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The biggest problem for Huawei is that its name evokes China. In times of growing disenchantment with the dragon, such association is not a good look for China’s foremost technology company. Huawei is not any company — it is the world’s largest supplier of telecommunications gear and the second-largest smartphone manufacturer in the world behind Samsung.

The Donald Trump administration has dialled up the tensions between the US and China and at the centre of the storm lies Huawei. Some would say Huawei is a victim of collateral damage — a third party that’s stuck in the middle of a tiff between two of the world’s biggest economies.

But there is evidence to support the notion that Huawei is an involved player, which has brought it into the eye of the storm. Following the bloody skirmish at the Indo-China line of actual control, or LAC, there has been an increasing sentiment against Chinese companies in India. The Galwan Valley standoff accelerated negativity in India against Chinese organisations especially after the coronavirus pandemic, which originated in China and has crippled the world economy including India’s.

On Twitter, there have been calls to boycott Chinese goods and companies — and in the wake of the Galwan skirmish, the Indian government has tightened the screws on Huawei’s operations in India, which were already in the doldrums because of US sanctions imposed by the Trump administration in 2019.

Already, the government has cancelled tenders by government-owned telecom operator BSNL for the upgrade of 4G infrastructure. There is a possibility that private operators like Airtel and Vodafone-Idea will also be encouraged to do the same. The recent tightening comes even as the government had previously resisted taking against Huawei despite being pressured by the US to not let the company participate in the impending 5G auctions.

While no one knows the truth, two things are clear. The world isn’t feeling the love for China thanks to coronavirus and its handling of it. And of all Chinese companies, Huawei is facing the most heat considering its founder Ren Zhengfei was an engineer in the People’s Liberation Army back in the 80s and is considered to be a confidant of Chinese President Xi Jinping, besides its stature in the technology industry.

That’s a recipe for disaster in this COVID-19 era. However, there is plenty of reported evidence of foul play on Huawei’s part which can be attributed to its meteoric ascent. Here’s the story of how it became the villain of the technology sector.

Questionable practices

Contrary to popular belief, it isn’t President Trump who started the investigations against Huawei. In 2014, it was revealed by whistleblower Edward Snowden that the US agency NSA had been spying on Huawei. It had hacked into the servers of its Shenzhen headquarters. The NSA was now keeping tabs on its executives and had obtained critical information about its telecommunications technology.

This was foreshadowed by more than a decade of concerns over Huawei in western countries like the US and UK where the Chinese major opened offices in 2001. By then Huawei was already a 14-year-old company.

The first major red flag against Huawei came in 2003 when legendary Silicon Valley router maker Cisco sued Huawei for copyright violations. Huawei was revealed to be playing fast and loose with intellectual property as the protection of US-based IP wasn’t policed by the Chinese authorities. Cisco alleged that its source code was found in Huawei products, but the case was resolved when it dropped the case.

By this time, Huawei was making bigger plans for the US market and it entered into a joint venture with California-based networking company 3Com.

But concerns about Huawei’s deep link with the Chinese government always existed. Ren Zhengfei was an ex-engineer in the People’s Liberation Army. The first major insinuation of Huawei being a puppet of the Communist Party surfaced in 2005 when the think tank Rand Corporation noted that companies like Huawei may seem independent but they engaged in significant joint research with the Chinese state.

It even said that sales to the Chinese military could account for as much as 6 percent f Huawei’s revenue.

In 2007, the FBI even interviewed Huawei founder Zhengfai amid suspicion that the company was circumventing trade sanctions against Iran with regards to the transfer of US-based technology.

By 2008, Huawei had become a big fish in the world of telecommunications. It, along with fellow Chinese company ZTE, was giving the likes of Ericsson, Nokia and Alcatel Lucent.

As Huawei’s business grew in the US, it tried to pick up a 16 percent stake in 3Com, which was on the verge of collapse. However, amidst concerns over its ties with the PLA, Huawei was forced to abandon its bid as 3Com was a provider of anti-hacking software to the US army. The Rand report from 2005 had come back to bite Huawei.

Year 2009 was momentous for the Chinese giant. It leveraged Google’s Android operating system to enter the smartphone market. Smartphones had become a big deal in 2007 after the announcement of the first iPhone and Google’s Android platform was a response to Apple’s historic device.

