The same reason why US targeted telecoms group also puts it in a strong position
Six months after coming under attack, the Chinese telecoms company Huawei is switching from defence to offence.
This week, the Chinese company intends to start suing the US, which has labelled its telecoms equipment as a security risk, for banning it from federal contracts.
The lawsuit comes after weeks of advertising campaigns, an assiduous courtship of journalists around the world and even an attempt to get the hashtag #HuaweiFacts to trend on social media.
At the end of last year, Huawei seemed down and out, with the “Five Eyes” intelligence sharing network of countries and other European allies considering joining Washington in blocking its equipment from next-generation infrastructure — the 5G networks that will enable faster streaming of videos and, when they come, laser-fast response on internet of things devices.
But the campaign is wobbling. The UK and New Zealand have backpedalled; Germany and France are likewise taking a more conciliatory line, even though Mike Pompeo, US secretary of state, warned of the consequences of using Chinese equipment. “We won’t be able to work alongside them . . . We’re not going to put American information at risk,” he said.
As the UK weighed up the Huawei debate, the UK telecoms company BT became one of the first foreign companies to win a licence to offer corporate telecoms networks in China. “BT had been seeking this licence for some time,” said one person familiar with the deal. “That’s the coincidence we see in play.”
A number of reputable names such as Robert Hannigan, former director of GCHQ, the UK’s communications intelligence agency, came out in support of a more flexible line. Huawei’s founder and president Ren Zhengfei, a largely reclusive figure, gave interviews to the UK’s BBC and CBS.
In taking to the courts, Huawei is borrowing a page from Kaspersky Lab, the Russian cyber security company that filed two lawsuits after US officials banned it from government systems in 2017, arguing that the ban violates the constitutional prohibition on passing a law which singles out an individual or group for punishment without trial.
Behind the US concerns on Huawei lie China’s increasing mastery of mobile internet technology. Galled at not playing a significant role in previous generations of mobile internet, in part because it devised its own standards, Beijing was determined to be in front when it came to 5G.
A glance at the relevant industry bodies shows how successful it has been. Houlin Zhao was late last year re-elected for a second four-year term as secretary-general of the International Telecommunication Union, the 154-year-old UN agency for information and communications technologies.
China also dominates 3GPP, the standard-setting body, with 110 individual members (including some local arms of multinationals) hailing from China compared with 82 from the US, the next biggest.
“The standard-setting process has always been a long and arduous one in which various techs try to play the system to their own advantage,” said one former US regulator. Dinners and smoky rooms all play a role in the backdrop to votes, he added — they have learnt from the American playbook.
Meanwhile, Huawei’s spending on research and development has left it in an enviable position.
While European and US telecoms equipment makers were reeling from the huge debt binge undertaken by the telecoms industry in the late 1990s, laying off staff and raising cash, Huawei was quietly building. Today even its critics concede that Huawei makes good equipment.
As importantly, thanks to economies of scale — and, critics say, state subsidies — it is cheaper and can come with generous vendor finance.
That matters even beyond emerging markets. The economics of telecoms carriers mean big upfront payments and a payback dependent upon take-up — and as of now there is only a very limited use case for 5G.
The jury is out on the raft of complaints levelled at Huawei, including IP theft and snooping. Huawei itself may be down at the moment, but it is far from out.
See? I can do that better than you as well!
