The influence of US surveillance program "PRISM" for Cisco

The US surveillance program "PRISM" or will make Cisco defeated in China

 Whether the recent U.S. spying scandal was affecting overseas business of Cisco in China ?

  

In the wake of Edward Snowden's revelations about the extent of U.S. National Security Agency electronic spying programs aimed at China, among other countries, some Chinese media have questioned Cisco's credibility.

Cisco is involved in almost all of China's large network construction of the project, involving financial, government, railways, civil aviation, military and other key departments of network development. But as in recent years, product constantly exposed loopholes and the back door, Cisco's business in China began to crack.

Huawei, Zte with the advantages of price and innovation investment, etc, are eating into Cisco's market share. With the increase of friction in Sino-US trade, trade protection become the main game between the government. After the outbreak of the "prism", the Chinese government may strengthen the supervision, Cisco's business in China will shrink in future

 

1.Prism incident exposed China's information security hidden danger

 USA          

  Asia-Pacific, pacific rim and china

  Others  

      The income regions constitute of Cisco ( Source : Bloomberg , GUOHAI security company )

On June 9, former CIA employees Edward Snowden revealed the "prism" event. At the same time, the media began to focus on some of the communications companies in the United States, with point of view of a potential threat to China's information security

Although it have no direct connection with Cisco equipment, nor is there any evidence that the Cisco's equipment had a quality problem . But Cisco communications equipment involved in almost all of China's large network construction project, so the Cisco pose a threat to China's information security of speculation is not surprising.

Currently, China's four big Banks and city commercial Banks ' data center all adopt the Cisco 's equipment and Cisco holds more than 70% share of China's financial industry. Meanwhile, in the customs, public security, industry and commerce, education and other government agencies, Cisco's share of over 50%. In addition, the Cisco's share reached 60% in the rail transportation network and in the field of civil aviation, air traffic control network backbone are all adopt the Cisco's equipment.

Although Cisco made an official response very soon , said the "prism" is not a Cisco project, Cisco's network is not involved in the project. In addition, the company stressed that there is no ordinary citizens or government's  department were under observation.

But this response is difficult to restore the confidence of the users in a short time. Today, by influence of the growing trade friction and the resurgence of trade protection , Cisco must face with the winter in China.

2.China release signal of instead because of Cisco product 's vulnerability

Sales volume

Number of employees

 

 Compare of sales volume and number of employees between cisco and Huawei in last 10 years 

Although the Cisco's network equipment widely used in the backbone of Chinese telecom operators, financial, government, railways, civil aviation and other key sectors. But, in fact, Cisco's products is not absolutely safe.

As early as in July 2005, Beijing Netcom' s ADSL and LAN network was widespread disruption, 200,000 netizens were affected, most of the questionable equipment are provided by Cisco. In 2009 the U.S. Department of Homeland Security found that Cisco's network equipment have security vulnerabilities, hackers can use these vulnerabilities invade the enterprise's  computer network.

In 2010, the loophole of Cisco's router software which triggered off a brief internet paralyzed accident was founded, about 1% of the global Internet were affected .

Cisco 's product security vulnerabilities also caused the attention of China. On October 25, 2012, China Unicom said they have already changed all the Cisco's equipment of "China169" backbone nodes at the core of the cluster router's relocation project in Wuxi city, Jiangsu province. the Chinese experts pointed out that the Cisco product has the back door and loopholes.

This events released an important signal to the outside world: in the Internet industry, telecommunications and other open competition, Cisco's products is no longer irreplaceable.

For Cisco, the profit contribution of the Chinese market is second only to the United States, accounting for 30% of its overall profits. Once the business in China blocked, the blow for Cisco will be very heavy.

3.Trade protection , add insult to injury

 

             The variation of Cisco's stock price in last 10 years

  

       When Cisco' s business began to appear rift in China, the competition with Chinese companies also exposed the weakness . Especially Huawei, because of price and disadvantage in aspects of innovation investment, let Cisco retreat all the way.

Although Cisco 's equipment is still very advanced, but because of its too large pace of mergers and acquisitions, main dilution, organization overstaffed, Cisco had to retreat to the core domain gradually.

As far back as 2002, Cisco sued Huawei, on grounds of infringement of intellectual property rights. But that did not stop the footsteps of Huawei. In the operator market, Huawei and zte seize the market share with channels and marketing advantages and march the high-end routers market .this situation lead to Cisco retreat to its the two core business, routers and switches

And by the end of 2012, Huawei suddenly being investigated in the United States, the United States claims that "Huawei, Zte may bring security threats against the United States", Huawei and Zte are difficult to stand on the United States market . Cisco stood behind the U.S. government again this time.

Although Cisco hold the most profitable market temporarily by the protection of trade protection, but Huawei is attacking Cisco's position relies on product quality, low price, performance. Especially under the background of Sino-us trade friction increase, trade protection became the main weight of game to the various countries' government.

The "prism" events, will let more countries to establish perfect auditing supervision system, strengthen the construction of national communications security. when the time comes , the situation of a one-horse race will change, Huawei and the other company will have much more  opportunities of further expanding the business landscape.

Conclusion

However Cisco still have obvious advantages in high-end sectors such as finance, government and large companies, but the outbreak of the "prism" events, will make the Cisco 's business in China which has started to shrink retreat rapidly . 






BY: YUAN Peng