What is Huawei and why does Washington worry about it?

Beijing: Huawei is China’s first global tech brand and a growing source of tension between Washington and Beijing. Huawei Technologies Ltd is the biggest supplier of network switching gear used by phone and internet companies. It has spent a decade battling US accusations it is a front for Chinese spying or poses other security risks. A look at Huawei and controversies surrounding the company:

What is Huawei?

The company founded in 1987 by a former military engineer is a national champion at the head of an industry Beijing is promoting as part of efforts to transform China from a low-wage factory into a technology creator.

That makes Huawei a political star in China but puts it at the centre of tensions over the Communist Party’s technology ambitions. Washington and other trading partners say those violate its market-opening obligations and might be based on stolen know-how. Huawei passed Sweden’s LM Ericsson in 2017 to become the No 1 global seller of network gear. The company says it supplies 45 of the top 50 global phone companies and has signed contracts with 30 carriers to test its next-generation technology.

Its smartphone brand, launched in 2010, passed Apple Inc in mid-2018 as the world’s No 2 seller behind Samsung Electronics Ltd. And it has kept growing despite weakness in the global smartphone market. Apple’s January 3 announcement of weaker-than-forecast iPhone sales jolted financial markets, but Huawei said its 2018 sales rose 30 per cent to more than 200 million handsets.

The company says 2018 global revenue should exceed $100 billion (Dh367 billion). This year’s target is $125 billion.

Headquartered on a leafy campus in Shenzhen, adjacent to Hong Kong, Huawei has China’s biggest corporate research-and-development budget at 89.7 billion yuan ($13 billion, Dh48.8 billion) in 2017 — 10 per cent more than Apple Inc’s. Its foreign customers can draw on a multibillion-dollar line of credit from the official China Development Bank.

Huawei is more important to Chinese leaders than ZTE Corp, a smaller rival that was nearly driven out of business after Washington blocked it from buying US technology over exports to Iran and North Korea. President Donald Trump restored access after ZTE paid a $1 billion fine, replaced its executives and hired US-picked compliance officers.

What are the controversies surrounding Huawei?

US warnings about Huawei drew attention when a 2012 congressional report said American phone carriers should avoid doing business with the company and with ZTE. Washington gave no evidence but Huawei’s US business vanished.

The same year, the Australian government barred Huawei and ZTE from bidding on a planned national broadband internet network. On Tuesday, a telecom company that was planning to build Australia’s fourth mobile phone network said it would scrap those plans due to a government ban on using technology from Huawei, its main contractor.

Japan’s cybersecurity agency said last month Huawei and suppliers deemed risky are off-limits for government purchases, effective April 1.

US charges unsealed on Monday accuse Huawei of violating American sanctions by using a Hong Kong shell company to sell equipment in Iran. The company is also accused of stealing trade secrets, including technology for a robot used by T-Mobile to test smartphones.

The company announced plans in 2017 to start selling smartphones for the first time through a US carrier. Those plans were later cancelled, reportedly because of US government pressure on the American partner.

Huawei’s chief financial officer, Meng Wanzhou, who is Ren’s daughter, was arrested on December 1 in Canada on US charges that she lied to banks about Huawei’s dealings with Iran.

A European Union official, Andrus Ansip, expressed concern last year about Chinese rules requiring tech companies to cooperate with intelligence services. Ansip suggested that might lead to “mandatory backdoors” to allow eavesdropping on computer or telecom systems.

China’s foreign ministry has complained the security accusations are unfounded and are being promoted by other governments to shield their own companies from Chinese competition.

How is the company responding?

The company denies accusations it is controlled by China’s ruling Communist Party, modifies its products to facilitate spying or helps Chinese spies gather information. Huawei, which is privately held and says it is employee-owned, has stepped up efforts to defuse security concerns since Meng’s arrest. Ren rarely appears in public. But he spoke to foreign reporters in a two-hour-long interview on January 15 at Huawei headquarters. He sought to lay to rest accusations Huawei might help Beijing spy on its customers by saying he would reject any government request to disclose their secrets.

One of three executives who take turns as Huawei’s rotating chairman, Ken Hu, gave a similar interview in December in which he challenged the United States and other governments to disclose evidence to back up accusations about security risks. Huawei also has allowed foreign reporters and photographers to visit some of its research centers for the first time.

Huawei has tried to reassure customers by setting up laboratories in Britain, Canada and Germany for governments there to conduct security tests on its software and hardware.

What is Huawei’s role in next-generation telecom technology?

Huawei is one of the biggest global developers of fifth-generation telecoms technology, along with Finland’s Nokia Corp and Sweden’s LM Ericsson. The 5G technology is meant to vastly expand the reach of networks to support internet-linked medical devices, factory equipment, self-driving cars and other devices. That makes it more politically sensitive and raises the potential cost of security failures and requires more trust in suppliers. Annual sales of 5G network gear are forecast to reach $11 billion by 2022, according to IHS Markit. Huawei has agreements to test 5G equipment with Deutsche Telekom, Bell Canada, France’s Bouygues, Telecom Italia, India’s Bharti Airtel and carriers in Singapore, South Korea and Ireland.