Meng Wanzhou, deputy president and CFO of Huawei, was arrested in Canada in December last year. Photo: Handout China’s biggest tech firm...
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| Meng Wanzhou, deputy president and CFO of Huawei, was arrested in Canada in December last year. Photo: Handout |
1. Why does the U.S. have an issue with Huawei?
U.S. government officials say Huawei is dangerous in part because it could use its growing share of the telecom equipment market to spy for the Chinese government. In 2012, a report by the U.S. House Permanent Select Committee on Intelligence tagged Huawei and ZTE Corp. as potential security threats. U.S. concerns about Huawei drove the 2018 decision by President Donald Trump to block a hostile takeover bid from Broadcom Ltd., based at the time in Singapore, for the U.S. chipmaker Qualcomm Inc. The transaction could have curtailed American investments in chip and wireless technologies and handed global leadership in those spheres to Huawei. Such concerns have expanded as carriers prepare to spend billions on new 5G networks, which will collect data and enable services on an unparalleled scale.
2. How important is Huawei?
Position on including equipment from China’s Huawei in 5G mobile networks, as of Dec. 17, 2019
In just over three decades it’s grown from an electronics re-seller into one of the world’s biggest private companies, with leading positions in telecommunications gear, smartphones, cloud computing and cybersecurity, and substantial operations in Asia, Europe and Africa. Huawei generated 850 billion yuan ($122 billion) in 2019 -- more than Boeing Co. It’s plowed billions of dollars into 5G and broke into the top 10 recipients of U.S. patents last year. It has helped build 5G networks in more than 10 countries and expects to do the same in another 20 in 2020.3. Why is its equipment a security issue?
The U.S. government — like the Chinese and others — is wary of employing foreign technology in vital communications for fear that manufacturers could install hidden “backdoors” for spies to access sensitive data, or that the companies themselves would hand it over to their home governments. U.S. Secretary of State Michael Pompeo has said the U.S. might hold back intelligence-sharing with NATO allies if they use Huawei equipment, a threat met with some skepticism. The 5G networks are of particular concern because they will go beyond making smartphone downloads faster to enable new technologies like self-driving cars and the Internet of Things. U.K.-based carrier Vodafone Group Plc was said to have found and fixed backdoors on Huawei equipment used in its Italian business in 2011 and 2012. While it’s hard to know if the vulnerabilities were nefarious or accidental, the revelation dealt a blow to Huawei’s reputation.
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| Xi Jinping with Huawei President Ren Zhengfei. Image: AP |
Japan and Australia are among a handful of countries that have joined the U.S. boycott, with Vietnam quietly following suit. But Huawei does have plenty of supporters: Its equipment tends to be less expensive than alternatives from Nokia Oyj and Ericsson AB and is often higher quality. The company has won 5G customers in Russia, the Middle East and Southeast Asia, including the Philippines and Thailand. In Malaysia, the prime minister has trumpeted the advantages of Huawei’s gear, saying his country will use “as much as possible.”
5. What’s going on elsewhere?
U.K. Prime Minister Boris Johnson has hinted he wouldn’t ban it outright, but also is sensitive to U.S. concerns. His intelligence agencies reportedly argued that Huawei is a manageable risk, and some companies warn that a full ban would delay the roll-out and cost hundreds of millions of pounds. Norway decided against a ban, leaving the choice to individual companies; so far two have gone with Ericsson. French President Emmanuel Macron says his country is looking to balance the need for “good technology and to preserve our national security.” In Germany, Chancellor Angela Merkel faces a similar dilemma, but is grappling with a potential revolt by lawmakers who want to effectively ban Huawei equipment. China’s ambassador to Germany threatened Berlin with retaliation if such a ban were adopted, citing the millions of vehicles German carmakers sell in China. Brazil has said it isn’t excluding anyone from bidding.
6. What else has the U.S. done?
The U.S. has moved to curb Huawei’s ability to sell equipment in the U.S. and, more significantly, to buy parts from U.S. suppliers, by adding Huawei to a Commerce Department blacklist. It’s granted temporary reprieves that allow U.S. companies to continue to sell parts to Huawei. Microsoft Corp., for instance, said it got a license to sell “mass-market software” to the Chinese company. But the Commerce Department has been weighing new limits to close some loopholes, prompting shudders from U.S. chipmakers, software companies and manufacturers. The Federal Communications Commission prohibited the use of federal subsidies to buy equipment made by Huawei and ZTE and said it would consider requiring carriers now using the products to remove them.
7. What’s going on in Canada?
In December 2018, at the request of the U.S., Canadian authorities arrested Huawei’s chief financial officer, Meng Wanzhou, who’s also the daughter of the company’s founder, Ren Zhengfei. The U.S. is seeking her extradition as part of a criminal case alleging that she conspired to defraud banks into unwittingly clearing transactions linked to Iran in violation of U.S. sanctions. Both Meng, who is also deputy chairwoman, and the company have denied wrongdoing.
8. Who else has accused Huawei?
In 2003, Cisco Systems Inc. sued Huawei for allegedly infringing on its patents and illegally copying source code used in routers and switches. Huawei removed the contested code, manuals and command-line interfaces and the case was dropped. Motorola sued in 2010 for allegedly conspiring with former employees to steal trade secrets. That lawsuit was later settled. In 2017 a jury found Huawei liable for stealing robotic technology from T-Mobile US Inc., and on Jan. 28, 2019, the Justice Department indicted Huawei for theft of trade secrets related to that case. The same month Poland, a staunch U.S. ally, arrested a Huawei employee on suspicion of spying for the Chinese government. Huawei fired the employee and denied any involvement in his alleged actions.
9. What does Huawei say?
It has repeatedly denied that it helps Beijing spy on other governments or companies. But bracing for continued pressure, it outlined plans to shake up its management ranks as revenue growth slowed. The company, which says it’s owned by Ren as well as its employees through a union, has in recent years begun releasing financial results, spent more on marketing and engagement with foreign media in an effort to boost transparency. Ren has become more outspoken as he fights to save his company. While he said he was proud of his military career and Communist Party membership, he rejected suggestions he was doing Beijing’s bidding or that Huawei handed over customer information. In March 2019, Huawei went on the offensive, filing a lawsuit in federal court against a statute that blocks U.S. government agencies from using its equipment.
9. Are other Chinese companies feeling the heat?
Yes. In October, the Trump administration placed eight other Chinese tech giants on its blacklist, accusing them of being implicated in human rights violations against minority Muslims in the country’s Xinjiang region. They included Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co., which by some accounts control as much as a third of the global market for video surveillance; SenseTime Group Ltd., the world’s most valuable artificial intelligence startup; and fellow AI giant Megvii Technology Ltd. ZTE almost collapsed after the U.S. Commerce Department banned it for three months in 2018 from buying American technology. The U.S. Justice Department has charged state-owned Fujian Jinhua Integrated Circuit Co., its Taiwanese partner and three individuals with conspiring to steal trade secrets from Micron Technology Inc.
Other news
- The promise of 5G adds to hurdles for Huawei.
- An assessment of Huawei’s legal offensive in North America, and Meng’s odds of beating extradition.
- Stuck in Vancouver, Meng awaits her fate in splendor.
- China’s cybersecurity laws vex foreign companies.
- A QuickTake explainer on 5G and another on intellectual property theft.
- Bloomberg Opinion’s Leonid Bershidsky says Huawei is being held to impossible standard, Tim Culpan sees the U.S. targeting other rising stars, and Andreas Kluth describes the dilemma facing the West.