Huawei ar­rest adds to ris­ing woes

• US eyes ex­tra­di­tion after Canada de­tains fi­nance chief

Business Day - - International Companies - Agency Staff Bei­jing

The ar­rest of a top Huawei ex­ec­u­tive in Canada is the lat­est in a se­ries of set­backs that have dis­rupted the Chi­nese tele­com be­he­moth’s global ex­pan­sion amid a US-led ef­fort to black­ball it in­ter­na­tion­ally.

The com­pany has faced a tough year, with some of its ser­vices re­jected in the US, Aus­tralia, New Zealand and Bri­tain over se­cu­rity con­cerns.

The lat­est hit came on Wed­nes­day, as Canada an­nounced that CFO Meng Wanzhou — the daugh­ter of founder Ren Zhengfei — was ar­rested at the week­end as US au­thor­i­ties seek her ex­tra­di­tion.

Canada’s jus­tice min­istry did not pro­vide de­tails about the charges, but US au­thor­i­ties are re­port­edly in­ves­ti­gat­ing whether Huawei vi­o­lated sanc­tions against Iran by sup­ply­ing parts to the coun­try.

An­a­lysts say the al­le­ga­tions, if proven, could re­sult in a ban with far-reach­ing global con­se­quences. China’s largest tele­coms equip­ment maker has re­ceived an in­creas­ingly chilly re­cep­tion in 2018 as US al­lies have moved to ban its prod­ucts.

Bri­tain’s largest mo­bile provider BT on Wed­nes­day an­nounced it was re­mov­ing Huawei equip­ment from its 4G cel­lu­lar net­work, days after the head of the MI6 for­eign in­tel­li­gence ser­vice sin­gled out the com­pany as a se­cu­rity risk.

A week ago, New Zealand’s in­tel­li­gence agency barred Huawei equip­ment in the roll­out of the coun­try’s 5G net­work, cit­ing sim­i­lar con­cerns.

Aus­tralia and the US also en­acted sim­i­lar bans ear­lier in 2018, leav­ing Canada as the only coun­try in the “Five Eyes” in­tel­li­gence net­work not to take steps against the Chi­nese firm.

Huawei founder Ren is a former Peo­ple’s Lib­er­a­tion Army en­gi­neer and there are con­cerns of close links with the Chi­nese mil­i­tary and gov­ern­ment, which the firm has con­stantly de­nied.

The com­pany is well aware of its rep­u­ta­tion as a “se­cu­rity risk”, said Kitty Fok, MD of re­search firm IDC China, adding that it has been tak­ing steps to show trans­parency, in­clud­ing shar­ing its source codes.

As gov­ern­ments roll out 5G in­fra­struc­ture, which many see as a back­bone of the new dig­i­tal econ­omy, it is “not the big­gest part of the busi­ness” for Huawei, Fok said. “But the ar­rest of the CFO, that is some­thing com­pletely un­ex­pected ... and if there is a ban like ZTE, given the size of Huawei, the im­pact will be a lot big­ger.”

Ear­lier in 2018, the US im­posed a seven-year ban on the sale of cru­cial com­po­nents to Chi­nese smart­phone maker and Huawei ri­val ZTE after it failed to take ac­tion against staff re­spon­si­ble for vi­o­lat­ing trade sanc­tions against Iran and North Korea. The ban nearly killed off the com­pany be­fore Wash­ing­ton and Bei­jing reached a deal.

While Huawei has de­vel­oped its own Kirin pro­ces­sor chips, un­like ZTE which is re­liant on chip­mak­ers such as US firm Qual­comm, global telecom­mu­ni­ca­tions ecosys­tems re­main vul­ner­a­ble be­cause of the sheer size of the com­pany.

“The im­pact on telecom­mu­ni­ca­tions car­ri­ers of a sim­i­lar and sud­den de­nial ban of the type placed on ZTE would be much wider, given that Huawei equip­ment is more widely used by car­ri­ers around the world, in­clud­ing in Europe and Africa,” said Paul Tri­olo, head of the geotech­nol­ogy prac­tice at the Eura­sia Group re­search firm.

Meng’s ar­rest sug­gests that the US depart­ment of jus­tice might be able to mount a sim­i­lar case to that of ZTE, Tri­olo added.



Ex­pan­sion op­posed: Huawei, China’s largest tele­coms equip­ment maker, faces grow­ing global re­sis­tance as the US and its al­lies in­crease ef­forts to ban the com­pany’s prod­ucts, as the com­pany is thought to be a se­cu­rity risk.

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