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Explained: Why governments are wary of Huawei

The Chinese telecom giant is at the centre of yet another controversy, which has cost a UK minister his job. What is it about the company that continues to cause security concerns to countries around the world?

Written by Debashish Pachal |
Updated: May 14, 2019 10:00:21 am
Explained: Why governments are wary of Huawei Huawei founder Ren Zhengfei with Chinese President Xi Jinping at the London offices of the tech giant.

A controversy involving the Chinese electronics and telecommunications equipment company Huawei claimed the job of a British cabinet minister this month, the latest of many incidents that reflect the suspicion with which the company is viewed around the world.

Huawei, based in Shenzhen, was founded in 1987 by Ren Zhengfei, an engineer who had served in the Chinese People’s Liberation Army (PLA).

What happened in the UK?

Prime Minister Theresa May sacked Defence Secretary Gavin Williamson over information leaked to the press about a top secret government meeting relating to Huawei. Williamson has denied leaking the information. The leaked information was published late last month in The Telegraph of London, which reported that May “had given the green light to a Chinese telecoms giant to help build Britain’s new 5G network despite warnings from the US and some of her most senior ministers that it poses a risk to national security”. The report said that at the UK’s National Security Council (NSC), chaired by May, she had overruled concerns expressed by senior cabinet colleagues.

Following the report, May ordered an inquiry into the leak under Cabinet Secretary Sir Mark Sedwill. This was followed by the dismissal of Williamson. MP Jacob Rees-Mogg has been quoted as saying: “The whole story here is not about a leak, it’s about whether or not we’re getting into bed with the Chinese company Huawei against the advice of the US and Australians who have decided not to.”

What are the suspicions about Huawei based on?

These arise from the fact that it was founded by an engineer who has earlier worked in PLA and is also a member of the Communist Party of China. Journalist Richard McGregor, the author of The Party: The Secret World of China’s Communist Rulers, had claimed that Huawei has received state support at crucial points in its development.

The concerns are over a perceived security risk posed by Huawei to countries it is operating in. For example, as per a report in Bloomberg quoting security briefing documents from 2009 and 2011 of Vodafone, which was using Huawei equipment, Vodafone had identified hidden backdoors in the software that could have given Huawei unauthorised access to the carrier’s fixed-line network in Italy. According to the report, Vodafone had asked Huawei to remove backdoors in home routers in 2011 and received assurances that the issues were fixed, but further testing revealed that the security vulnerabilities remained.

What was the advice of the US mentioned by British MP Rees-Mogg?

The US government has banned Huawei from the country’s networks and has advised the UK, Australia, New Zealand and Canada to do the same. The US claims that Huawei’s close ties with the Chinese government and its army make it a national security risk.

In January this year, the US Department of Justice unveiled two indictments against Huawei. One indictment, unsealed in the Western District of Washington, centre on Huawei’s attempted theft of US company T-Mobile’s secrets. From 2012 to 2013, Huawei China, with help from employees in the US, allegedly implemented a scheme to steal T-Mobile’s phone-testing robot.

Wilbur Ross , the United States secretary of commerce, speaking in January about charges against Huawei of bank fraud and stealing trade secrets. (NYT Photo)

The other indictment, unsealed in the Eastern District of New York, focuses on Huawei’s alleged attempts to skirt US sanctions on Iran. It accuses Huawei of running a Hong Kong-based company, Skycom, as an “unofficial subsidiary to obtain otherwise prohibited US-origin goods, technology and services, including banking services”.

Last week, the US State Department official responsible for 5G, Robert Strayer, was quoted as saying: “Putting Huawei or other untrustworthy vendors in any part of the 5G telecommunications network is a risk.” He added that “if other countries insert and allow untrusted vendors to build out and become the vendors for their 5G networks, we will have to reassess the ability for us to share information and be interconnected with them in the ways that we are today”.

Where else has Huawei run into trouble?

Last December, Huawei’s chief financial officer Meng Wanzhou was arrested by Canadian authorities at the request of the US, with which it has an extradition treaty. Around a week later, it emerged that an arrest warrant had been issued on August 2018 by US District Court for the Eastern District of New York. The warrant was based on allegations of a conspiracy to defraud banks which had cleared money that was claimed to be for Huawei but was actually for Skycom, described as the “unofficial subsidiary”, which allegedly attempted to sell US equipment to Iran despite the US and European Union bans.

Among other countries, New Zealand and Australia have blocked the use of Huawei’s equipment in the rollout of 5G networks. In April 2018, US regulations were announced that banned government companies buying from any company deemed a security threat. In July 2018, the US lifted the ban on Chinese company ZTE as a part of a settlement, while the ban on Huawei equipment continues.

In August 2018, the Australian government banned Huawei and ZTE from supplying telecom equipment for 5G network, citing national security concerns. In November, New Zealand’s security services too blocked Huawei from supplying mobile network kit to a local company on concerns of national security. In the UK, telecom service provider BT confirmed last year that it is removing Huawei equipment from key areas of its 4G network, following concerns from MI6.

Where does India stand in this controversy?

In India, there has been confusion among telecom operators on what to do about Huawei when they switch to 5G networks. Huawei network equipment has been used by Vodafone Idea and Airtel in many circles, but the Chinese company has still not got a nod on 5G trials. Huawei and ZTE were barred from taking part in the trials initially.

How big a player is Huawei globally?

Today, it is the world’s second-largest smartphone maker, selling more than Apple, and behind only Samsung. It surpassed Apple in the first quarter of 2019, according to research firm Counterpoint, which said Huawei shipped 59.1 million smartphones. Samsung retained the top spot with 72.0 million units.

Huawei in India

Huawei set foot in India in 2000, working with telecom operators to provide them with network equipment. Though the segment was crowded with other companies like Ericsson and Nokia Networks, the boom that was about to happen in the Indian telecom sector enabled it to accommodate Huawei too. Huawei’s first research and development centre outside China was set up in India, one of its biggest outside its home turf. Ten years after it began network operations in India, Huawei launched its first line of smartphones in 2010. However, its devices, which are now sold under the Honor brand, recorded sluggish sales compared to its Chinese counterparts such as Xiaomi, Oppo and Vivo. The brand broke into the top five rankings in the Indian smartphone market for the first time in the January-March quarter of 2018.

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