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China's Huawei to Reverse Controversial Deal for 3Leaf

Chinese network equipment supplier Huawei has reversed its stance and has accepted a U.S. panel's recommendation to voluntarily divest from a business acquisition that had drawn national security concerns.

Huawei said in a statement on Saturday that the company has agreed to follow the recommendation of the Committee on Foreign Investment in the United States (CFIUS) by stopping to acquire specific assets from a U.S. startup.

In May, Huawei had paid US$2 million to buy intellectual property from 3Leaf Systems, which specializes in building servers to run together as more powerful mainframe computers. The deal, however, has come under scrutiny from the U.S. government, because it was cleared without the approval from CFIUS. Government officials then asked Huawei to place the deal under the review of CFIUS.

Huawei already purchased the intellectual property and hired staff from 3Leaf Systems, so it's unclear how the deal would be reversed.

Earlier this week, the Chinese company had said it declined the CFIUS's recommendation to voluntarily divest from acquisition. Huawei's move likely would have forced President Barack Obama to make a decision and resolve the matter.

"The significant impact and attention that the transaction has caused were not what we intended," Huawei said in its statement. "Rather, our intention was to go through all the procedures to reveal the truth about Huawei."

Huawei has drawn accusations from U.S. officials that the company is linked to the Chinese military. The alleged ties has made it difficult for the company to complete certain U.S. business deals in the past. Huawei, however, denies any such ties to the Chinese military, stressing that the company is completely employee-owned.

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