Arrest, security worries stymie Huawei’s reach
While a Huawei executive faces possible US charges over trade with Iran, the Chinese tech giant’s ambition to be a leader in next-generation telecoms is colliding with security worries abroad.
Australia and New Zealand have barred Huawei Technologies as a supplier for fifth-generation networks. They joined the US and Taiwan, which limit use of technology from the biggest global supplier of network switching gear. Last week, Japan’s cybersecurity agency said Huawei and other vendors deemed risky will be off-limits for government purchases.
None has released evidence of wrongdoing by Huawei, which denies it is a risk and has operated a laboratory with Britain’s government since 2010 to conduct security examinations of its products. But the accusations, amid rising tension over Chinese technology ambitions and spying, threaten its ability to compete in a sensitive field.
“This is something that’s definitely concerning Huawei at this stage, because there is a political angle to it and a business angle,” said Nikhil Bhatra, a senior researcher for IDC.
Huawei is no ordinary electronics supplier. The company founded in 1987 by a former military engineer is China’s first global tech brand and a national champion at the head of an industry Beijing is promoting as part of efforts to transform this country into a technology creator. It has China’s biggest corporate researchand-development budget at 89.7 billion yuan ($13 billion) in 2017 — 10 percent more than Apple’s — and foreign customers can draw on a multibillion-dollar line of credit from the official China Development Bank.
That puts Huawei at the heart of strains over the ruling Communist Party’s technology aspirations, competition with Western economies and ties between companies and government, including possibly spying.
A EU official, Andrus Ansip, expressed concern that Chinese rules requiring telecom equipment suppliers to cooperate with intelligence services would involve possible “mandatory backdoors” in computer or telecom systems.
“Do we have to be worried about Huawei and other Chinese companies? Yes, I think we have to be worried,” said Ansip, the trade bloc’s ZTE paid a $1 billion fine, replaced its executives and hired US-picked compliance officers.
That won’t work with Huawei, which is the “key to Beijing’s aspirations to lead globally” on 5G, according to a Eurasia Group report. It said Chinese leaders would see an attempt to impose ZTE-style controls as “tantamount to an open technology war.”
Huawei’s US business evaporated after a 2012 congressional report labeled the company and ZTE security threats. The same year, Australia banned it from bidding on a national high-speed broadband network.
Taiwan, the self-ruled island Beijing claims as its territory and regularly threatens to attack, imposed curbs in 2013 on Huawei and other Chinese telecoms technology.
Elsewhere, Huawei supplies phone carriers in Asia, Africa and Europe. The company says it serves 45 of the 50 biggest global telecom operators. Its 2017 global sales rose 16 percent to 604 billion yuan ($92.5 billion) while profits increased 28 percent to 47.5 billion yuan.
Huawei accounted for 28 percent of last year’s $32 billion global sales of mobile network gear, according to IHS Markit. Ericsson was second with 27 percent and Nokia had 23 percent. ZTE, South Korea’s Samsung Electronics and other vendors made up the rest.
Asked about the impact of security concerns on its 5G business, Huawei said this year’s total revenue — which also includes the No. 3 global smartphone brand and an enterprise unit — should exceed $100 billion. That would be an 8 percent gain over 2017.
Washington is pressing allies to shun Huawei, but Germany, France and Ireland say they have no plans to ban any 5G network suppliers.
Huawei “has an important place in France” and “its investments are welcome,” the country’s economy minister, Bruno Le Maire, said Dec. 7, according to news reports.
The company has agreements to field-test 5G equipment with Deutsche Telekom, Bell Canada, France’s Bouygues, Telecom Italia, India’s Bharti Airtel and carriers in Singapore, South Korea and Ireland.
IDC’s Bhatra warned excluding Huawei would leave countries with only two major 5G suppliers, Ericsson and Nokia. He said that would limit competition, raise prices and might slow innovation.
“There are quite widespread implications,” said Bhatra.