R&D LAB: An engineer handling equipment at Huawei's headquarters in Shenzhen

Perhaps anguished by a report from the House Permanent Select Committee on Intelligence, claiming "Huawei and ZTE (Zhongxing Telecommunication Equipment) threaten U.S. national security," Huawei, the second largest telecom-equipment provider in the world, has hastened preliminary steps to get listed. Despite its Beijing-based public and media office's denying any IPO preparations, insiders reveal that Huawei has been in contact with some international accounting firms and investment banks, and Hong Kong and London are the likely choices.

Some believe Huawei's IPO plan is designed to improve transparency in a bid to boost its chances of winning major overseas contracts. Among the top five telecom giants, Huawei is the only one yet to go public and is now haunted by the ill will of American politicians who are dead set against the company's expansion into the United States.

On October 8, the committee unveiled the results of its one-year investigation into Huawei and ZTE, suggesting the American Government not use equipment manufactured by the two companies. On October 14, the U.S. Congress launched a second round of investigations against the two Chinese firms.

Huawei and ZTE strongly denied the accusations. Huawei argued the report was aimed at hindering access to the American market for Chinese ICT (information communication technology) companies through false allegations and rumors without any regard to the large volume of factual information provided by Huawei and its good track record of network security in the United States and worldwide.

ZTE also said that its own equipment posed no threat to U.S. national security because all equipment it supplied to American operators is assessed by the U.S. Security Assessment Laboratory, which is supervised by the American Government.

Whether or not the prospective IPO will breathe new life into Huawei's U.S. plans is uncertain. Disagreements over whether to go public are rife within the company. In November 2011, when the House Permanent Select Committee on Intelligence filed for investigation against Huawei and ZTE, Huawei's executive and board of directors raised the possibility of an IPO.

Proponents believed an IPO could enhance the company's transparency and sources of income, while opponents argued an IPO plan would not yield the desired result because ZTE–already a listed company–was nonetheless under investigation.

Political force-out

In 2007 and 2008, Huawei's two attempts to acquire 3COM, an American network equipment manufacturer, were blocked for national security concerns. In 2010, its bids for 2Wire and the mobile network branch of Motorola also failed to obtain approval from the American Government. In 2011, the company backed away from its attempt to purchase 3Leaf, an American server maker.

Since February 2011, when the House Permanent Select Committee on Intelligence began its investigation into Huawei and ZTE, the two companies have cooperated with the committee in an open and transparent manner.

The Committee insists that Huawei has been heavily subsidized by the Chinese Government which is eager to use it as a Trojan horse to infiltrate the American communications network if and when necessary.

However, as allegations swirled by the U.S. Congress that both companies pose "security threats" to the country, no evidence has yet to be presented. The United States is more sophisticated in network and telecommunications development than China. If a security threat did exist, the United States would quickly spot it.

"I don't know where these 'security threats' come from," said Mei Xinyu, a research fellow of the Chinese Academy of International Trade and Economic Cooperation.

"Huawei has an undisclosed level of closeness to the Chinese Government," according to the report, which points to the background of Ren Zhengfei, the company's founder, who served in the PLA (Chinese People's Liberation Army) engineering corps in the 1970s in its information technology research unit.

In an open letter responding to the speculation in 2010, Ren's personal details were published. "Ren, born into a rural family on October 25, 1944, spent his childhood in a remote tiny town in Guizhou Province. He graduated from Chongqing University of Civil Engineering and Architecture in 1963 and had engaged in the trade of civil engineering since then. In 1974, he began to serve as an engineering construction soldier in the PLA to participate in building the Liaoyang Chemical Fiber United Factory and served successively as a technician, engineer and deputy director, without a military rank. After cuts to the armed forces, he left the army in 1983. Later, he moved to Shenzhen and took up a post at a logistics service base. Unhappy with his job, he set up Huawei in 1987 with just 21,000 yuan, a bit more than $2,500 at the time. Ren has been Huawei's president since 1988."