21Vianet 2600Hz 3Com 3GPP 3Leaf 4G 4G licensing 5G Africa Alcatel Shanghai Bell Alcatel-Lucent Alibaba Android antiitrust Apple APT Satellite Arete AT&T auction backbone Baidu Bain bandwidth base station Battery broadband cable CBN CCP censorship Cfius China China brands China FTTH China hi-tech China market China media China Mobile China Mobile Hong Kong China Science China Telecom China Unicom chips Ciena Cisco civil society CNNIC Communist Party convergence copyright CSL cybersecurity Datang drones Egypt Elop Ericsson EU Facebook FDD LTE FDD-LTE feature phones Fiberhome FLAG forecasts Foxconn FTZ Galaxy S3 Google GSMA GTI handset handsets Hisilicon HKBN HKIX HKT HKTV Hong Kong HTC Huawei Hugh Bradlow Hutchison India Infinera Innovation Intel internet investment iOS iPad iPad 2 iPhone IPv6 ITU Japan KDDI KT labour shortage Leadcore low-cost smartphone LTE MAC MAE Mandiant market access Mediatek Meego Miao Wei Microsoft MIIT mobile broadband mobile cloud mobile data mobile security mobile spam mobile TV mobile web Motorola music MVNO MWC national security NDRC New Postcom Nokia Nokia Siemens Nortel NSA NTT DoCoMo OTT Pacnet Panasonic patents PCCW piracy PLA politics Potevio price war private investment Project Loon Qualcomm quantum Reach regulation Reliance Communications Ren Zhengfei Renesys RIM roaming Samsung sanctions Scania Schindler security shanzhai Sharp SKT Skype smartphones Snowden software Sony Ericsson spectrum Spreadtrum standards startups subsea cables subsidies supply chain Symbian tablets Tata Communications TCL TD LTE TD-LTE TD-SCDMA Telstra Trump Twitter urban environment USA US-China vendor financing Vitargent Vodafone New Zealand WAC WCIT Web 2.0 web freedom WeChat WhatsApp Wi-Fi Wikileaks Wimax Windows Mobile WIPO WTO Xi Guohua Xiaolingtong Xinjiang Xoom Youku YTL ZTE
Main | After a long phoney war, US takes a real shot at Huawei »

Finding a way out of the Huawei mess  

For a recluse, Ren Zhengfei is certainly getting around. In the past week alone he's put himself in front of Time, Bloomberg, Business Insider and Chinese media.

He may not have done himself any favours trashing Donald Trump’s offer to include Huawei in a trade deal, and Trump himself has said he's not ready for a deal, but there is still a good chance that the US will throw Ren a lifeline.

Despite the clamour to crush Huawei, there are many across the global supply chain, including the US, that have an interest in seeing it survive. 

A positive outcome for Huawei would likely involve Trump cutting a deal with Beijing and declaring victory.

But there’s a roadblock: Huawei has been framed not as an economic problem but as a security and geo-strategic threat. A highly influential group of security officials and politicians is keen to see Huawei disappear altogether.

While their claims that Huawei is a chronic electronic eavesdropper have never been sustained, they are driven by the belief that Huawei 5G means a massive increase in network vulnerabilities.

According to a Reuters report last week, it was the findings of an Australian cyber-security exercise that convinced Washington to harden its opposition to Huawei’s 5G role.

The US concern is that 5G's massive IoT capability will create an existential security hazard through the billions of connected devices, a number of them plugged into critical infrastructure.

(Yes, an estimated 8 billion devices are already connected to 3G and 4G, but let’s not get into the weeds here.)

Secretary of State Pompeo has warned European allies that the US would reconsider intelligence sharing if they deployed any Huawei 5G kit.

It’s not easy to walk this back. Any deal would involve Trump either ignoring his intelligence services or coming up with a compromise they won’t accept.

The situation has pundits predicting the fall of a digital curtain, where the world must choose between the US and Chinese camps.

At the application layer that’s already a reality. Big brands like Google, Facebook and WhatsApp do not exist behind the Great Firewall. China's cloud and telco service providers are untroubled by foreign competitors.

It looks like the US prohibition on component supply will extend this bifurcation to the hi-tech supply chain as well. It would be a foolish tech manufacturer that didn’t already have advanced contingency plans.

From Huawei’s point of view, for all its accumulated inventory and nascent handset OS, it can’t make a viable mobile phone without the ARM architecture or Android OS.

And while Ren has boasted Huawei is two or three years ahead of the US in 5G, that is only because it relies on a raft of US and Japanese suppliers.

At a national level China’s technology deficit is even more stark. A CSIS study has calculated that in 2015 the US earned $3 for every dollar spent on foreign IP. By contrast China earned a few cents for every dollar spent, behind Brazil and India.

If they can make it look like they're not caving, Chinese leaders may be more desperate for a deal than Ren.

But the best they, and the global supply chain, might hope for could be a modified blacklist, providing Huawei access to some but not all the technologies it needs.

That could mean a reprieve for Huawei’s non-threatening mobile phone unit but a contrinued throttle on its network business.  Which means Ren has a lot more media work before him.

PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>