U.S. Ban on Huawei: Superpowers’ Insecurities and Nightmares
By Min Jiang (Ph.D.), Associate Professor of Communication, UNC Charlotte | CyberBRICS Fellow
What is Huawei?
Since 2018, Huawei, the Chinese tech giant, has been caught in the eye of the storm of U.S.-China trade war (Keane for CNet, 2019). Founded in 1987 by its current CEO Ren Zhengfei and headquartered in Shenzhen, China, Huawei, a private employ-owned company has grown to be the world’s largest telecommunications equipment manufacturer (overtaking Ericsson in 2012) and the 2nd largest smartphone maker (surpassing Apple in 2018 and after Samsung), poised to dominate the next-generation mobile infrastructure of 5G (Tsang & Satariano for NYT, 2019), at least until most recently. With its networks reaching one third of the world’s population by 2012 (The Economist, 2012), Huawei is one of China’s most successful global companies.
U.S. Ban on Huawei
Trump is Huawei’s worst nightmare. On May 15, 2019, the U.S. Department of Commerce blacklisted Huawei amid escalating US-China trade tensions. The two-pronged ban (Feng for NPR, 2019) not only restricts the sale of U.S. technology to Chinese telecommunications companies like Huawei, it also blocks U.S. companies from buying foreign telecom equipment if it is deemed a national security threat, a move believed to be directed at Huawei.
On May 21, the U.S. Department of Commerce created a temporary license allowing Huawei to keep support for its existing products and customers till August 19, 2019. The U.S. Justice Department claimed Huawei has broken sanctions on Iran, among other things, although the Five Eyes intelligence alliance’s (US, UK, Australia, Canada, New Zealand) allegation that Huawei’s cellular equipment contained backdoors to enable surveillance by the Chinese government had no hard evidence (Bryan-Low, Packham, Lague, Stecklow & Stubbs for Reuters, 2019). In a lawsuit filed by Huawei to challenge the US government on May 29, Huawei chief legal officer Song Liuping stated: “The US government has provided no evidence to show that Huawei is a security threat. There is no gun, no smoke. Only speculation” (BBC, 2019).
Ripples in Huawei’s Global Supply Chain
Like the manufacturing of airplanes, Huawei’s products and services – smartphones, telecommunications equipment and infrastructure such as 5G networks – rely on a wide range of global suppliers from chipmakers (e.g. Intel, Qualcomm, ARM) to software (e.g. Google, Microsoft). Google’s announcement on May 20, 2019 to cut off its services to Huawei’s new phones sent a big blow to the Chinese tech giant (Satariano, Zhong & Wakabayashi for NYT, 2019).
As part of Huawei’s global supply chain, Google’s Android operating system and popular apps like Gmail and Google Maps power Huawei smartphones sold around the world. Following suit, Microsoft also removed Huawei laptops from its online store as it moved to suspend its Windows license to Huawei (Warren for The Verge, 2019). U.S. chipmakers Intel and Qualcomm, German chipmaker Infineon Technologies, and U.K. chip designer ARM all cut ties with Huawei (MIT Technology Review, 2019).
Huawei’s Plan B?
Facing all the suspensions from its global supply chain, does Huawei have a Plan B? Huawei founder Ren Zhengfei told Chinese state media CCTV last week that the company had been preparing for such a fallout (Goh & Freifeld for Reuters, 2019). Huawei’s phones in China, for instance, already operate without Google’s apps and services (except Google’s Android operating system) as Google Search, Maps, Gmail and YouTube are banned in China. Analysts also suggest that the Chinese telecom giant can tap into non-U.S. suppliers from Japan, South Korean and France (Washington Post, 2019). In addition, Huawei reportedly has been developing its own operating system as an Android alternative and its own chip Kirin for years (Deng for SCMP, 2019).
Despite the available technical workarounds, Huawei’s path forward without U.S. technologies is deemed by many to be unattractive and arduous as Android-based Google products and services are ubiquitous worldwide outside China and creating apps for a new OS simply takes time without promise of success (Dolcourt for CNet, 2019). Some may remember that in 2018, Huawei’s domestic rival ZTE, another Chinese telecom and mobile equipment giant, also suffered a 3-month suspension of supply of U.S. components, which temporarily halted its operation (Feng for NPR, 2019). It is unclear whether the U.S. ban on Huawei would be short-lived like ZTE. Nor is it certain Huawei’s Plan B would work.
