Who’s Afraid of Huawei?

Huawei (or ”WAH-way” for those untrained in the ways of pinyin, according to a promotional video made by the company) is now the world’s largest manufacturer of telecommunications equipment. The company, founded by former PLA engineer Ren Zhengfei, has become an economic powerhouse and a ubiquitous part of the global telecommunications infrastructure, and is creating much anxiety around the world. In June, a US congressional committee began probing the Shenzhen-based behemoth. In its latest issue, The Economist focuses two articles on Huawei. After describing the company’s rise and global reach, the cover story outlines the major concerns:

Critics are convinced that there is more to Huawei’s rise than strategy, guts and Mr Ren’s devotion to innovation. They think it has stolen vast amounts of intellectual property and that it has been heavily subsidised in its expansion by the Chinese government, eager to use it as a Trojan horse with which to infiltrate itself into more and more foreign networks. Huawei rejects all these allegations.

[...]Then there is the question of whether China’s government bankrolled Huawei’s undercutting of its rivals. In 2011 Huawei acknowledged that its customers did benefit from access to $30 billion in potential “export financing”, though apparently only a fraction of that has been used. Pressed for details, the firm says that “in 2011, the financial support that Huawei provided to customers came to 5.86% of total contract sales,” a figure not specified.

[...]This leaves the most troubling criticism: that the firm might be a creature of China’s security services. Mr Ren’s past in the PLA fuels such suspicions, as does a reasonable perception that privately held Chinese companies are often in cahoots with the powers that be. The firm’s dealings with unsavoury regimes such as Iran, where its salesmen boasted that their equipment makes it easier to spy on potential troublemakers, are taken as supporting this view.

The second article from The Economist has more on the US congressional committee, and explains why a ban on Huawei would be a mistake:

Arguments against imports always need to be viewed with caution, since they will be used by protectionists to keep emerging rivals out. Still, it is reasonable to worry about security in telecoms: recent reports have pointed to the efforts of Chinese state-sponsored hackers to vacuum up valuable Western commercial secrets on a massive scale. [...]

But banning Huawei from bidding for commercial contracts is wrongheaded, for two reasons. One is that the economic benefit of competition from China in general and Huawei in particular is huge. It boosts growth and thus wellbeing. Huawei’s cheap but effective equipment helped make Africa’s mobile-telecoms revolution possible.

The other reason for not banning Huawei is the dirty little secret that its foreign rivals strangely neglect to mention: just about everybody makes telecoms equipment in China these days. Chinese manufacturers and designers have become an integral part of the global telecoms supply chain. Blocking Huawei (or its rival Chinese telecoms giant, ZTE) while allowing gear from, say, Alcatel-Lucent or Ericsson on a network may make politicians feel good. But it is no guarantee of security. Huawei’s competitors have a vested interest in hyping concerns about it, while disguising their own reliance on Chinese subcontractors and on subsidies.

Last month, in response to the congressional committee and in effort to prove its commitment to security, Huawei hired an American cybersecurity strategist and former Homeland Security officer as its chief security officer.

T-Mobile has switched to Huawei made handsets for their MyTouch smartphones, and a review in Wired has drawn attention to their outdated specs. Also see a more favorable article from the Nation outlining Huawei’s Ascend series of smartphones.

For more on Huawei, see prior CDT coverage.