In a report issued on Monday, the Intelligence Committee issued a warning about those two companies, and possible security threats to the U.S. The report stated that U.S. telecommunications operators should exert caution when doing any business with those companies due to potential Chinese state influence on them.
Despite being relatively unknown in the U.S, those two companies are China's top network equipment makers; the report followed an 11-month investigation into the two of them. The report covers more than just Android smartphones, as the companies also provide more mainstream network and telecommunications hardware.
Globally, Huawei is the second-biggest manufacturer of routers and other telecommunications hardware, while ZTE is fifth overall. Both companies have a desire to expand their U.S. market share which, combined with their perceived connections to the Chinese government, prompted the congressional investigation.
The report said that:
"China has the means, opportunity and motive to use telecommunications companies for malicious purposes. Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems."
The report stopped short of asking telecommunications firms to boycott the two companies.
Both firms responded to the report with statements. China's Xinhua news agency quoted ZTE as saying,
"ZTE has set an unprecedented standard for co-operation by any Chinese company with a congressional investigation."
Meanwhile, Huawei issued a press release that said:
“The report released by the Committee today employs many rumors and speculations to prove non-existent accusations. This report does not address the challenges faced by the ICT (information and communications technology) industry. Almost every ICT firm is conducting R&D, software coding and production activities globally; they share the same supply chain, and the challenges on network security is beyond a company or a country. The Committee’s report completely ignored this fact. We have to suspect that the only purpose of such a report is to impede competition and obstruct Chinese ICT companies from entering the US market.”
In separate, but damning news, Cisco on Monday said that it had ended a longstanding sales relationship with ZTE after an internal Cisco investigation into allegations that the Chinese telecommunications equipment maker sold Cisco networking gear to Iran.