, but no more.

Now, Huawei is aggressively pursuing a foothold in the United States, hoping to build the next generation of digital networks here. It's prompted an outcry in Washington, and a year-long investigation by the House Intelligence Committee that has raised concerns about national security, Chinese espionage, and Huawei's murky connections to the Chinese government.

Huawei's world headquarters is located on this sprawling Google-esque campus in Shenzhen, not far from Hong Kong. China's first international conglomerate is a private company, ostensibly owned by its 140,000 employees, but exactly how that works and other details of corporate governance are closely held secrets.

What we do know is that Huawei is now the world leader in designing and building fourth generation communication networks, known as 4G, the latest technology for moving high volumes of phone calls, data, and high definition video. Its innovative low cost systems have already captured markets in Africa, Latin America and Europe.

Now with Huawei eyeing potential customers in the U.S., congressional leaders and the national security establishment are doing everything they can to prevent it from happening.

Steve Kroft: Do we trust the Chinese?

Mike Rogers: If I were an American company today, and I'll tell you this as the chairman of the House Permanent Select Committee on Intelligence, and you are looking at Huawei, I would find another vendor if you care about your intellectual property, if you care about your consumers' privacy, and you care about the national security of the United States of America.

Republican Congressman Mike Rogers and the ranking Democrat on the House Intelligence Committee, Dutch Ruppersberger, believe that letting a Chinese company build and maintain critical communication infrastructure here would be a serious mistake.

Dutch Ruppersberger: One of the main reasons we are having this investigation is to educate the citizens in business in the United States of America. In the telecommunications world, once you get the camel's nose in the tent, you can go anywhere.

Their overriding concern is this: that the Chinese government could exploit Huawei's presence on U.S. networks to intercept high level communications, gather intelligence, wage cyber war, and shut down or disrupt critical services in times of national emergency.

Jim Lewis: This is a strategic industry. And it's like aircraft or space launch, or computers, IT. It's a strategic industry in the sense that an opponent can gain serious advantage, can gain serious benefit from being able to exploit the telecommunications network.

Jim Lewis has followed Huawei's explosive growth for years from the State Department and the Commerce Department, where his job was to identify foreign technologies that might pose a threat to national security.

Steve Kroft: How did they get so big and so cheap, so quickly?

Jim Lewis: Two answers. First, steady, extensive support from the Chinese government. If you're willing to funnel hundreds of millions, maybe even billions of dollars to a company, they're going to be able to grow. The second reason is industrial espionage. And Huawei was famous in their developing years for taking other people's technology.

Steve Kroft: You mean stealing?