Huawei wanted a pie of this glamourous and growing market. But even now many experts believe that Huawei copied many design elements of Apple’s iconic phone. Huawei’s software mimicked the look of Apple’s operating system and does so even today. At the time, some of the phones even looked like knockoffs of the iPhone.

Today, Huawei’s smartphone business is globally number 2 ahead of Apple’s. However, time and again the Chinese major has brought features that have been first seen in the iPhone or have been rumoured to be in the pipeline. A great example of Huawei’s imitation was seen in the Mate S, which had force touch, a feature popularised in iPhone 6S.

In 2010, Motorola filed a lawsuit against Huawei claiming corporate espionage. The case was later settled but it underpinned the fact that the company that invented the mobile phone was under Huawei’s radar to grow in the smartphone space.

Huawei and ZTE were now the faces of Chinese tech — but also feared for their methodology. ZTE and Huawei were both excluded from Sprint’s auctions for the modernisation of their networks.

The US government under the Barack Obama was now wary of Huawei’s proximity to the Chinese government and its growing clout in the global tech landscape. In 2011, the Committee of Foreign Investment in the US (CFIUS) told Huawei to sell its assets of bankrupt startup 3Leap Systems. Huawei had not flagged the deal to the CFIUS and the panel decided to engage in a review.

Perhaps, for the first time this triggered a reaction from Huawei’s senior management. Its deputy chairman Ken Hu wrote an open letter to the US, inviting it to a probe in an attempt to clear its name. It even provided more details about its founder and his ties to the Chinese government.

Brian Shields, a former cybersecurity analyst for Canadian telecommunications company Nortel claimed in 2012 that Huawei was responsible for state-sponsored hacks for almost a decade from the Chinese. He claimed Huawei was a contract manufacturer for Nortel and was the primary beneficiary of these hacks.

Later that year, a house committee issued a 52-page report warning against using equipment from Huawei and ZTE. This warning came despite the lawmakers not finding any wrongdoing. The lawmakers claimed it happened because both companies didn’t provide evidence for a fair and full investigation.

Obama administration turns up the heat

During Obama’s second term, the US government dug in. Its tightening the screws on Huawei coincided with the Chinese company’s growing stature in the world of technology as it started to grow in the smartphone space, developing its own processor -- and by then, it was one of the biggest telecommunications providers in the world.

In 2013, a Reuters report claimed that a Hong Kong-based company called SkyCom Tech, which had close links to Huawei, was selling HP computers to the Mobile Telecommunications of Iran in violation of the US’ trade embargo of Iran.

This was problematic because Meng Wanzhou, the daughter of Huawei’s founder Ren Zhengfai, was on the board of SkyCom Tech. It was believed SkyCom Tech was controlled by Huawei and was a front for it to do business in Iran, circumventing some trade sanctions.

In 2014, when Edward Snowden exposed spying by the NSA, it was also revealed that the US agency was keeping tabs on Huawei and its management.

Later in the year, US-carrier T-Mobile, which did business with Huawei filed a lawsuit against Huawei accusing it of stealing technology, including a part of a robot’s arm from its headquarters. It has been alleged that Huawei’s workers stole a part of Tappy, a robot developed by T-Mobile to test smartphones. This was the first time Huawei admitted to being guilty and claimed that its employees had acted inappropriately.

Years later, the case was won by T-Mobile when the jury ruled in its favour determining that Huawei had misappropriated its trade secrets, breached a handset-supply contract between the two companies. The jury ordered Huawei to pay $4.8 million to T-Mobile.

A year later in 2015, Huawei joined hands with Google for developing the Nexus 6P smartphone. This was Google’s most significant and globally relevant phone and considered its answer to the iPhone. The Nexus phones were well received especially for their cameras and design and portrayed Huawei in a good light. But at the same time, the US government was planning to open an investigation against it.

In 2016, the US commerce department issued a subpoena to Huawei investigating alleged violations of US trade sanctions on export or re-export of American technology to countries like Cuba, North Korea, Syria and Sudan. The investigation even involved the US treasury department by the end of the year. It came at a time when the US government had already found ZTE, Huawei’s Chinese rival, guilty of violating trade sanctions. The investigation also revealed that ZTE had followed the approach of a rival towards breaching the trade sanctions without naming Huawei.

