US disbands Huawei: From the CFO’s arrest to the latest executive order, all you need to know

By way of an executive order, the US administration last week decided to blacklist Huawei, the world’s seventh-largest technology company and second-largest smartphone manufacturer, citing national security interests.

Accusing it of quiet intellectual property violations and trade secrets theft over the years, US President Donald Trump finally handed down an order on May 15, adding Huawei to the US Department of Commerce’s Bureau of Industry and Security Entity List and banning US companies from doing business with it.

This effectively halts the Chinese firm’s access to key hardware including ARM‘s current and future chip designs, losing which would cripple Huawei’s operations and compel it to produce its own chips.

It also arrives on the heels of similar breaks from Google and Microsoft that provided the company with software for its cellphones and associated technology.

An array of troubles faces Huawei

This is not the first time the US government has expressed open suspicion of Huawei’s networks and equipment. The Obama administration in 2012 banned companies from using Huawei networking equipment under similar pretexts.

However, turbulence properly kicked in at the end of March, 2018, when FBI and Pentagon warned against the sale of Huawei phones, turning up the government scrutiny for potential cybersecurity risks due to its alleged ties to Beijing.

Around the time, Cambridge Analytica was gathering storm, and a report revealed that Facebook gave Huawei special access to user data.

Australia soon followed the US’ hardline approach to stymy Huawei’s 5G roll-out, while Japan decided to stop buying Huawei equipment; Amazon Japan has even stopped selling Huawei products.

Legal troubles over theft of technology began with US-based CNEX Labs last October. The tussle between Huawei and the US administration reached a climactic point in December when CFO Meng Wanzhou was arrested in Canada. In January, the Senate slapped 23 indictments for alleged trade secret theft, and first floated the possibility of an executive order.

In March, Huawei sued the US government over its equipment ban. Last month, a series of developments implicating Huawei hit the headlines, notably with the CIA alleging Chinese state security of funding the firm, and Vodafone finding hidden backdoors in its equipment.

Huawei’s response shows China is pursuing its own tech ambitions

The company, like always, denied any wrongdoing and continues to maintain its innocence through the recent charges.

Pushing back against the US ban, Huawei’s billionaire founder and CEO Ren Zhengfei not only dismissed allegations that his firm aids the Chinese government in espionage, but also appeared defiant in the face of sanctions that threaten the very existence of his firm, especially on the eve of a global 5G rollout by rival firms.

In an interview with Bloomberg TV, the billionaire founder of China’s largest technology company, conceded that the Trump administration’s export curbs will cut into a two-year lead that Huawei had painstakingly built over rivals like Ericsson and Nokia.

But the company seems to have anticipated this moment, as it has been developing its own operating system, which doesn’t rely on Android or Windows and could potentially be ready by the year-end. 

After knocking Apple off the second place, Huawei reported in January that it’ll take the smartphone crown from Samsung by 2020.

Ren further indicated that Huawei will either ramp up its own chip supply or find alternatives to keep its edge in smartphones and dominance in next-generation 5G wireless networks; right now, it is finding closed doors in a lot of prospective client-countries.

Huawei’s cell towers are the problem, not its cellphones

Huawei, one of the main hardware providers, is also an important supplier for telecom service infrastructure in the US alongside Ericsson and Nokia, although the latter two cover most of the market share. The first wave of concerns pertained to its cell towers presumed to have backdoors, but there is no hard evidence to suggest that.

The paranoia, at least ostensibly, seems to lead from Huawei’s alleged coziness with the Beijing government—a worry that stems from a belief that it’s not possible to operate in China without engaging with the state apparatus and acting as an arm of its spy network.

As long as there remains “a pipeline from Huawei’s China headquarters to cell towers in the US,” the risk of Chinese surveillance agencies using it to sneak malware into the US network lingers.

Irrespective of whether they’d do it with Huawei’s help or by hacking themselves into the middle, the risk is too huge—it cannot be allowed to spy on other countries or companies.

That is perhaps why when carriers raced to build out 5G networks, intelligence agencies and lawmakers rushed to keep Huawei hardware out of whatever was being built.

But both verticals are facing the wrath

By placing Huawei on a government blacklist, the US has effectively cut off Huawei’s oxygen supply by limiting its access to critical chips and software from American companies, writes Chinese publication South Morning China Post. But it feels OTT, according to some.

The Verge notes, “Revoking Huawei’s Android license doesn’t matter for US network equipment, nor does Huawei’s access to ARM chip designs. Instead, it feels like Huawei’s device business has become collateral damage in a broader fight over 5G.”

Moreover, if this is punishment for predatory behaviour, the broad scope of the sanctions exposes other Chinese companies like Lenovo and Xiaomi too (which source processors and glass screens from Huawei).

Tech war—an extension of trade war?

More importantly, without the lack of concrete evidence (most of which is classified in this case), it is hard not to interpret this as a means to bring a successful foreign competitor down.

Attacking Huawei’s hardware business does nothing to preserve the security of networks and the privacy of individuals, as claimed by Trump. If that were indeed the goal, experts suggest investing in research on encryption and counter-cyberespionage.

US and China have been battling it out on the international trade front for a while now. It is suspected that the sanctions on Huawei, a Chinese tech giant, is a tactic for the ongoing trade and tariff war between the two countries.

According to The Washington Post, this tech cold war may eventually usher in a bipolar world in digital technology with two walled-off ecosystems.

“This division would erode the open world economy, the deep levels of interdependence and the cross-border investments and supply chains that characterize the global economy today,” it notes, arguing that China’s own, home-grown hi-tech industry will offer cheaper tech because of its lower labor costs, looser regulations and government aids, and thus be more popular in the developing world.

Its impact on American jobs and companies is also a major talking point, and leaves one to wonder if either party is actually prepared for this.

How the world responded to this saga

Responding to concerns over equipment made by Huawei, security officials from 30 countries formlated a common approach to wireless network safety early in May, warning governments against “relying on suppliers of fifth-generation networks that could be susceptible to state influence or based in countries that haven’t signed international agreements on cyber security and data protection.”

The UK regularly monitors Huawei’s equipment as part of the Huawei Cyber Security Evaluation Centre Oversight Board—a body that was set up to allay fears about its equipment.

The UK, France, and Germany, among other nations have concluded that they will continue to use Huawei’s technology regardless of this sanction; in a growing movement towards a united 5G security approach, the UK nonetheless recognised the “significantly increased risk” it poses, and said certain safeguards will be in place.

The country’s National Security Council has decided to give Huawei access only to the edge of the 5G network, which does not involve the transmission of sensitive information, keeping the core of the network safe.

Prarthana Mitra is a Staff Writer at Qrius

5GHuaweiNational securityUS-China Trade War