COMMENTARY: Huawei's Huge Turnaround Week

The smartphone and telecom giant starts to win an influence battle against the Trump administration as it settles a suit with Samsung and introduces a game-changing product.

Mark Melnicoe
    Mar 02, 2019 4:35 AM  PT
COMMENTARY: Huawei's Huge Turnaround Week
author: Mark Melnicoe   

After suffering through months of unrelenting pressure at the hands of the U.S. government, telecom provider Huawei suddenly is seeing some light.  

In fact, the company had a very good week, as it settled a longstanding legal dispute with Samsung and saw a number of countries refusing to bow to American insistence that they ban the firm's technology.

To start the week, the world's two biggest makers of mobile phones said in a U.S. federal court filing Tuesday that they had agreed the day before to a settlement of a lawsuit Huawei filed against Samsung over patent infringement. Huawei sued Samsung for using its patents without paying licensing fees the companies had been negotiating since 2011. Samsung would owe Huawei more than $3 billion in past royalties, according to Bloomberg Intelligence.

Terms of the settlement were not announced, but the deal resolves a two-year fight after Huawei won two battles in Chinese courts. Huawei surpassed Apple to become the No. 2 smartphone manufacturer last year. According to figures from Gartner, Samsung now has about a 19 percent global share to Huawei's 13.4 percent and Apple's 11.8 percent.

Beyond that, Huawei is a global leader in 5G and is the world's biggest maker of networking equipment used by phone and internet companies. The Trump administration has repeatedly and aggressively accused Huawei of inserting components in its devices so it can conduct industrial espionage on behalf of the Chinese government.

It has filed fraud charges against the company, accusing it of selling American-made components to Iran in violation of U.S. sanctions. Meng Wanzhou, Huawei's CFO and daughter of the company's founder, is being held in Vancouver, Canada, pending an extradition request from the United States.

U.S. Pressure Failing

The Trump administration sent top officials, including Vice President Mike Pence and Secretary of State Mike Pompeo, to Europe last month to cajole EU allies including Germany, France and the UK into banning Huawei's products, citing national security concerns. They even threatened to cut off allies from U.S. trade in some products if they didn't comply.

But the effort looks to be failing. Over the past week, officials in Great Britain, Germany, Australia, and other countries balked at excluding Huawei from their networks. The company's equipment is considered to be of high quality and affordable by many experts, and banning it would no doubt slow the adoption of 5G networks.

Huawei, which has vehemently denied all of the accusations, made light of them at the Mobile World Congress, a huge Barcelona trade fair, this week.

"PRISM, PRISM on the wall, who is the most trustworthy of them all?" Guo Ping, Huawei's rotating chairman, asked in a keynote speech, needling the U.S. over its infamous data-gathering program, the Associated Press reported. PRISM was a National Security Agency program revealed by Edward Snowden that used U.S. internet companies to gather intelligence about foreign threats to the U.S.

Most countries are concluding that any alleged threat in Huawei's networking equipment can be countered with their own technology. They are wise to the likelihood that the Trump team's real concerns stem from competition, and few allies are eager to please an American president who has mostly treated them with disdain.

A Public Relations Blitz

Chinese tech companies are growing in sophistication. China has become a serious global player in 5G, artificial intelligence, cloud computing and other key areas that are shaping future technologies and products. For the first time, Silicon Valley feels threatened, envisioning a future where it no longer dominates.

For its part, Huawei attempted something of a charm offensive in the American media on Thursday, placing full-page ads in newspapers that included the Washington Post, New York Times, Wall Street Journal, Politico, USA Today and the Los Angeles Times, Huawei spokesman Chase Skinner told the Reuters news agency.

"Our doors are always open. We would like the U.S. public to get to know us better," the ads say, accusing the U.S. government of creating "some misunderstandings about us."

Thursday's ads followed multiple foreign media interviews by Huawei CEO Ren Zhengfei in what Reuters called an unprecedented public relations blitz.

And no wonder. China's signature global technology company has been under fire for a long time.

Huawei's happy week didn't end with the Samsung settlement and its inroads against U.S. interference. The company also made a huge splash at the MWC event in Barcelona with the unveiling of its first foldable mobile phone. Dubbed the Mate X, it's a $2,600 device that really combines smartphone and tablet.

Samsung also released its version of a foldable phone as the two companies continue to go at it in the consumer tech wars.

All in all, not a bad week for a company that looked for awhile like the U.S. had it on the ropes.