2018: A punishing year for Huawei

4 min read
Huawei Annual Report
(Image credit: Huawei)

The year began full of promise for Chinese telecommunications giant Huawei.

Just 12 months ago, the Shenzhen-based giant looked poised to sell its smartphones in every major market on the globe, and to be a, if not the, leading equipment provider for development of what appears to be a once-in-a-generation revolution in infrastructure—5G.

At this time last year, Huawei had its sights set on entering the US smartphone market. The company reportedly planned to do so through a deal with major US carrier AT&T.

Now, as 2018 comes to a close, it finds itself in unexpectedly difficult terrain, caught between a rock and a hard place, wedged between trade and national security tensions, legal troubles, and a slowing domestic economy.

Then, of course, there’s the arrest of Huawei CFO Meng Wanzhou in Canada.

Let’s take a look at what Huawei’s gone through in what seems to be one of its rockiest years:

January

By early January, Huawei’s hopes for the US phone market were dashed, as AT&T pulled out of the deal. While reasons were not made clear, a group in the US Congress had written a letter to the US Federal Communications Commission the previous month, citing security concerns.

April

In April, the US Department of Commerce banned US companies from selling components to another Chinese telecoms titan, ZTE, based on accusations that the company had violated sanctions against Iran.

This was seen by many as a signal that similar actions could be taken against Huawei, as in 2016, the Commerce Department made documents public that showed ZTE’s misconduct and also revealed how a second company, identified only as F7, had successfully evaded U.S. export controls.

In a 2016 letter to the Commerce Department, 10 US lawmakers said F7 was believed to be Huawei, citing media reports. In April 2017, lawmakers sent another letter to Commerce Secretary Wilbur Ross asking for F7 to be publicly identified and fully investigated.

July

In July, Huawei overtook Apple as the world’s Number 2 smartphone maker, driven by growth in the Chinese phone market, and rising brand recognition for Huawei in Asia and Europe.

Also in July, the intelligence chiefs of the “Five Eyes” nations (Australia, Canada, New Zealand, UK, US) met secretly in Canada to discuss the threat of Chinese cyber attacks, including on the US Office of Personnel Management, Australian National University, and countless companies.

Having identified the Chinese Communist Party as the “greatest emerging threat,” the Five Eyes nations began taking actions to counter its influence in the tech and cyber arenas. This included restricting Huawei, China’s top telecoms and tech firm.

August

After it had become clear earlier in the year that the company would be unable to substantially enter the US smartphone market, Huawei let go of its long-time vice president of external affairs, William Plummer.

In August, he published a 351-page tell-all about his time at the company: “Huidu—Inside Huawei.”

Plummer maintains that Huawei and its equipment are not a national security threat. However, his book paints a picture of an exclusive, jingoistic, dysfunctional and paranoid corporate culture, struggling to adjust to the company’s growing global prominence.

Also in August, the Australian government banned Huawei and ZTE equipment from the country’s 5G projects, citing a Chinese national intelligence law requiring Chinese companies and individuals to aid in national intelligence-gathering operations.

September

Reports circulated among the Chinese internet that Huawei was being acquired by a Chinese state-owned firm. Huawei rebuffed the rumors. However, since Huawei is not a publicly listed firm, and is instead owned by its employees, it is very difficult to verify either claim.

SK, South Korea’s largest telecoms operator, announced that Samsung, Nokia, and Ericsson would be preferred bidders, a list that excluded Huawei.

Also in September, Huawei and ZTE were excluded from 5G trials in India. (Huawei was later invited to Indian G5 trials in December.)

October

Senator Marco Rubio and Senator Mark Warner of the US Senate Intelligence Committee wrote to Canadian Prime Minister Justin Trudeau, urging the country to bar Huawei from its 5G network, citing national security concerns.

November

New Zealand announced it would join Australia in banning Huawei 5G equipment.

December

Image credit: Huawei

On Dec. 1, Huawei CFO Meng Wanzhou, the daughter of the company’s founder Ren Zhengfei, was arrested in Canada. She faces extradition to the US on charges of wire fraud, allegedly assisting her company in evading Iran sanctions. The move has heightened tensions between the US and China, and Chinese authorities have detained two Canadian citizens in what appears to be retaliation for Meng’s arrest.

The same week that Meng’s arrest was made public, the UK’s BT Group said it was removing Huawei Technologies’ equipment from the core of its existing 3G and 4G mobile operations and would not use the Chinese company in central parts of the next network.

A week later, after Huawei pledged to address the British government’s security concerns with a $2 billion overhaul, a meeting with prominent UK officials ended with one British official walking out in dissatisfaction.

December has also seen an effective ban on Huawei products by Japan’s government.

EU tech commissioner Andrus Ansip told a group of journalists in Brussels on Dec. 7 that the bloc should be “worried” about the risk to industry and security that Huawei and other Chinese technology companies pose. Huawei expressed surprise and disappointment in response to Ansip’s statement.

Huawei now faces the possibility of bans in France and Germany, and Czech officials have also issued security warnings about Huawei and ZTE equipment. However, German officials have expressed skepticism with regards to the claims that Huawei equipment poses a security risk.

It’s worth noting that the year isn’t quite over, and there might even be more twists in store for the company in the coming weeks.

One thing that is clear is that with intensifying international tensions, Chinese telecommunications firms like Huawei seem to be casualties in the conflict. For them—and indeed for both foreign firms working in China and Chinese firms doing business overseas—there is not much cause for optimism for 2019.