Uncertain Times in Global Tech Ecosystem
Trump administration’s ban not only has further jeopardized Huawei’s future but has also injected a great deal of uncertainty into the global technology ecosystem. Following the announcement of the ban, shares of Alphabet (Google’s parent), Qualcomm, Infineon, and Intel all fell, as did those of Apple whose products and revenue depend in important ways on the Chinese market (Satariano, Zhong & Wakabayashi for NYT, 2019), although Ericsson, Nokia, MediaTek, Samsung and Cisco are predicted to be top winners of this ban (Rockman for Fortune, 2019). Surprised by the ban, tech companies around the world are scrambling to calculate its ramifications for their operations. While Huawei’s phones are largely unavailable in the U.S., they are highly popular in European countries like Greece, Portugal and Spain for being cost-efficient (Tsang & Satariano for NYT, 2019).
Following the ban, two UK carriers – Vodafone and EE – have decided not to offer Huawei phones on their future 5G networks. Two of Japan’s largest mobile carriers have also delayed the debut of a new Huawei phone in the Japanese market. In the UK, the value of Huawei’s flagship phone P30 Pro has crashed from $1150 to $130 (Doffman for Forbes, 2019). The news has also seen Africa caught choosing between Chinese and US technologies where Huawei phones are popular but many also rely on Google’s Android operating system (Olewe for BBC, 2019). In another escalation of tensions, Beijing announced on May 31 that it will set up its own “unreliable entity” list for foreign firms (Teng for Caixin, 2019), sending even more ripples through the world’s tech ecosystem.
5G: The Tipping Point
Although Huawei has been an integral part of the world’s 3G and 4G mobile network infrastructure, its ambition to be the world’s leading supplier of 5G technologies proved to be the tipping point for the Five Eyes intelligence alliance. Reuters (2019) investigative report reveals that after conducting a digital war game to simulate the destruction of equipment on a 5G network in early 2018, the Australian intelligence agency concluded damage to its critical infrastructure would be catastrophic should 5G be exploited by a potential adversary during cyber warfare. Many worry in times of conflict, Chinese authorities could order Huawei to do its own bidding, which the latter would be hard-pressed to resist (Kharpal for CNBC, 2019). According to the same Reuters report, an Australia-led campaign has managed to convince the U.S. to slap the ban on Huawei and put pressure on EU to shut Huawei out of its 5G mobile networks.
So far, Australia has banned Huawei from 5G (Wingrove for Bloomberg, 2019); U.S. issued a ban with a temporary reprieve till August 19; U.K. has allowed Huawei to supply non-core 5G equipment while continuing to monitor risks (Sabbagh for The Guardian, 2019); Japan’s Softbank has chosen Nokia and Ericsson over Huawei to be its 5G supplier (Alpeyev & Hyuga, 2019); Canada has largely put the issue on the backburner to see if the ban is a trade negotiation tactic rather than an evidence-based decision (Connolly for Global News, 2019); Germany is also hedging, concerned that a total ban on Huawei’s cheaper 5G solutions will jeopardize German jobs and trade relations with China (Sanger for NYT, 2019). America’s close allies, it seems, are fairly divided for now. Given Huawei’s dominance in 5G technology and competitive pricing, Wall Street Journal (2019) argues, it is nearly impossible to restrict the company from current and future telecom networks.
Security Slippery Slope: From Hardware to Data
The vague and broad language of the Trump executive order, some argue, creates enormous uncertainty (Dickinson for China Law Blog, 2019). For instance, will similar Chinese companies such as ZTE be placed on the list of “foreign adversaries”? How about other Chinese technology companies such as Alibaba and Tencent that engage in large-volume, cross-border data transmission? What about similar companies from other countries?
If one looks to the past for guidance into the future, it seems restrictions have already expanded from hardware to data more broadly. In May 2019, it is reported that Grindr, the gay dating app based in West Hollywood but solely owned by Beijing Kunlun Tech Company, has been investigated by the Committee on Foreign Investment in the U.S. (CFIUS) and pressured to part with the company in June 2020 over concerns that large numbers of U.S. military personnel on the app could be blackmailed by Chinese authorities (Wang & O’Donnell for Reuters, 2019).
The broad scope of the executive order to protect U.S. interest in sectors – ranging from critical infrastructure and national security to digital economy, information and communications technology – can apply to virtually any modern digital product. Data processors holding user data deemed “strategic” by the U.S. government from social media companies to Internet of Things (IoT) applications are simply too numerous, making application of the executive order largely arbitrary.
