As US hostility towards China climaxed this week with an indictment against Huawei, industry experts are speculating if this is a battle over the forthcoming fifth-generation (5G) broadband networks.
This new communications technology will enable significantly faster wireless access and create the infrastructure needed for connecting robots and sensors for what is being called the fourth industrial revolution.
Tensions with Huawei appeared to reach a peak in December when Huawei’s CFO Meng Wanzhou was arrested in transit in Canada
US law enforcement agencies are concerned that having Huawei equipment at the core of a network will compromise its security and potentially allow for snooping.
Huawei, which connects a third of the planet’s population to the internet or telecoms networks, denies all accusations, which reached a crescendo with this week’s charges two days before trade negotiations began in Washington on Wednesday.
The timing of the charges that Huawei circumvented sanctions against Iran and lied about it, and that it stole intellectual property from US network T-Mobile do not seem to be coincidental given these crucial negotiations, most observers say.
Beijing called the charges “unfair and immoral” and labelled the pressure on Huawei as “unreasonable suppression”.
As the largest technology company in China, it attracts huge national pride. Even though most SA consumers only know it for its smartphones — which overtook Apple in 2018 as the number two handset maker, both globally and in SA — Huawei is the world’s largest telecommunications equipment manufacturer.
It operates in more than 170 countries, serves more than 3-billion users globally and had revenue of $92.5bn in 2017 and spent $13.23bn on research & development in 2018.
Numerous telecoms companies in the US, UK and Europe, including Vodafone, majority owner of Vodacom, have said they will hold off on new Huawei technology purchases. Apart from waiting to see which way this global trade war wind blows, the implications for SA telecoms operators are not known yet.
“Against the backdrop of heightened political noise in Europe and wanting to make sure the industry is engaging in a fact-based discussion around this issue, Vodafone has decided to pause any new deployment of Huawei’s 5G equipment in its ‘core’ in Europe,” a Vodacom spokesperson told Business Day.
Meanwhile, MTN SA’s corporate affairs executive Jacqui O’Sullivan said: “Huawei has been a valued partner to MTN Group for many years. MTN is monitoring this matter and will continue to operate in the very best interest of all our stakeholders, across our markets.”
Tensions with Huawei appeared to reach a peak in December when Huawei’s CFO Meng Wanzhou was arrested in transit in Canada on request of the US, which is attempting to have her extradited. Meng, daughter of Huawei founder Ren Zhengfei, was detained on charges that she intentionally deceived US banks to break sanctions with Iran.
“The Trump administration’s conflict with China has little to do with US external imbalances, closed Chinese markets, or even China’s alleged theft of intellectual property,” Columbia University professor Jeffrey Sachs wrote in December about Meng’s arrest. “It has everything to do with containing China by limiting its access to foreign markets, advanced technologies, global banking services, and perhaps even US universities.”
Describing this as a “part of an economic war on China, and a reckless one at that”, the economist called the arrest “rare” and listed 25 banks that have been fined for violating US sanctions since 2010.
The reclusive Ren, 74, served as an officer in the military during China’s Cultural Revolution before he started Huawei, leading to fears about its links to the Chinese government.
“I still love my country. I support the Communist Party of China. But I will never do anything to harm any other nation,” Ren said in a rare interview. “We will never do anything to harm the interests of our customers.”
Arthur Goldstuck, MD of researchers World Wide Worx, says it is difficult to comment on the legal issues without knowing what evidence the US authorities have. “However, it is telling that far more egregious behaviour by Russian interests has been all but ignored. It suggests strongly that the action is motivated by the trade-warmongering noises made by the US president.”
Two major business trends probably underlie it, he believes. “On the consumer side, Huawei has overtaken America’s corporate darling, Apple, to become the second-biggest handset seller in unit terms in the world. On the corporate and operator side, Huawei leads the world in 5G technology.”
Therefore, he says, Huawei “is poised to own the near future, even as American rivals are all but surrendering technology leadership. One can imagine US interests scrambling desperately to head off the country that is their most bitter economic rival.”
With a 20-year track record of doing business in Africa, a Huawei SA spokesperson said: “We’ve had no security breaches here or in the rest of the world to date. In SA, we work with our carrier partners to meet their privacy and cybersecurity requirements. In addition, Huawei also works with government and regulators in SA and on the continent to ensure we are compliant with all laws, rules and regulations.”
The Trump administration has taken a hard line with China over import tariffs, and has set a March 2 deadline, after which it said it will levy an additional $200bn in tariffs on Chinese goods.
Whatever the complaints about Huawei may be, the company has found itself in the middle of a trade war between the world superpowers.
• Shapshak is editor-in-chief and publisher of Stuff
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