Huawei Reports 33 Percent Growth Despite U.S. Security Concerns

By Jordan Mammo email: , Jan 22, 2013 07:29 AM EST

Chinese technology company Huawei announced on Monday its annual financial report for the year 2012. Despite U.S. anxiety about a possible link between the company and the Chinese government, the results were generally very positive.

Huawei reported that its 2012 net profit rose 33 percent compared to the previous year. The company took in 15.4 billion yuan ($2.5 billion), up from a disappointing 2011 that saw a profit 11.6 billion yuan ($1.9 billion). What's more, revenue rose by 8 percent and it predicts even stronger growth over the course of the next year due to smartphone sales and cloud computing.

"Cloud computing is a huge sector in the next five years. In the telecom industry, we are expecting a 5 percent increase in capital investments. Smartphone penetration is still way too low and there is a lot of room for growth," said Cathy Meng, Huawei's chief financial officer. "So these three areas will create a lot of opportunities for us."

Huawei's rebound is buoyed by strong sales in Europe, Asia, and Africa, but the good news comes tempered by the fact that it still faces significant hurdles in other countries that consider it a security risk.

Last year, the U.S. House of Representatives Intelligence Committee issued a report suggesting that phone carriers shouldn't work with companies like Huawei and ZTE because of the potential influence of the Chinese government, specifically citing espionage and data theft concerns. The company isn't permitted to sell telecom equipment to U.S. carriers, has been banned from helping build Australia's national broadband network, and is forbidden to access Canada's government network.

For its part, Huawei has denied these allegations multiple times. It says that, in the end, the people getting hurt are consumers that won't benefit from cheaper prices and increased competition.

"These measures using trade protectionism to interfere with free competition will ultimately harm the benefits of end users and consumers," Meng said. "As we continue to invest in this industry and work with our customers, our customers and markets generally see the value we create for them."

Meng also said that accusations of spying will not affect the decisions that other countries make regarding use of its technology.

"We feel that security concerns in the United States are restricted within the country and that won't have an impact on strategic decisions made by other countries," she said. "Over the past 20 years, we have not had any incidents based on security issues."

While Huawei's fortunes are looking up, rival manufacturer ZTE has warned that it could be facing a potential 2.9 billion yuan loss for 2012.

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