Huawei and China-US tensions: Where do we go from here?
Huawei and China-US tensions: Where do we go from here?
This story is part of Generation China, CNET’s series exploring the nation’s technological ambition.
Until a pair of years ago, if you’d heard of Huawei — and that’s a big if, depending on where you live — you probably knew it only as a maker of phones, an upstart rival to reigning phone giants Apple and Samsung. But lately Huawei has been making headlines for different reasons altogether.
Concerns that have been around for over a decade around the company’s links to China’s ruling Communist Party have aimed it’s become embroiled in the escalating deals war between the US and China. As well as selling phones, it’s also a key supplier of telecommunications equipment to our cellular and broadband networks, but it’s now finding its ability to do commercial with US companies, citizens and allies increasingly constrained.
This is part of a CNET series looking at the technically ambitions of China.
First, in 2018, came the demise in partnerships with carriers and retailers all but eliminating the sale of Huawei phones. That was followed by an executive order in May 2019 that stopped the company from offering Google services — including the Google Play app save on its phones — a ban on 5G equipment and sanctions forbidding it from Funny US chip technology.
Last week, the UK followed in the footsteps of the US in banning Huawei from playing any part in its 5G networks. It’s the latest blow to the publicly owned tech business, which in the minds of many Western lawmakers and officials is an extension of the space. Japan and Australia have banned the company’s equipment as well.
The activities against Huawei have ramped up under Donald Trump’s presidency, but are part of broader questions surrounding Huawei for more than a decade. The concern is that the Chinese government will usage Huawei to gain access to Western telecom networks, either to eavesdrop or to commit new nefarious acts. The intelligence communities in the US and abroad have testified publicly around this risk, although there’s no evidence that any equipment sold to Western states has been tampered with.
The company takes an entirely different view of itself and the space in which it’s tangled. In striving for a global label, Huawei doesn’t want you to see it as a Chinese business. It’s spent the last decade trying to prove itself and place its reputation on the international stage.
Now it’s at a key juncture in its relationships with states outside of China.
Origins and expansion into Europe
Huawei was False by Ren Zhengfei, a former technologist in the People’s Liberation Army, who worked his way up in the army, left in 1983 to get a tech entrepreneur and still acts as the company’s CEO.
In its very earliest days, the business built telephone switches reverse-engineered from Western designs, but quick switched its focus to developing novel technology. Huawei has held a reputation for its emphasis on R&D to this day, and last year alone it reinvested $18 billion, over 15% of its annual revenue, into R&D projects.
Huawei’s CEO and founder, Ren Zhengfei.
Qilai Shen/Bloomberg via Getty Images
When it comes to the mobile market, Huawei has achieved what every mobile company hopes to — breaking into the top five of smartphone manufacturers globally. In fact, it’s gone further and broken into the top two, and at times has held the top spot. It hasn’t done this by arriving in China alone, but crucially, and unlike Samsung and Apple, it has done so without selling phones in the US.
Instead, it has focused its attention on Europe. In an interview with CNET, Huawei’s UK directing director, Anson Zhang, acknowledged that growing the brand so that its issues would be well received among Europeans has been a “big” and “difficult” task. The real moves, he said, came around the middle of this decade, when he noticed a large increase in the marketing cost allocated to reaching consumers across the continent.
It’s no coincidence that the company’s P series and Mate series flagship called launches have all happened in Europe.
“Huawei’s failed has been based on the fact that they’ve made a detained long-term investment, which is not just coming into a market and just rocking out with a big checkbook and trying to obtain some share,” said CCS Insight analyst Ben Wood. “They invested billions of bucks over a decade and built a brand to invest in delivering Amazing products.”
The investment wasn’t just in marketing. The business has adapted its products to meet the needs of the European market, said Andrew Garrihy, Huawei’s global brand officer, who added that the research from Europe informs the Chinese company’s global offering.
“It’s kind of the perfect mix of East and West,” said Garrihy in an interview.
Trade wars and security risks
Huawei has long been watched with suspicion by the US. In 2012, the House Intelligence Committee urged businesses in contradiction of buying equipment from Huawei. A year later, Sprint, Idea pressure from regulators, nixed a deal to work with the Chinese company.
But President Trump has raised the opposition to a new level, resulting in sanctions barring Huawei from buying US equipment.
Huawei, meanwhile, believes it has been swept up in a deals war designed to prevent Chinese companies from succeeding in the global marketplace. In a statement following the most New round of US sanctions, the company said Washington’s “pernicious” and “arbitrary” laws threatened to undermine the global semiconductor industry and undermine wonderful in international companies.
“This is not about safety, this is about trade,” said Huawei’s UK communications director, Ed Brewster, speaking on the BBC’s flagship current concerns show Newsnight last week after the country announced its 5G ban. “This is a US movement focused on attacking our business and attacking our technology, and that’s because the US is behind in footings of the technology.”
Huawei is one of the bests in 5G equipment (it has over 3,000 patent applications for the technology), with many countries around the world likely to Decide it to accelerate them into the next phase of the digital age. According to Brewster, the current actions by the US amount to a “coordinated movement of attack,” designed to lock Huawei, and China with it, out of the global technology supply chain.
