Huawei arrest adds to rising woes
• US eyes extradition after Canada detains finance chief
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.
THE COMPANY IS WELL AWARE OF ITS REPUTATION AS A SECURITY RISK ... IT HAS BEEN TAKING STEPS TO SHOW TRANSPARENCY