What makes China telecom Huawei so scary?

Huawei, the world's second-largest supplier of telecom and Internet gear, has little trouble garnering business around the globe. The Chinese company has customers in 130 countries, sells equipment to 45 of the world's top 50 telcos, and brought in $27 billion in revenue in 2010 -- enough to rank No. 352 on Fortune's Global 500 list. With sales on pace to grow another 10% this year, it's likely that Huawei (pronounced "HWAH-way") will soon race past Sweden's Ericsson and take over as the globe's No. 1 manufacturer of communications equipment. Yet success in the world's biggest telecom market, the U.S., has been hard to come by.

Despite bidding again and again since it first entered America a decade ago, the company has yet to win a single big contract from the top-tier U.S. carriers. There are some good reasons for that. U.S. telecom companies have long relationships with home-grown suppliers. It's also true that for many years Huawei's gear just wasn't that good -- fine for emerging markets, perhaps, but not for the 24/7 service and reliability required by U.S. networks. Today, however, Huawei is building some of the best, most innovative, and fastest equipment in the industry. Quality is no longer an issue. But Huawei is facing resistance that goes beyond pure competition with its peers. Several members of Congress, joined by Gary Locke, the U.S. Commerce Secretary soon headed to Beijing as the next U.S. ambassador, have lobbied hard against Huawei. Meanwhile, U.S. regulators have blocked it from three acquisitions, and earlier this year forced it to unravel its purchase of a defunct California cloud-computing company called 3Leaf.