The Huawei’s Conundrum

Huawei is one of the largest firms in China. It is a technology powerhouse which now provides equipment which allows cutting edge telecom technology to be implemented in many countries of the world. The scale of Huawei’s operations has been astronomical. The company has clocked in more than $100 billion in revenues in 2018. It also surpassed Apple in terms of the number of smartphones sold. Huawei is now the second largest smartphone manufacturer in the world!

It is strange that a company of this magnitude is now being looked upon suspiciously. Many countries including the United States and Canada now claim that Huawei is a security risk. Huawei claims that the allegations of spying are baseless and unsubstantiated and that nothing has ever been proven against Huawei in any country.

The Huawei conundrum has led to further deterioration of the conditions between China and the United States. From China’s point of view, the United States is purposely trying to obstruct the development of its technological giants because America is afraid that it might lose its technological edge to Chinese companies.

In this article, we will understand why Huawei is shrouded in mystery and suspicion.

The History of Huawei

To understand the history of Huawei, one needs to start with their founder, Ren Zhangfei. According to the company, Ren is the perfect rags to riches story. In 1987, he started with nothing, and now he runs one of the biggest companies in the world.

This story does not seem plausible to the rest of the world because Huawei sells high-end technological equipment. It is not possible for a person with no knowledge or understanding of technology to be able to run such a company and grow it to great heights. Also, Ren Zhangfei used to serve in the Chinese military before he founded the company. Hence, the suspicion that the company is actually a proxy for the Chinese military given the fact that the lines between the state and private business are extremely blurry in China.

Ren Zhangfei’s behaviour further adds to the suspicion of his critics. He has been openly accused of being a proxy for the Chinese military. However, Ren has never come out in the open to clarify. Also, when these questions are asked to him directly in a press conference, Ren does not give direct answers making the company appear more mysterious, elusive and dangerous.

Concerns From All Over the World

• Huawei’s suspicious history is supplemented by accusations from some of the top companies in the world. Cisco, the American networking giant, has accused Huawei of stealing their intellectual property. Huawei has faced similar allegations from T-Mobile which is one of the largest cellular service providers in the United States. These allegations were settled out of court where Huawei has not admitted to any wrongdoing.
• Huawei also faced the onslaught of British regulators. The regulators supposedly identified a big loophole in the engineering process of Huawei. This loophole was compromising the privacy and the security of the British population. Hence, Huawei agreed to spend $2 billion to correct the problem. However, once again, it did not admit any wrongdoing.
• British Telecom, which is one of the largest telecom service providers in the United Kingdom has announced that it will not use any equipment manufacturers by Huawei. All the existing equipment will have to be decommissioned and replaced with other equipment
• Countries like United States, Canada, Australia, and New Zealand have openly announced that they will not buy any Huawei equipment for building their 5G networks. The 5G network is going to be very advanced as compared to 4G networks. It will be much faster since the concept of smart homes, self-driving cars, etc. are all dependent upon this network. This is the reason why an inordinate amount of personal information is likely to move through the 5G network. Hence, countries are averse to using Huawei’s equipment since they believe the transmission of such information will compromise national security.
• Private companies like Orange and Deutsche Telekom in Europe are also reconsidering their decisions to use Huawei’s equipment. Many Czech and Japanese authorities have also warned their people against using Huawei equipment.

Hence even though Huawei has not been directly convicted, there is a good reason to believe that it may be involved in spying on behalf of the Chinese military.

The CFO Debacle

Huawei found its troubles escalating as Meng Wangzhou was arrested by the Canadian government. This led to aggressive posturing by the Chinese government as it made open statements threatening Canada of dire consequences. In due course of time, Meng Wangzhou who is the daughter of Huawei founder was let go as per the legal process in China. However, Canadian President Justin Trudeau was surprised at the extent of the reaction that the Chinese government gave when a corporate executive was arrested. Canada has vowed to not stand down to Chinese threats, and the situation is becoming even more tense.

The bottom line is that the perception across the world is unfavourable for Huawei. With the advent of 5G, a lot more critical information is likely to reach the internet and hence become a subject of spying. Hence, Huawei’s connection to the Chinese military is actually a liability for the company right now. These connections are the reason why Huawei is being denied lots of opportunities that are arising in the global market.

Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.