COMMENTARY: Huawei Now at the Bull's-Eye of Western Security, Technology Concerns

The Chinese telecom giant is being squeezed out of markets in a U.S.-led campaign targeting its alleged cybersecurity and IP practices.

Mark Melnicoe
    Feb 16, 2019 4:25 AM  PT
COMMENTARY: Huawei Now at the Bull's-Eye of Western Security, Technology Concerns
author: Mark Melnicoe   

A U.S.-led campaign against Huawei does more than threaten to seriously undercut the world's largest telecom equipment company. It serves as a symbol – or perhaps a warning – that China Inc.'s longstanding practice of swiping and coercing intellectual property from the West is no longer tolerated. It also represents an opening salvo in a Sino-U.S. battle for technological supremacy.

The speed at which the 5G and smartphone leader is being hit is almost breathtaking. A glance at recent headlines tells the story.

  • Huawei and its CFO, Meng Wanzhou, have been charged on multiple counts of fraud and conspiracy, with the executive and daughter of the company's founder being held in Canada pending a possible extradition to the U.S.

  • President Trump is expected to sign an executive order next week banning Huawei from U.S. wireless networks, according to Politico.

  • The European body for mobile communications, GSMA, is considering banning Huawei from key markets, and the European Commission is mulling a prohibition on Huawei's 5G network equipment in the EU, Reuters says.

  • New foreign investment laws in the UK will block Huawei from "sensitive state projects," including 5G, according to the Sun newspaper.

  • Two of the world's most prestigious universities – Stanford and UC Berkeley – announced they are pulling out of any new joint research projects with Huawei.

  • The FBI has the goods in an undercover investigation into the alleged theft by Huawei of a new glass prototype for cell phones made by Akhan Semiconductor Inc., reports Bloomberg Businessweek.

New Response

Most of these stories broke in the past week, and in sum, they reveal an accelerating movement to remove Huawei from Western markets. The stated reason: cybersecurity concerns.

U.S. officials accuse the Shenzhen-based private company of inserting spyware into its hardware, enabling it to conduct espionage against businesses and governments. Western businesses have long complained about coercive methods or outright theft by Chinese companies to obtain key technologies. What is new is the response.

The U.S., under the hardline approach of the Trump administration, is orchestrating the pressure, lobbying its allies to keep Huawei technology out of their networks and equipment.

New Zealand and Australia, along with several European countries, Canada, and Japan, are either taking action against Huawei or considering it. The New Zealand Herald reported this week that relations between China and New Zealand have plummeted to new lows, with Chinese officials pulling out of a major tourism project. This is seen as retaliation for Auckland's decision to ban Huawei from the country's big 5G rollout.

Huawei is the most global of all of China's companies. It has operations in 170 countries, employs 180,000 people, had $92.5 billion in revenue in 2017, and competes globally in 5G, cloud computing, and artificial intelligence. In short, it is China's tour de force tech company.

It has created footprints all over the world, sponsoring rugby teams in Australia, funding university research around the globe, bringing foreign students to China for technical training, promoting classical music concerts in Europe, and donating pianos to schools in New Zealand, the Associated Press noted this week.

The authorities in Beijing see the company as the main vehicle to push China's version of future technologies, and they attack the claims against Huawei as economic warfare.

"Recently, Huawei has been under constant attack by some countries and politicians. We are shocked, or sometimes feel amused, by those ungrounded and senseless allegations," said Abraham Liu, Huawei's vice-president for the European region and chief representative to the EU institutions, in a Xinhua report

"Excluding Huawei from the market doesn't mean the network is safe. For example, since Huawei's equipment is not used in the U.S. networks, is the U.S. having the most secure network? The answer is no."

Changing Landscape

But in truth, Huawei seems to be losing the battle.

"Huawei's marketing plan up until December 1 [when Meng was arrested] was working very well," Guy Saint-Jacques, a former Canadian ambassador to China, told the AP. Now, "public opinion is changing toward China and Huawei."

Where this will land is impossible to know. Huawei will continue to defend itself and the Chinese government will back it. This is the Middle Kingdom's marquee global tech company, after all. It is competing with Silicon Valley to set world standards in spheres ranging from 5G to artificial intelligence. The stakes could hardly be higher.

Beyond that, the Huawei affair ties into the trade war. Will the dispute sabotage the chance for a big trade agreement? Or might it figure in some sort of grand bargain?

Huawei will never admit engaging in espionage or stealing technology, but might it quietly mend its ways? Is the West willing to look past Huawei's alleged actions in pursuit of better commercial relations with China? If so, what about all the other Chinese companies accused of IP theft and coercion?

By a variety of measures, this is uncharted territory and a pivot point in the bigger battle over the future of technological leadership.