Taiwan tech giant Hon Hai said on Wednesday it has pulled out of a deal to buy 4G equipment from Huawei after the government warned that the Chinese company posed a national security threat.
Taiwan raised those concerns in March after Hon Hai announced the $178 million deal, saying telecom equipment purchased from Huawei could be used for cyber espionage.
Ambit Microsystems, a company affiliated with Hon Hai, had applied for permission from the telecom regulator to import Huawei equipment after it won a 4G spectrum license.
But Ambit on Monday pulled out of the deal with Huawei, which offers cheaper products than rivals such as Nokia.
"Ambit respects the cautious position of the government regarding national security, so we resubmitted our application on June 30 excluding any mainland-manufactured equipment," the company said in a statement.
Shenzhen-based Huawei has for years faced accusations that it is a potential security Trojan Horse due to perceived close links to the Chinese government, which it denies.
It has been barred from involvement in broadband projects in the United States and Australia over espionage fears.
"Authorities have voiced national security concerns about Huawei," Liang Wen-hsin, a spokesman for telecom regulator National Communications Commission (NCC), told AFP.
Taiwan and former rival China, split in 1949 at the end of a civil war, are still technically at war despite eased tensions since 2008 after Ma Ying-jeou of the Beijing-friendly Kuomintang party came to power. He was re-elected in January 2012.
Huawei was founded in 1987 by Ren Zhengfei, who was an engineer in the People's Liberation Army.
Besides network equipment, it has moved into consumer electronics and is the world's third-largest seller of smartphones.