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Why Americans don't know about Huawei


Huawei remains an obscure name in the United States, even after the Chinese company passed Apple to be the second largest smartphone maker in the world. It will also soon pass Samsung, according to the Verge. But many Americans would likely struggle to pronounce the company’s name (HWah-Way).

This is largely because the U.S. government doesn’t trust the company, and has effectively blocked it from selling products on American soil. Washington D.C. In 2012, the Permanent Select Committee on Intelligence has cited concerns that the products could be used to conduct espionage on American citizens.

In March the FBI officially warned U.S. consumers to not purchase anything from Huawei on national security grounds (The Verge). The announcement also included ZTE, another controversial Chinese phone maker. 

“We’re deeply concerned about the risks of allowing any company or entity that is beholden to foreign governments that don’t share our values to gain positions of power inside our telecommunications networks,” FBI Director Chris Wray said in congressional testimony in February (CNBC).

Both AT&T and Verizon abruptly walked away from partnerships with Huawei because of espionage accusations – effectively handicapping their ability to sell phones in the U.S. (Bloomberg).  

Whether the concerns are justified, depends on how much independence Huawei has from the Chinese communist party. Huawei has long faced accusations of helping the Chinese government conduct espionage, according to the New York Times. Though as of now, no evidence is publicly available indicating Huawei products have been used to allow for Chinese spying. 

U.S. suspicion of Huawei

The exact nature of Huawei’s relationship with China’s government is unclear. Huawei CEO Ren Zhengfei was a former technology officer of the Communist Party of China. Former CIA Director Michael Hayden said in a 2013 interview that there was hard evidence that Huawei shared telecommunications of foreign users when the Chinese government asks to see them.

 

Photo courtesy of Rory Cellan, from Wikipedia

National security concerns about Huawei, and ZTE, first came to a head in Washington D.C. in 2012 when the House of Representatives released a report finding Chinese telecoms to be “influenced” by China’s government. Similar to the recent FBI announcement, the congressional report did not produce examples of espionage.

The 2012 congressional report focused on U.S. businesses using Huawei routers and switches, which act as mediums for internet traffic and telephone calls, and thus a portal through which to siphon data. These concerns were rational, according to the MIT Technology Review, considering the corporate structure of Huawei remains a mystery.

Huawei advertises itself as “a private company fully owned by its employees.” In reality, the business model gives some workers shares of the company as a means of incentivizing better performance. 

The Center for Strategic and International Studies, a U.S. think tank, says that the “employee-owned” moniker is a thinly veiled attempt to hide government influence. Critics have said that Huawei could eliminate skepticism if it went public and allowed investors to see how the company was managed (Financial Times). 

Huawei’s employee-owned concept is not without value for the workforce. The Harvard Business Review found that far more of Huawei’s earnings have gone directly to employees than to corporate coffers. The case study estimated that money dedicated to compensating employee was 2.8 times greater than Huawei’s reported profits between the mid-1990s and 2015.  

Huawei continues to operate in the U.S.

The aggressive stance of the U.S. towards Huawei is unusual considering that the company has a sizable presence that spans 17 years, and is widely accepted by the international community.

“We remain committed to openness and transparency in everything we do and no government has ever asked us to compromise the security or integrity of any of our networks or devices.” Jannie Tong told WikiTribune, spokesperson of Huawei USA. 

Major retailers, such as Best Buy, pulled Huawei products from store shelves since the FBI warning, however, their smartphones and laptops are still available on Best Buy’s website (CNN). Huawei’s Nexus 6P smartphone, which was co-designed by Google, is available for $440 on Walmart.com. Huawei’s Matebook received favorable reviews on Techspot as a laptop that rivals Apple’s MacBook despite being roughly $100 cheaper. 

Picture of the Nexus 6P. November 2015. Author Dag Olsen Hegnar

And unless Huawei is explicitly banned in the U.S., it has no intention of pulling out of the U.S. – a market that the Chinese company has invested heavily in since 2001 (CNET).

Huawei first opened in the U.S. in 2001 when it opened a corporate office in Plano, Texas, but did not sell products or services for another three years. (Fortune). Instead, the Chinese company invested millions in research and development and infrastructure projects, including partnering with more than 50 universities and colleges.

In 2017, the Huawei reported investing $13.8 billion worldwide in research and development much of which has gone to higher learning. The University of Illinois at Urbana-Champaign was one of Huawei’s first school partnerships in the United States, according to an university press release.

(WikiTribune changed the dollar figure above which previously reflected 2015 levels).

According to Professor Steven LaSalle, who was also briefly employed by Huawei, most of the funding went to cloud-based technology and other projects unrelated to telecommunications. He said this capital was needed. 

“Companies help support the university and the research there, the universities get overhead for the research support that’s provided by the companies…a lot of this is because of decreasing amounts of tax dollars going to support public universities,” says LaSalle, who connected with Huawei during his tenure at UI.  After seeing the level of commitment in the U.S., he doubts Huawei would conduct espionage and potentially risk over a decade of investment. 

Whether Huawei will continue to invest in American universities is difficult to say.  The New York Times reported that Huawei laid off at least five U.S. executives in April and has dramatically reduced its lobbying budget since 2012.

Meanwhile, Huawei faces no accusations of espionage or government roadblocks in other countries. European countries, including the United Kingdom, have embraced the competitive prices of Huawei phones and the companies investments at local universities. (Wall Street Journal). 

LaSalle says that Huawei’s name recognition outside of the U.S. is markedly different.

“People seem to have no idea what Huawei is, let alone pronounce it, and I think that if they do know something about it, it may be from unfortunate press,” he says. “On the other hand, if I talk to Europeans, or Asians,… they know I [worked] for a top company.”

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