Since the arrest of Meng Wanzhou, CFO and daughter of the head of Hauwei, the company has been in the news lately. Popular media has placed this story at the center of deteriorating relations between the US and China on both sides of the Pacific. In the US, the implications of Hauwei acting as, essentially, an agent of the Communist Party of China have pepperd the stories. In China, it’s all been another front on the trade war and effort to keep China itself down, yet again.
Which side is right?
Without a lot of context, it’s impossible to tell just what is going on. Huawei is indeed a fast rising company, and its connections to the government have definitely played a role in that. They’ve also played the free market game like any fast rising company by working incredibly long hours, poaching top talent (and their information), skirting around inconvenient laws, and slapping things together with blazing speed.
But, in the end, it’s not entirely Hauwei which is the issue after all.
The Hauwei story is a classic rags-to-riches pitch for its founder, Ren Zhengfei. Upon retiring from the army at age 42, he set out to start an electronics firm using his engineering expertise and growing openness in China. Scraping together what he could, he formed partnerships with other small companies and very rapidly grew the company to the giant it is today.
Sounds great, right? Oh, and what did Ren do in the army? It’s not entirely clear, actually, but it has been reported that he was a communications expert in military intelligence. It does not appear that this has been verified, however.
Move the story along 30 years, and the planet is about to implement 5G mobile data nearly everywhere, simultaneously. The blazing 10-20x speeds over 4G, with better ability o handle high volumes of users, mean that it’s likely to be implemented very rapidly for use by billions of consumers. The volume of data that will be handled by these systems is astonishing, and the potential income beyond belief.
Hauwei is in the best position of any company to make this happen, too.
Just as 5G implementation has begun to heat up, the charges against Hauwei have multiplied. The arrest of Meng Wanzhou was the main catalyst for the explosion in the popular press, but this story has been circulating for quite a while. Or, rather, this series of stories that as a whole feel like a stage-whisper campaign to discredit the company have become very numerous.
Is there anything to this? Let’s run down the five major stories on Hauwe that have been getting attention lately.
Stealing from Cisco. In 2003, Cisco filed a lawsuit claiming that Hauwei stole code for routers from them. It was quickly settled, and Hauwei discontinued products which relied on the code. It was all chalked up to an employee who came from Cisco and brought code with him, a common occurance in the industry. But it didn’t stop there. The allegations come up repeatedly, and in 2012 part of the sealed agreement between them was released by Cisco.
While bad blood and talent poaching are both very common in the industry, this has been particularly nasty and persistent. This is the root of all allegations, often referenced offhand, that Huawei steals intellectual property.
Violated Iran Sanctions. This is the centerpiece of the case against Meng Wanzhou. In 2007, Hauwei routers and other technology made their way to Iran through other companies located in the middle east. The allegation is that this was not at all an independent effort, and that these companies were not at arms length from Huawei. Specifically, some of the people involved are now Hauwei employees and money appears to have been transferred directly to Hauwei.
While the company has not admitted this, it’s hardly surprising. Companies outside the US routinely skirt US sanctions and take steps to cover their tracks. The US is making a huge deal out of this but is not necessarily going after other companies based in Europe which likely did similar things. It’s hard to know what to make of this one.
Financial Issues. This is often reported as a distinct issue, but it appears to grow from the Iran trade. The allegation is that bank fraud was committed by shielding the actual receiver of money transferred out of Iran. This would be incredibly dumb if it was done in a traceable way, but it’s also rather likely. At the time of the sanctions, Iran was cut off from the world banking network, SWIFT, and transactions were difficult at best. How did they move money in and out?
The one big problem with this story is that it is definitely used ham-handedly in the press. “Allegations of bank fraud” sounds terrible by themselves, but as part of the larger Iran sales story are a bit more benign. No one is alleging that Hauwei is routinely committing fraud. But it is a serious allegation, provable outside of any sanctions regime, with serious jail time as a penalty.
Insecure platforms. This is much harder to pin down, but there are issues about Hauwei’s products on their own. The company’s big advantage is that they are first to the market with a working 5G system, which was an incredible achievement. The problem is that they may have gotten there not just with insane work hours, but with a few short-cuts. The code has been called “badly written and likely due to (an) immature software development process.” That assessment comes from the UK government and British Telecom, so it’s directly from a potential customer.
This has been backed up by many in the field, too. The ability to verify the security of Hauwei devices and code has been hampered by this overall issue, and many experts question whether they will work at all as planned. While this is a common problem In the industry, or at least has been in the past, this is 100% legit and a serious issue. Security of 5G networks has to be tested and verifiable, and apparently that’s not working well with Hauwei.
Chinese spying. This is where we save the best for last. Is Hauwei just a front for the Chinese government, which wants to put spyware in every device everywhere in the world? It doesn’t take tin-foil headgear to be worried about this. On June 27, 2017, China enacted with unusual speed the Chinese National Intelligence Law. This states that “any organization or citizen shall support, assist, and cooperate with state intelligence work according to law.” The concern is that Hauwei, regardless of any issues related to how close they are to the Chinese government or not, can be compelled to put in backdoors for their national intelligence effort by this law.
The history of Hauwei doesn’t help alleviate these fears. Nor does the difficult and far les than transparent code. There have been no confirmed discoveries of spying software or hardware on Huawei products, but the allegations have been made repeatedly. Simply put, it’s not possible to have Huawei equipment in place and be able to sleep at night believing that the network is secure.
So what’s the story? Some of the allegations against Hauwei are being blown out of proportion, and do resemble a smear campaign. The press loves to pile on to a company in trouble, and a company from China is simply not going to get any benefit of the doubt. But there are legitimate issues at stake here, and they are indeed directly tied to Chinese law and policy. There is also a complete lack of transparency and verifiable security in the products, which opens the door to most of the allegations.
Is it fair to dump on Hauwei? It’s always tempting to go over the old stores, particularly if they establish a pattern of bad corporate behavior. The arrest of Mang Wazhou certainly brought one of the dodgier stories into the headlines, so that can’t be ignored. But there is a lot tied up in the ritical part fo the story which only muddies the waters and makes it harder to judge what is going on.
Staying with the national Intelligence Law of 2017 and the spaghetti code issues, there are very legitimate concerns with Hauwei products as the backbone of any national or international 5G network. It’s vital to stick to these issues, no matter how tempting the other ones are, and focus on the concerns these raise. Hauwei, and the Chinese government, can fix these problems and they should be given an opportunity to do so.
Anything else appears to be part of an attempt to smear Hauwei, and with them all of China, in an effort that appears to support the implementation of bad policy. Foreign policy, like data security, is based largely on appearances and attitudes. In both of these cases, the situation is far uglier than it should be if we’re going to solve problems, not create them. That is the real problem with Hauwei right now.