Trump dials up the pressure

By 2018, Huawei was the largest Chinese smartphone maker in the world. It was the biggest player in China, the world’s largest smartphone market. It had also become the world’s third-largest smartphone maker having become popular even in Europe. The only place Huawei hadn’t managed to make a dent was the US.

On the heels of critically acclaimed phones like the Huawei P9, P10 and Mate series, Huawei was now on the precipice of a deal with AT&T signing up its latest phone for the US. This was supposed to a major announcement at the high profile annual CES event.

But the US lawmakers and federal regulators intervened and AT&T abandoned the deal at the eleventh hour. Huawei wasn’t just a force to be reckoned with in smartphones but was now considered to be one of the pioneers in the development of 5G technology. Huawei’s influence in 5G deployments was seen as a threat to the US, which was outlined in a House memo. AT&T hadn’t just cancelled the launch of a Huawei phone but had cut all ties with it even in the development of 5G technologies.

This was a body blow to Huawei’s business in the US. The company decided to downsize its operation in the US, letting go its VP for external affairs, William Plummer. Plummer later wrote a book titled Huido, detailing many of Huawei’s missteps.

In the same year, the Pentagon banned the sale of both Huawei and ZTE phones in stores on military bases. The thinking was that the Chinese government could order companies to track soldiers’ movements. In a couple of months, the National Defense Authorization Act was issued barring the US government agencies from buying equipment from Huawei and ZTE.

An investigation by French newspaper Le Monde claimed that China had engaged in hacking the African Union headquarters in Ethiopia from 2012 to 2017, which was built by Chinese contractors including Huawei whose equipment was being extensively used in it.

It was followed up by a wide campaign by the US urging its partners across the world to bar Huawei from participating in 5G auctions for telecommunications. In recent years the US urged partners like Canada, the UK, Australia, Germany, New Zealand, Japan, Italy and even India. Much of those attempts have borne fruit as the world’s top economies grew jittery about using Huawei gear in their network infrastructure.

Huawei vs the world

December 1, 2018, was a day of reckoning. Huawei’s chief financial officer and the daughter of the company’s founder, Meng Wanzhou, was arrested in Canada at the behest of the FBI. She was taken in on suspicion of violating US trade sanctions against Iran by part of being a board member of SkyCom Tech.

Year 2019 began with the US filing criminal charges against Huawei. It accused Huawei with more than 20 allegations that included violation of trade sanctions and theft of trade secrets. The US formally asked Canada to extradite Wanzhou who was now living in a mansion in Vancouver, not allowed to leave Canadian territory as a part of the case.

At the CES, the consumer electronics show, in Las Vegas, the FBI conducted a sting operation. Akhan Semiconductor, a company that makes scratch-resistant glass, helped the FBI in the sting. Reportedly, Huawei had attempted to steal Akhan’s technology called Miraj, which features an artificial diamond that could be even used for defence purposes.

The news almost coincided with a Huawei employee being arrested in Poland by its counter-intelligence agency and charged with espionage. He was said to be a sales director working with the telecom firm Orange.

In February 2019, the Information reported a startling story of how Huawei had probed Apple’s suppliers including workers at manufacturing giant Foxconn for details on Apple, such as its Watch’s heart-rate monitors to connector cables on the MacBook Pro.

A Bloomberg report in April 2019 said Vodafone Italy had discovered security vulnerabilities in its Huawei fixed-line network equipment including back-doors in optical nodes, broadband gateways and telnet on its home routers. This could potentially give Huawei access to its network, the report said. Huawei and Vodafone, however, denied the report’s claims.

In May 2019, Donald Trump signed an executive order, which proved to be a crippling blow to Huawei’s business that could potentially turn into an existential crisis for the Chinese major. It mandated the creation of an “Entity List” -- US-based technology firms could now do business only with companies approved on the list. The US companies aren’t even allowed to transfer technology, including US-based units to foreign organisations. Predictably, Huawei didn’t make the cut.

This meant both Google and Microsoft were barred from sharing their respective Android and Windows operating systems with Huawei for their smartphones and notebooks. Google’s Android which was open source could still be used by Huawei but Google was barred from sharing its core applications like Maps, Gmail, YouTube and even the Google Play Store, which would make Huawei’s phones inferior to every other phone outside of China.

