Telco Deep Dive 2018: Which way for Huawei?

• Recent troubles are just a symptom of larger geopolitical issues between US and China
• Accusations of security vulnerabilities are both understandable and hypocritical

CHRISTMAS in 2018 for Huawei was not exactly a time of festivity and joy. In the previous few months, the President of the United States urged his country's allies to follow his lead and not use products from the China telco equipment company, resulting in countries such as Australia, New Zealand and Britain publicly declaring their boycott in varying degrees.

Then, Huawei's CFO and daughter of its founder was arrested in Canada, and is awaiting extradition to the US where she will face charges of her company violating US sanctions.

In short, the future of Huawei is in the balance, and with it the future of mobile communications as well.

China's plan is for China to become the world's leading maker of telecoms, specifically with an eye on the newly-minted 5G, with its promises of Gigabit speeds and high capacity. The latest version of "Made in China 2025" (MIC2025), the country's 10-year industrial plan for self-sufficiency that focuses on high-tech fields, reveals China's ambitions, and recognises Huawei as one of the companies that can help them achieve that.

It also caught the attention of the rest of the world.

Huawei: Three decades in the making

Huawei's beginnings were relatively modest. It began in 1987, building and supplying telephone exchange switches for the People's Liberation Army (PLA). It was founded by Ren Zhengfi, who was a military technologist in the PLA's Information Technology research unit, who noted, "a nation that did not have its own switching equipment was like one that lacked its own military”.

From then, Huawei has grown from strength to strength. In 2015 it became the world's biggest maker of networking equipment. In 2018, it held approximately one-fifth of the world's telecom equipment market share by revenue.

It also works hard to stay ahead. Huawei claims that 45% of its employees work in R&D, with a 2017 budget of US$13 billion (RM53.5 billion). In comparison, Google's parent company, Alphabet Inc, spent US$16.6 billion on R&D (RM68.3 billion).

As a result, Huawei’s products and solutions are currently deployed in over 170 countries, and serve an estimated one third of the global population.

This success did not go unnoticed by China's government. Not the least, because the name Huawei itself in Chinese characters (华为) can be interpreted to mean "Chinese success" or "China achievement".

But it was the "Made in China 2025" plan that rang alarm bells. In 2018, the US Council on Foreign Relations called it "real existential threat to US technological leadership".

The simple truth is that if China manages to build and own a significant part of the world's communications network, then they can set the terms on how the technology will be shaped in the future. And perhaps even control access to the traffic on it.

“Inviting the fox to guard the henhouse”

There are two levels of concern exhibited by the United States and its allies. The most obvious is whether Huawei equipment has security vulnerabilities or backdoors in it that make it unsafe to use.

In February 2018, the US intelligence chiefs from the CIA, FBI, NSA and the director of national intelligence publicly informed a US Senate Intelligence Committee that they would not recommend private American citizens to use products from Chinese companies.

"It provides the capacity to exert pressure or control over our telecommunications infrastructure," said Chrstopher Wray, FBI Director. "And it provides the capacity to conduct undetected espionage."

Later, US Senators Mark Warner and Marco Rubio, both members of the Senate Intelligence Committee, wrote a letter to the Canadian Prime Minister Justin Trudeau, warning him that allowing Chinese companies to build 5G infrastructure would be akin to “inviting the fox to guard the henhouse”.

Huawei immediately denied any allegations of security risks, but commentators from the US quickly pointed to the military background of the founder. In sharp contrast, Arne Schönbohm the President of the German Federal Office for Information Security said that, “for such serious decisions as a ban you need evidence", yet no such evidence had been uncovered.

Schönbohm even attended the official opening of Huawei Technologies’ Security Innovation Lab in Bonn in November 2018.

One reason why the US might suspect China of building backdoors and spyware is because it is likely the Americans themselves have been guilty of this.

In 2013, it was reported that the NSA had taken advantage of backdoors in Cisco routers, and although Cisco has vehemently denied working with the security organisation, in 2017 Cisco themselves revealed a vulnerability that allowed the CIA to remotely command some of its switch models.

Clearly, the concern is that if China has control of the infrastructure, they could conceivably have access to the data as well. The fact that this is equally true of US equipment seems to be largely ignored.

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