Sure, one could argue that the Trump administration is simply taking a page from China’s own playbook. For years, U.S. Internet companies have had limited success in China in part due to government ownership and licensing rules as well as state practices of censorship and orchestrating of public opinion against foreign competitors. Google, Facebook, Twitter have all been banned in China, though Apple and Cisco have access to the Chinese market (not approved for government use since 2015 post-Snowden Affair however) (Pasick for QZ, 2015). In the current U.S.-China standoff, it is argued, Mr. Trump is simply “sealing up that wall” built by China between itself and the rest of the world from the other side (Li for NYT, 2019).
On the flip side, however, reports have pointed to the lack of hard evidence of Huawei’s spying at Beijing’s behest, whereas Snowden revelations revealed NSA hacked into Huawei’s systems (Bryan-Low, Packham, Lague, Stecklow & Stubbs for Reuters, 2019) as well as world leaders’ (German Chancellor Merkel and Brazilian President Dilma Rousseff) personal cellphones. Although China has repeatedly been portrayed in Western media for engaging in cyberattack and industrial espionage, it is also on the receiving end of foreign cyber threats, bearing a considerable degree of vulnerability and defensiveness (CNCERT, 2016). The perception of Huawei as an aggressor or victim may be in the eyes of the beholder. In the large scheme of things, however, NSA’s vast surveillance activities around the globe will continue to make the U.S. side of the story “a tough sell” (Cate, 2015). By and large, users, companies and countries around the world do not want to choose “[which] side of the new Berlin Wall [they] want to live on” (Sanger for NYT, 2019).
The Optics of Obedience vs. Independence
As much as Huawei wishes to stay out of the crosshairs of escalating China-US cyber rivalry, it is also part and parcel of China’s uneasy integration into global economic and technological systems. Over the years, Huawei has been careful in maintaining its independence and distance from the Chinese government especially in its expansions overseas. Since 2010, for instance, Huawei has worked with the UK government to inspect its technology in order to gain access to the UK telecom market (Bryan-Low, Packham, Lague, Stecklow & Stubbs for Reuters, 2019). The company has repeatedly denied allegations that it works on behalf of the Chinese government. Right before the U.S. announced the ban, Huawei was reportedly “prepared to sign no-spy agreement with UK government” (Sabbagh for The Guardian, 2019).
However, Huawei’s effort to depoliticize itself often runs against the Chinese government’s high-profile branding and promotion of national tech champions home and abroad. While it is understandable that the success of a nation’s enterprises (Apple or Huawei) is in the interest of respective countries, the Chinese leadership’s open demand for loyalty from not only Chinese government officials (The Economist, 2017) and state media (Associated Press, 2016) but also its tech companies (BBC, 2017) tends to undermine, not strengthen, Huawei’s neutrality and independence. These optics may be helpful for Huawei inside China but are quite detrimental to the company overseas.
The End of Power Play?
Without presenting to the public concrete evidence of Huawei spying on behalf of the Chinese government to harm U.S. national security, the U.S. ban against Huawei hinges largely on speculations. Such calculated assessment of security risks in turn hinges on Huawei’s identity as a Chinese telecom firm that many fear would cave to Chinese authorities during times of intense conflict (Kharpal for CNBC, 2019).
Fear-based insecurity aside, the Huawei embroilment is fundamentally about power and domination of the next-generation technological and economic infrastructure as well as the future shape of global geopolitics. Harking back to the 1980s, Roach (2019) argues today’s U.S.-China tech/trade war mirrors a similar scenario between America and Japan more than 30 years ago where Japan was deemed America’s greatest economic and technological threat, guilty of intellectual property theft, currency manipulation, state-sponsored industrial policies and more.
The fateful decline Japan suffered three decades ago may not be China’s storyline today. However, the Huawei episode does reveal deep-seated weaknesses and insecurities at the heart of the world’s largest superpowers: America’s fear of losing out in the 5G race and ceding its reign in the next-generation technological competition; China’s recognition of its technological dependence on U.S. ecosystems and the lack of attractive alternatives.
Ultimately, neither seems to possess the moral authority needed to inspire and guide the technological world and beyond in the 21st century. America’s NSA scheme and the deeply flawed surveillance capitalism model (think fake news and ad-based targeted manipulation of voters in recent elections) have been exposed to be vastly invasive, untrustworthy, and unsustainable. China’s political mentality and values, which Western observers consider to be out of date and anachronistic, offer no appealing assurance or blueprints for the rest of the world to emulate. Yes, it is about technology; but ultimately, it is about values.