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China’s Huawei and ZTE face worldwide setbacks

Xi Jinping

China’s technology titan and its 5G champion Huawei Technologies has seen the toughest times in its international business in the last few years. Huawei’s controversial involvement with the Chinese government and security agencies has sparked protests in many countries, especially those which are either capable of independently upgrading their telecommunication infrastructure, or are close allies of the former.

The United States, spearheading the debate on security threats relating to Huawei’s alleged involvement with the People’s Liberation Army (PLA), in 2019 became one of the first to ban Huawei’s 5G trials in the US telecommunications equipment handling and telecom business.The US has alleged that the Chinese tech giant is actively involved in stealing American intellectual property and technology specifications. The US Department of Justice (DoJ) in 2019 alleged that Huawei was stealing trade secrets from Bellevue, Washington based T-Mobile company.In the same case, the DoJ released a list of crimes against the company’s officials including money laundering, conspiracy, wire fraud, obstruction of justice, etc. Consequently, in May 2019, the US banned its companies from using telecom equipment manufactured by Huawei. It also added Huawei to the blacklist of companies that were restricted from doing business with American businesses.

But US was not the only one to crack whip. Down under Australia, in 2018 became one of the first to put a complete ban on Huawei’s 5G equipment rollout along with its engagements with ZTE, another Chinese telecom giant. This was immediately followed by Japan in 2018 when it also banned both Huawei and ZTE from its domestic telecom equipment manufacturing industry. Australia also advised its partners including India to ban Huawei from the supply of telecom parts for national security reasons.  In 2020, India followed suit by deciding to keep Huawei and ZTE out of its 5G rollout. Prior to it in 2018, the UK government also banned Huawei from rolling out its 5G equipment. In addition, it ruled out that Huawei equipment within the 4G infrastructure shall also be pulled out of the country by 2020.

Now, Canada has become the latest country to designate Huawei as a national security concern. Ottawa has accused the company of installing backdoors in its products and services that provides the company an unauthorised access to its user data.  It is worth remembering that in 2018, Canadian authorities had arrested Huawei’s the high-profile top executive, Meng Wanzhou. She was accused of allegedly misleading banks about the company’s business dealings in Iran flouting the US sanctions.

Out of the group of ‘Five Eyes’ alliance, New Zealand in 2018 itself, had banned Huawei from country’s first 5G network, following the move of Australia. In South East Asia, in 2019 Malaysia has announced that its security standards will dictate the engagement of Huawei with its domestic companies from time to time, signifying concerns with Huawei’s equipment. In the Middle East too, countries which are using Huawei equipment are under the US radar, and Washington has repeatedly flagged its concerns with its Gulf allies over security risks associated with the company.

But not just the governments, other companies too are rethinking their ties with Huawei due to concerns over data piracy and cyber security. Apple has alleged that Huawei stole its trade secrets for business purposes. Cisco has repeatedly cited its 2003 case when it accused Huawei of stealing its source code to build Huawei’s network routers. In 2019, Nokia also decided to replace Huawei from its core infrastructure and partnered with other companies like Intel and Marvel technologies. A similar move came from a non-corporate entity, the University of Oxford, which has announced in January 2019 that it will not accept any donations or research grants for research projects from Huawei at the University.

Huawei’s challenges in the European market are mounting. The continent remains the largest market for Huawei’s telecom and mobile phone sales. However, after the debate on national security concerns, several countries have conducted deeper scrutiny and halted the company’s business in the European 5G market. Several private telecom companies in the European countries picked other companies like Nokia to help build their 5G network instead of Huawei. No European country so far has put a blanket ban on the company’s engagement with their domestic markets except Sweden.

However, the European Union is considering proposals that aim to ban Huawei in its future trials of next-generation mobile networks. Countries like France and Germany, which are not as vocal as others, have clarified that their telecom operators will not be able to renew their licenses with Huawei after their expiry in 2028. These European moves are also forced due to the US threats on limiting intelligence sharing with these countries as they are engaging and sharing data with the Chinese tech giant.

Since 2018, China’s Big-tech companies, mainly Huawei, have faced the heat of US-China tech war. While other companies in China have received a setback from their own government in the recent years, Huawei continues to enjoy China’s state patronage owing to its strategic advantages and associations with China’s Belt and Road initiative. The extent to which the US concerns over Huawei have affected China’s technology expansion plans is not yet known. However, it is safe to say that it has surely affected the business of company’s international business and its global standing.