The bigger issue was that semiconductor makers like Intel, Qualcomm and even UK-based ARM holdings weren’t allowed to sell or share their technology with Huawei. ARM was a critical partner for Huawei as it licensed its technology for creating custom microchips for its phones as part of its HiSilicon unit. This unit also made chips for its networking business. Without ARM’s designs, Huawei wouldn’t be able to design its semiconductors and Intel and Qualcomm -- two of the world’s largest semiconductor suppliers -- were off-limits.

On its part, Huawei proved to be quite resilient. It was expecting such US sanctions and was stockpiling components for months. Despite this, its business was now being choked as it wouldn’t have the latest access to software or hardware from the US firms that controlled IP in the tech sector.

The wheels were now starting to come off. Every day, there would be a new claim. Days after being added on the US entity list, Dutch newspaper De Volkskrant claimed that Dutch intelligence agency AVID was investigating reports of backdoors in Huawei sourced network gear of a carrier.

Later that year, a Washington Post story revealed that Huawei had collaborated with a Chinese state-owned company called Panda international to build telecom network in North Korea. This again raised questions about the company breaking US trade sanctions as its telecommunications products deeply utilise components sourced from US companies.

In April 2020, a New York Times report sensationally claimed that five Huawei employees were jailed in China after being embattled in a dispute with the company. It began when employees had formed a WeChat group where one of them talked about Huawei’s violations of trade sanctions against Iran. Within weeks of the chat, Chinese authorities detained them. They were asked if they had been in touch with foreign news outlets. One of them eventually was jailed for more than eight months.

In what was said to be tit-for-tat move, China detained Canadian nationals Michael Kovrig and Michael Spavor on espionage charges. Kovrig was a former diplomat while Spavor is the founder of the Paektu Cultural Exchange.

Is India wary of Huawei?

India has always been wary of Huawei. As far back as 2010, the RAW, India’s top security agency claimed that Huawei was part of a Chinese spy network. In an Economic Times report, RAW claimed the Chinese firm shared ties not only with the Chinese security establishment but also was part of its intelligence set up.

In 2014, it was alleged that Huawei was involved in the hacking of the BSNL network in Andhra Pradesh. Huawei denies these allegations.

Huawei has been in India since 1999, having an R&D centre in Bengaluru. The R&D centre employs over 4,000 people. The quandary for India is that on one side, the security agencies and global powers are lobbying against Huawei but on the other, for the proliferation of affordable connectivity, Huawei’s technology is important for telecom operators.

Vodafone Idea, which is already bleeding has a large part of its network based on Huawei’s technology. If it were to survive the ongoing AGR case, for the future upgrade of its network, it will likely prefer to choose Huawei as it would be cost-effective and help ease its transition to 5G.

In the wake of the Galwan Valley tussle, Huawei has already been put out of contention for public sector players like BSNL. The government is contemplating a blanket ban even for private sector companies. Even if that doesn’t happen already, India’s biggest player, Jio, isn’t dependent on Huawei. Its technology is sourced from Samsung and has been reportedly developing its 5G technology in-house, an unprecedented move in the telecom sector.

Chances are both Airtel and Vodafone-Idea would be encouraged to move on from Huawei and choose a non-Chinese partner.

Huawei’s proximity to the Chinese government and the fact that party committees are now mandatory in all private sector companies in China would raise the Indian government’s concerns.

Huawei can’t shake off its China problem because of Chinese law

One of the biggest concerns for foreign governments about Huawei has been a Chinese Law that was passed in 2017.

Article 7 of the National Intelligence Law of the People’s Republic of China states that “All organisations and citizens shall, by the law, support, cooperate with and collaborate in national intelligence work.” Article 12 notes that state intelligence agencies may “establish cooperative relationships with relevant individuals and organisations, and entrust them to undertake relevant work.”

This law creates legitimate paranoia in the eyes of the world. It gives Huawei the agency of an agent of the state. This notion is further fuelled by the fact that its founder was part of the Chinese military setup.

Then, of course, there is evidence of unethical practices and copycat behaviour. In the wake of the detention of Meng Wanzhou, there is also plenty of evidence that Huawei works in cahoots with the Chinese government to support rogue nations and also squash the civil liberties of people who speak against it.

But within China, Huawei has a storied reputation. “You can take Huawei out of China, but you can’t take China out of Huawei,” goes the line.


June 28, 2020 at 10:44PM
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View: How Huawei emerged as the Internet’s bad boy - CNBCTV18

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