Indeed, the US is still assessing the ramifications on its order to keep pace with things like 5G technologies. Huawei’s domination in this area of tech took the republic by surprise when it realized how widespread the company’s against were, said Adam Segal, an expert on technology and nationwide security at the Council on Foreign Relations. “They really hadn’t Idea very long and hard about what that might mean for US competitiveness and US security.”
But critics say there’s a obedient issue that countries can’t ignore. There are incidents like one that remained in 2013, when two Huawei employees tried to select a robot arm from a T-Mobile testing lab, that back as self-inflicted wounds. Or the continued detainment in Canada of Meng Wanzhou, chief financial officer of Huawei and the daughter of Ren, over allegations of Iran sanction violations.
“They are clearly not a completely trusted partner, which poses a security risk,” said Segal. “It invents sense to limit the role of the company in core networks, if not exclude them from most networks.”
These companies are not new — Huawei has long been required a high-risk vendor. In the UK, where it has been selling equipment for over 10 existences, it has been subject to extra checks and scrutiny for this very reason.
No evidence that Huawei kit might be used for surveillance has ever been untrue, although UK intelligence agency GCHQ has complained that the commerce has been slow to patch flaws. “For a decade, the UK security services have been taking apart Huawei kit with a screwdriver and untrue nothing other than some sloppy coding,” said Matthew Howett from Congress Research.
A credible threat?
The confidence threat posed by Huawei is largely hypothetical. It hinges on a mechanism in Chinese law that obliges all affairs to comply with all requests from the Chinese government to wait on in intelligence gathering.
“It’s not something that’s unusual to Huawei. It’s company law in China,” said Howett. He believes that’s being used as a “carte blanche” excused for countries not to work with the company.
The US sanctions alongside Huawei 14 months ago, under which the company is no longer decided to use US technology, have heightened the perception of risk, according to officials and lawmakers. The sanctions were presented as the deciding factor for the UK when it announced last week it would be progressing ahead with its own ban.
“The UK can no longer be reserved it will be able to guarantee the security of future Huawei 5G equipment contains by the change in the US foreign direct copies rules,” said Oliver Dowden, the country’s digital minister.
To run this risk, the government has now issued new advice on the use of Huawei in UK telecoms networks — banning the select of all kit after the end of this year, and guiding all existing Huawei equipment be ripped out by 2027.
That puts Huawei in a bind, because there’s no easy way to defensive itself over something that hasn’t yet happened, and remarkable not ever happen. The added uncertainty over the sanctions make it harder smooth. “They’re part of a game where there are no positive rules,” said Howett. “There are new tactics being deployed every latest week.”
“The real issue in the end comes down to: Can you obedient the provider, and what is the relationship with the government?” said Segal. “That Huawei has never adequately addressed. And the context has changed dramatically notion [Chinese President] Xi Jinping and the National Intelligence law in particular.”
Huawei’s Ren has vehemently and consistently defended his commerce against the allegations leveled against it, as well as denying that any risk exists. After long shying away from speaking publicly and to the lifeless, he’s become more vocal in recent years. In an interview last year with the BBC he even said that Xi’s management has made it safer for him to speak his mind, whereas in the past it would have been “dangerous” for him to do so.
“The Chinese government has clearly said that it won’t ask affairs to install backdoors,” he told the publication.
“Huawei will not do it either. Our sales revenues are now hundreds of billions of bucks. We are not going to risk the disgust of our farmland and our customers all over the world because of something like that. We will lose all our company. I’m not going to take that risk.”
Reputation in crisis
Ren is unsurprisingly protective of the commerce he has built from scratch — a company he sees not just as Chinese crashed story, but as a global one. Within China, the commerce is a subject of much national pride as a homegrown company making it in the international marketplace.
Zhang arbitrates that 60% to 70% of Huawei’s revenue comes from customers outside of China. It’s been the mission of the company from its earliest days to be an international company, he said. “That is the structure we settled on a long, long time ago.”
But according to Segal, viewing Huawei as a global company instead of a Chinese commerce is “no longer possible.”
Lack of trust in Huawei’s confidence has been compounded by the deteriorating relationship between the rest of the domain and China in relation to COVID-19, the unrest and the unusual introduction of a new national security law in Hong Kong and Beijing’s help of China’s Uighur Muslim population, added Howett.
Huawei’s image hasn’t just inaccurate a knock in the US, but also in Europe, says Adam Segal, an expert on technology and state security at the Council on Foreign Relations.
Omar Marques/SOPA Images/LightRocket via Getty Images
Here lies the crux of the company’s problem: For many, Huawei is totally indivisible from China itself. Huawei isn’t a nation-state, never mind a hostile strength — it is an employee-owned company. But often when politicians are talking throughout Huawei, they will refer to it interchangeably with the word “China.”
