China’s biggest tech firm, Huawei Technologies Co., has risen to global prominence as a leader in 5G, the next-generation wireless technology. It’s also become a major target for the US, which has been leaning on allies to ban Huawei equipment from their national networks over spying concerns. In May 2022, Canada became the latest country to sign on to the American effort. Underlying the wrangling is the question of which country will take the lead in the nascent, “everything-connected” era, and who gets left behind.
1. Why does the US have an issue with Huawei?
US government officials say Huawei could use its substantial presence in the world’s telecommunications networks to spy for the Chinese government. In 2012, a report by the US House Intelligence Committee singled out Huawei and ZTE Corp., another Chinese communications equipment maker, as potential security threats; the Federal Communications Commission in 2020 designated the companies as such and ordered US carriers to pull Huawei and ZTE equipment from their networks. Already in 2018, concerns about Huawei drove then-President Donald Trump to block a hostile takeover that could have curtailed American investments in chip and wireless technologies and handed global leadership to the Chinese company. Such concerns have grown as carriers spend billions of dollars on new 5G networks, which will collect data and enable services on an unparalleled scale.
2. How important is Huawei?
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 telecom gear, smartphones, cloud computing and cybersecurity, and substantial operations in Asia, Europe and Africa. Huawei generated 637 billion yuan ($96 billion) in revenue in 2021 — more than twice that of Coca Cola Co. It’s plowed billions of dollars into 5G, breaking into the top 10 recipients of US patents in 2019, and helped to build 5G networks across the world. US sanctions spooked some Huawei customers and suppliers globally, while Chinese consumers and carriers rallied to its side.
3. Why is its equipment a security issue?
The US 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. 5G networks are of particular concern because they go beyond making smartphone downloads faster. They also will enable new technologies like self-driving cars and the Internet of Things. UK-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 those vulnerabilities were nefarious or accidental, the revelation dealt a blow to Huawei’s reputation.
. Who’s using Huawei and who’s not?
Japan and Australia joined the US boycott early. The UK prohibited its telecom operators from buying Huawei 5G equipment starting in 2021, and equipment already installed must be removed by 2027. Sweden banned Huawei and ZTE from its 5G network in 2020. While Germany has avoided an outright ban, its carriers decided not to use Huawei in the critical core of their 5G networks. But the company has won 5G customers in Russia, the Middle East, Africa and Asia, including the Philippines and Thailand. Huawei’s equipment has tended to be cheaper than that of Nordic rivals Nokia Oyj and Ericsson AB and it’s invested more in research and development. In Malaysia, the prime minister has said his country will use Huawei “as much as possible.” South African President Cyril Ramaphosa has also defended using Huawei equipment. “We cannot afford to have our economy to be held back because of this fight,” he said in 2019.
5. What else has the US done?
It moved to curb Huawei’s ability to sell equipment in the country and, more significantly, to buy parts from American suppliers by adding Huawei to a Commerce Department blacklist in 2019. Accusing the company of seeking to “undermine” those export controls, the department imposed further restrictions on chipmakers using American technology to design or produce semiconductors used by Huawei, meaning suppliers such as Taiwan Semiconductor Manufacturing Co. will have to cut off Huawei unless they get a waiver from Washington — or potentially face penalties. Under President Joe Biden, conditions on some export licenses were tightened on such components as semiconductors, antennas and batteries, barring their use in Huawei 5G devices. Other, earlier measures included the black-listing of 38 Huawei affiliates in 21 countries. The FCC said it would establish a list of proscribed equipment domestically and set up a program to reimburse US carriers for implementing the “rip and replace” order.
6. What’s going on in Canada?
Prime Minister Justin Trudeau joined the US in barring Huawei from 5G after wavering for more than three years. Canada has had tense relations with Beijing since 2018, when Huawei Chief Financial Officer Meng Wanzhou was arrested in Vancouver on a U.S. extradition request. China imprisoned two Canadians within days of Meng’s arrest. The high-stakes standoff was resolved in 2021 after the US struck a deferred-prosecution deal with Meng, allowing her to return to China and for the two Canadians to come home.
7. 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 Huawei 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 in January 2019 the US Justice Department indicted Huawei for theft of trade secrets related to that case. The same month, Poland, a staunch US 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.
8. What does Huawei say?
That US restrictions are not about cybersecurity but are really designed to safeguard American dominance of global tech. It has repeatedly denied that it helps Beijing to 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 founder Ren Zhengfei as well as its employees through a union, has in recent years begun releasing financial results, spent more on marketing and engaged with foreign media. Ren became more outspoken as he fought to defend 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.
9. Are other Chinese companies feeling the heat?
Yes. In late 2020 the Pentagon added four more firms, including China National Offshore Oil Corp. and Semiconductor Manufacturing International Corp., to a list of those it says are owned or controlled by China’s military, exposing them to increased scrutiny and potential sanctions. Other Chinese tech giants have been blacklisted for allegedly 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 US Commerce Department banned it for three months in 2018 from buying American technology.