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Huawei and ZTE Hit Hard as U.S. Moves Against Chinese Tech Firms

Huawei is a global telecommunications equipment powerhouse, with $93 billion in revenue last year. It has spent millions trying to pry its way into the United States but found few takers — save for smaller, rural telecom companies that receive federal subsidies and would likely be barred from working with it by the F.C.C. rule.

Huawei’s troubles in the United States have been mounting since 2012, when a congressional report warned that its gear could be used to spy on Americans or to destabilize American telecom networks. The company spent $1.2 million on lobbying that year. Last year, it spent $60,000.

Major American carriers such as Verizon and AT&T have since shunned Huawei. The Commerce and Treasury Departments have subpoenaed it over possible violations of American sanctions on Iran and North Korea. And bills are before Congress to stop government agencies and contractors from buying Huawei products.

In January, researchers discovered security flaws in the microprocessors inside nearly all of the world’s computers. A Senate committee wrote to Huawei’s founder to ask what the company knew about the vulnerabilities, and how it had been affected by them. Huawei decided not to respond.

Then, last week, Huawei laid off five American employees, including William B. Plummer, the executive who was the face of its Sisyphean efforts to win over Washington.

The company has said repeatedly that its products pose no security risk and that it complies with the law everywhere it operates. Still, the layoffs appear to be an acknowledgment by Huawei that it has failed to clear the political cloud around it.

“Some things cannot change their course according to our wishes,” Eric Xu, Huawei’s deputy chairman, said at the company’s annual meeting with analysts on Tuesday in its home city, Shenzhen. “With some things, when you let them go, you actually feel more at ease.”

Mr. Plummer, who was Huawei’s vice president of external affairs, had been with the company for almost eight years. He was the most senior member of Huawei’s American policy team who was not a Chinese citizen.

It is not clear whether he will be replaced. The company’s policy operations in the United States are led by a relatively recent arrival, Zhang Ruijun, who took the post nine months ago after working for the company in Mexico and Russia.

A Huawei spokesman said in a statement that any layoffs simply reflected an effort to better align resources with “business strategy and objectives.”

“Any changes to staffing size or structure are simply a reflection of standard business organization,” he said.

In the United States, Huawei customers that would be affected by the F.C.C.’s proposed rule — small cellular carriers, largely in rural areas — may soon need to find new equipment suppliers.

These carriers love Huawei gear, said Carri Bennet, general counsel for the Rural Wireless Association, an industry group for American telecom companies with fewer than 100,000 subscribers.

The association’s members have even elected a Huawei executive, William Levy, to their board.

Ms. Bennet said that rather than blacklisting specific manufacturers, Washington should be creating a system for testing telecom gear for security vulnerabilities.

“These companies who are reliant on this support, they don’t have the funds to overhaul their whole network,” she said. “Public safety, getting 911 services, broadband — it all just starts falling apart.”

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News credit : Nytimes