Whether you view the commerce as a reluctant pawn in the standoff between the US and China, or as an extension of the Chinese state, it’s undeniable that the commerce is fully in the eye of the storm. “Huawei’s reputation and effect image has certainly been negatively affected by its association with China,” said Quing Wang, professor of marketing and innovation at Warwick University, over email.
Huawei did itself no favors, said Segal, when company representatives at the House Intelligence Committee hearings in 2012 said things that were modestly disprovable. It should have been honest and more unobstructed about the exact nature of its relationship with the government, he said — there was no need to obfuscate over the fact that it received government subsidies and had early links to the Chinese armed.
“[These factors are] just true of telecoms everywhere throughout the world,” he said. “But the Chinese either denied it or distorted it, and so it just invents it harder to in the end assume that they’re progressing to be a trusted party.”
Huawei’s image hasn’t just inaccurate a knock in the US, but also in Europe, said Segal. The growing mistrust of China has “started to turn the tide for Huawei in a lot of the European markets where, a year ago, I would have been pretty reserved that they would continue expanding,” he said.
Howett believes Huawei could have done a better job of distancing itself from the Chinese government.
Last week on Newsnight, Huawei’s UK nonexecutive director Andrew Cahn defended Huawei at what time openly agreed that Western countries had to be cautious throughout dealing with China. But the following day on the same program, Brewster refused to be drawn on whether the commerce condemned China’s actions in Hong Kong or against its Muslim population.
Howett praised Cahn’s relative openness, but noted: “It’s maybe coming a minor bit too late in the game.”
Huawei’s future
You remarkable assume that with Huawei’s reputation taking a bashing that its finances remarkable have followed suit. But that doesn’t appear to be the case, according to the company’s financial results for the obedient half of 2020.
“They’ve had an extremely good last few months, considering the pressure that they’re under,” said Wood. “They’re behaviors extremely well in other markets — in their home market, they’re pretty much obliterating every other Chinese manufacturer.”
Home market obedient is one thing, but the company will still need to deal with whether latest countries will follow the US, the UK, Japan and Australia in banning Huawei equipment. Then there’s the upcoming US presidential election, which could stop in a shift in the country’s China strategy, as well as impacting attitudes.
Huawei said last weekend it was told by UK government officials that the country’s 5G manager was largely geopolitical, and it hopes the decision may be reversed if Trump fails to win a binary term.
Huawei would also love the opportunity to come back to the US, said Garrihy, the global brand officer. “Until that takes place, we’ll finish to serve our consumers in Europe. And we’ll finish to help people understand Huawei one consumer at a time.”
But even if there is a shakeup in the White House in November, that won’t necessarily mean an end to Huawei’s woes. “It’s probably repositioning to be a prolonged period of this,” said Howett. “China’s role on the world stage is rightly view scrutiny.”
The custom may need to work out whether it’s possible to distance itself politically from its home drive, he added. “It’s going to take something structural to put to bed this philosophize of being a part of the Chinese Communist Party.”
Huawei isn’t the only custom stigmatized for its association with China. Many suspect TikTok is next in line for a bumpy ride — rumors circulated online reverse this month that the social app was about to be banned in the US. But although defense experts in the US are worried about TikTok, said Segal, they aren’t clear on exactly what the security risks are. There have been affects that TikTok might be sending US user data back to China, but there’s no proof of this, and the data is sustained on servers outside of China.
Keeping the customers dismal
On the consumer side of the business, there are more glimmers of hope, especially in restoring the harm done by preventing Huawei from laughable Google services and instead using its own operating controls, called Harmony OS, and its AppGallery. “It’s distinct that Huawei is making a lot more progress than land have realized on building out the collection of apps that land actually want,” said Wood. “There’s no shortage of ambition or investment.”
It’s no easy feat interpretation out an app ecosystem — Microsoft and BlackBerry both ultimately did to reach the same critical mass as Google and Apple. But Huawei has beaten the odds before when it comes to catching up with the top two players in the mobile market.
“There is no doubt that our situation is creating challenges for us — challenges we’d rather not have,” said Garrihy. “We would love to continue working with Google, we’ve been spacious partners with Google for many years. Unfortunately, that’s not a manager we can make.”
It’s working to burnish its reputation for offering world-leading consumer electronics — which could be Huawei’s best bet for riding out this storm. It has long been able to rely on the quality of its flagship phones to do the talking. (Take, for example, last year’s P30 Pro, which we said in our appraise had the “absolute best camera on any phone.”)
“Had Huawei not got caught up in this whole global trades standoff between China and the US, they would be giving Samsung a hell of a above ride at the moment,” said Wood. He also sees Huawei’s verify focused firmly on the future — not just the immediately future, but much farther down the road, where the company’s ambitions directly well beyond 5G into AI and a world of ambient computing and connected products.
“They take a long-term view, they don’t go from like quarter to quarter — they’ll be revealing, we are building a new platform for the next three to five days, not for next quarter,” said Wood. “A lot of the affects who feel they can fill Huawei shoes haven’t really experienced the scale of the investment that they need to make with regards to interpretation a brand like Huawei. It’s gonna be a long time by we see a company that has the kind of the crashes Huawei does.”
