Huawei’s rapid growth, al­leged theft helped sow mis­trust in U.S.

The U.S. has pushed Euro­pean gov­ern­ments to avoid Huawei’s gear, say­ing it’s an en­abler for Chi­nese es­pi­onage, which the com­pany has al­ways de­nied

Business a.m. - - TECHNOLOGY & INNOVATION -

HUAWEI TECH NOLO GIES Co. wanted a bet­ter way to test its tele­phone hand­sets, so it sent an en­gi­neer to see “Tappy,” the ro­bot in part­ner com­pany TMo­bile US Inc.’s lab­o­ra­tory in Bellevue, Wash­ing­ton.

“Tappy,” com­puter-driven and tire­less, taps on touch screens, sim­u­lat­ing weeks of use in a day. The Huawei en­gi­neer was cu­ri­ous about Tappy’s fin­ger­tips. So he slipped one into a lap­top bag and left with it, in an act TMo­bile branded theft.

The 2013 in­ci­dent, de­scribed in a law­suit filed the next year by T-Mo­bile, is the sort of al­leged be­hav­ior by China’s top telecom­mu­ni­ca­tions equip­ment maker that has alarmed se­cu­rity ex­perts. Now some are warn­ing against the use of Huawei gear in the next-gen­er­a­tion 5G net­work be­ing as­sem­bled to con­nect fac­to­ries, ve­hi­cles, homes, util­ity grids and more.

“They’ve sur­passed ev­ery­one else, and the way they’ve done that is through copy­cat tech­nol­ogy and ruth­lessly steal­ing in­tel­lec­tual prop­erty from Western com­pa­nies,” said Jeff Ferry, an econ­o­mist with Coali­tion for a Pros­per­ous Amer­ica, an ad­vo­cacy group close to the Trump ad­min­is­tra­tion and its China hawks.

Rep­re­sen­ta­tives of Huawei’s Chi­nese head­quar­ters re­ferred calls to Chase Skin­ner, a San Fran­cisco-based Huawei spokesman, who de­clined to com­ment. Huawei has reg­u­larly de­nied that it steals in­tel­lec­tual prop­erty or un­fairly copies tech­nol­ogy from other com­pa­nies. It said this week that black­list­ing its equip­ment with­out proof will hurt the in­dus­try and dis­rupt the de­vel­op­ment of new high­speed tech­nol­ogy.

But Huawei’s con­duct is draw­ing re­newed scru­tiny after the Dec. 1 ar­rest in Van­cou­ver of Chief Fi­nan­cial Of­fi­cer Meng Wanzhou on al­le­ga­tions she de­frauded banks to vi­o­late Ira­nian sanc­tions. The daugh­ter of Huawei’s bil­lion­aire founder Ren Zhengfei, she now faces ex­tra­di­tion to the U.S. in a case that’s sparked a diplo­matic row.

Meng’s ar­rest fol­lows a long string of al­le­ga­tions by the U.S. gov­ern­ment about a po­ten­tial threat to net­work se­cu­rity. The U.S. has pushed Euro­pean gov­ern­ments to avoid Huawei’s gear, say­ing it’s an en­abler for Chi­nese es­pi­onage, which the com­pany has al­ways de­nied.

In 2012, the House In­tel­li­gence Com­mit­tee pub­lished a re­port that de­scribed Huawei as “a com­pany that has not fol­lowed United States le­gal obli­ga­tions or in­ter­na­tional stan­dards of busi­ness be­hav­ior.” The com­mit­tee called on the U.S. in­tel­li­gence com­mu­nity to “re­main vig­i­lant,” and said na­tional se­cu­rity of­fi­cials must block ac­qui­si­tions in­volv­ing Huawei or fel­low Chi­nese gear maker ZTE Corp.

Years ear­lier, Cisco Sys­tems Corp. sued to stop Huawei from sell­ing data­traf­fic switches and routers al­legedly based on Cisco’s patents and copy­rights. The lit­i­ga­tion ended with Huawei agree­ing to stop sell­ing dis­puted prod­ucts in 2003.

Re­lated: Why U.S. Politi­cians Are Scared of China’s Big­gest Tech Com­pany

In 2010, the com­pany failed to reach agree­ments to buy U.S. soft­ware and wire­less-gear mak­ers, re­port­edly be­cause the sell­ers doubted the com­pany would win ap­proval. In 2008, Huawei and Bain Cap­i­tal Part­ners LLC aban­doned a bid for gear maker 3Com Corp. after fail­ing to as­suage se­cu­rity con­cerns raised by U.S. of­fi­cials.

The Tappy ca­per in­volved a ma­chine that used its me­chan­i­cal arm to re­peat­edly poke and prod phone screens, in im­i­ta­tion of a hu­man user, help­ing T-Mo­bile to im­prove the re­li­a­bil­ity of its hand­sets. Huawei wanted to know the size of the fin­ger and the ma­te­rial out of which the con­duc­tive tip was made, T-Mo­bile told a fed­eral court in Seat­tle.

The Huawei en­gi­neer, left alone in the lab, first slipped the fin­ger­tip be­hind a com­puter mon­i­tor then three hours later tucked it into his bag, T-Mo­bile told the court.

“There is some truth to the com­plaint,” Huawei spokesman Wil­liam Plum­mer said at the time. He blamed “em­ploy­ees act­ing in­ap­pro­pri­ately in their zeal.” (An­other worker had furtively taken pho­tos of Tappy, ac­cord­ing to T-Mo­bile.)

T-Mo­bile dropped Huawei as a sup­plier and in 2017 a jury awarded the Amer­i­can com­pany $4.8 mil­lion in dam­ages for breach of con­tract but re­jected al­le­ga­tions of mis­ap­pro­pri­a­tion of trade se­crets. The two sides later agreed to drop the case after set­tle­ment talks. Michael Ki­pling, an at­tor­ney in the case for T-Mo­bile, de­clined to com­ment and at­tor­ney Bo Yue, for Huawei, didn’t re­spond to a re­quest for com­ment.

The largest U.S. mo­bile providers, after urg­ing by U.S. of­fi­cials, have shunned Huawei net­work gear, and small providers are con­cerned they may be forced to rip out and re­place Huawei prod­ucts as the Fed­eral Com­mu­ni­ca­tions Com­mis­sion moves against Huawei.

U.S. in­tel­li­gence and law en­force­ment agen­cies har­bor a deep sus­pi­cion of Huawei, ex­ac­er­bated by its ties to China’s Peo­ple Lib­er­a­tion Army, said James Lewis, di­rec­tor of the tech­nol­ogy pol­icy pro­gram at the Cen­ter for Strate­gic & In­ter­na­tional Stud­ies in Wash­ing­ton.

“Deep con­nec­tions with the PLA, in­dus­trial es­pi­onage, and sub­si­dies from the Chi­nese gov­ern­ment -- there you have it,” Lewis said in an in­ter­view.

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