Mistrust in U.S. and India Impacts Chinese Telecom, VoIP Equipment Suppliers

Concerns are rising in the United States and India over perceived security risks associated with using Chinese-made telecommunications equipment, potentially slowing global sales growth for China’s major gear makers.

According to iSuppli Corp., a group of U.S. Senators recently asked the Obama Administration to review a bid from China’s Huawei Technologies to supply telecommunications gear to Sprint (News - Alert) Nextel, citing concerns over espionage.

The stakes are enormous

The stakes are enormous, with the combined global market for wired and wireless infrastructure telecommunications gear expected to amount to exceed $65 billion in 2010, and rise to more than $83 billion in 2014.

“India’s move to obstruct the orders from the Chinese telecommunications has kicked off a sequence of events that resulted in billions of dollars of lost revenue for global telecom market vendors and significant project delays for India’s telecom service providers,” said Lee Ratliff, senior analyst for broadband and the digital home at iSuppli. “India’s concern stems from suspicions that foreign-made equipment—particularly Chinese gear—represents a significant security risk given the possibility that sensitive information could be transmitted to foreign governments through firmware back doors.”

In May, India’s state-run telephone company BSNL announced that Huawei and ZTE would be excluded from bidding on a $500 million GSM expansion project, most likely to avoid delays because of the security clearance process. The decision came despite the fact that BSNL (News - Alert) had chosen Huawei as a GSM vendor for a project earlier in the year that had since then been cancelled, telecom market research from iSuppli reported.

The recent concerns expressed

Even before the recent concerns expressed by the Senators, the Chinese telecommunications gear makers have faced obstacles when doing business in the United States.