While technology news in August was dominated by whether Microsoft would buy TikTok or not, the “Huawei issue” was deepening further. The Chinese company is due to release Mate 40, the latest mobile device equipped with Kirin, the Huawei chipsets, later this fall, and the United States Department of Justice released an indictment by the U.S. Attorney against Huawei on fraud, intellectual property theft, money laundering and other charges.
Meanwhile, the State Department has increased the pressure on European countries to stop cooperation with the telecom equipment vendor. As things stand now, the costs of replacing all Huawei technologies would be enormous, while it is still not clear how the company’s hardware would represent security risks to the countries involved. And this is just one side, among numerous others, in the Huawei story.
Huawei is a relatively new player on the technology market, founded in 1987. Since then, it has seen a rapid and continuous development. Many suspect that this is largely due to the founder, Ren Zhengfei, being a former army officer, and a member of the Communist Party.
In a country as centralized and tightly controlled by its communist regime as China, it certainly seems hard to believe that a former military man, albeit one who was a telecommunications engineer in the army, suddenly turns into an investor and builds a huge business in a strategic area with no involvement from the government. But Huawei insists that this is exactly the situation.
Whatever the truth of that, the fact is that Huawei is popular with consumers, even with strong new players on the market like Xiaomi, Oppo and others. According to market research company Gartner, Huawei is still second regarding its share on the global mobile device market, after Samsung, albeit with a shrinking share: while in Q1 2019 Huawei had 15.58%, in Q1 2020 it had decreased to 14.13%. As for the number of sold devices, the drop is much higher, down 27.3% year-on-year.
While it is true that all major vendors experienced lower sales in Q1 (only Xiaomi managed to grow, by 1.4%), Huawei will probably face further falls in the next quarters, at least among Android-based devices. Last year, Google halted Huawei’s license, following a United States government ban on American companies doing business with several Chinese companies, including Huawei.
This means that Huawei users will not be able to install Google applications on their smart devices (at least, not officially). Huawei immediately announced that it will speed up development of Harmony OS, its own mobile operating system, to replace Android and Google apps, and has already launched what it calls Huawei Mobile Services.
Based on the latter system, the company says tens of thousands of apps worldwide are available from a store called AppGallery. Many of the most popular international and local applications can now be found on HMS-based smartphones in Europe, including in Hungary, where the the firm says every fourth Huawei phone sold already works with the system.
It is uncertain if users would adopt the new operating system, especially in the West. But, if Harmony does spread among Asian countries, Huawei would gain an unexpected advantage over Google, achieving the opposite result of what U.S. President Donald Trump had hoped for, increasing the advantage of American companies over others.
But basically, with mobile devices, the situation is relatively simple; they are easily replaceable with another vendor, since the hardware is very similar. But when it comes to telecommunications equipment, things get complicated. And Huawei is present here, too.
Historically, protecting telecommunication networks is a matter of national security, filed under the “critical infrastructure” category. With communications extending far beyond voice services, digital networks connect users, utility services, financial and health institutions, military organizations, companies, and data banks.
Using fifth generation networks, huge amounts of data can be transferred in milliseconds, which opens new perspectives for digital services. And for telecom equipment suppliers too, where Huawei has already set foot with 4G technologies and offers reliable and cost-effective systems.
The question is: are these costs too good to be true? Are telecom operators being lured into buying them so that China can tap the data transferred through Huawei systems? Huawei says “No”, but the U.S. administration certainly thinks so. On August 17, the U.S. Commerce Department announced that it “further restricted access by Huawei Technologies (Huawei) and its non-U.S. affiliates on the Entity List to items produced domestically and abroad from U.S. technology and software.”
In effect, Washington is blocking the use of any American technology in processors powering Huawei networking equipment. This means not only physical components, but also all codes, for example instruction sets running inside the circuits.
To understand the size of the problem, look at Deutsche Telekom, which uses Huawei technologies in Austria, Croatia, the Czech Republic, Germany, the Netherlands and Poland. Poland and the Czech Republic have already agreed to cut Huawei’s market access. France (traditionally opposed to many U.S. requests) said it will phase the company out gradually over the next years. Spain, together with Germany, has not taken a clear position yet.
So, what next? According to Politico, “With so much uncertainty surrounding Huawei, operators face a choice of whether to switch to alternatives such as Finland’s Nokia or Sweden’s Ericsson.
Many have so far resisted the prospect of pushing Huawei out of the bidding process for 5G contracts due to fears it will drive up costs. In the meantime, operators will look to see how fast Huawei is able to restructure its supply chain and find new, non-American chipmakers to serve it.”
In all this turmoil, there is one other element not very often discussed. With Huawei already present on the European market, deeply embedded, as we have seen in the case of Deutsche Telekom, has there been any evidence until now that the company has seized sensitive data, breached critical systems, harmed deliberately clients in any way?
Well, no. And that is the position of the Hungarian government in this issue. Hungary is usually a strong supporter of the Trump White House, but during a visit by U.S. Secretary of State Mike Pompeo to Budapest in February last year, Minister of Foreign Affairs Péter Szijjártó was unusually blunt.
“If you look at that Chinese company which is very often in the news nowadays regarding telecommunication, is it present in Hungary? Yes. Who are its major contractors? A German and a British company. So, when it comes to China, I think hypocrisy should be left finally behind.”
Later last year, Szijjártó announced that Huawei would be involved in the rollout of the Hungarian high-speed 5G network.
The United States, however, has made its position on Huawei crystal clear. In an op-ed published on August 26, U.S. Ambassador to Romania Adrian Zuckerman, was explicit in his words.
“Communist China, like the communists controlling Romania previously, wants to control the Romanian people and Romania at any cost for its personal gain. They will do so at any cost: spy, steal, lie, and bribe to do so. Huawei Romania is just one tool in the Chinese communists’ playbook. They have other state actors like the Confucius Institutes and businesses that are trying to achieve the same goal. This is the time to stand up for freedom and democracy. The poisonous falsehoods of a corrupt communist Chinese government, wrapped in pretty lies, cannot be allowed to enslave the people of Romania.”