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Huawei is now Beijing’s most important weapon in a battle over semiconductors that’s poised to shape the world economy for decades.
When the Trump administration blacklisted Huawei Technologies in 2019 over spying concerns, the move almost wiped out the Chinese company’s global smartphone business.
Yet it bounced back with the support of China’s government, and is now at the centre of national efforts to achieve technological independence from the West.
The remarkable comeback raises questions about whether US efforts to contain China’s geopolitical ascent have been effective or adequate, and which of the two superpowers will come to dominate in areas such as semiconductor design and artificial intelligence (AI). Washington officials are now deliberating ways to co-opt its allies in a broader containment campaign, and exploring additional sanctions on Huawei and its Chinese partners.
1. Why does the US have an issue with Huawei?
The initial US measures targeting Huawei were driven by concerns that the tech giant could use its substantial presence in the world’s telecommunications networks to spy for the Chinese government. In 2020, the Federal Communications Commission designated Huawei and its Chinese peer ZTE as national security threats and ordered US carriers to pull their equipment from their networks.
Those sanctions have since morphed into a broader battle with China for technological supremacy. Huawei is one of Beijing’s chief weapons in that fight, and a major recipient of state support to help develop a range of technologies. In 2023, the company, long a leader in networking and mobile technology, also leapt to the forefront of China’s nationwide semiconductor effort.
2. What did the US do to sideline Huawei?
It made it harder for Huawei to sell equipment in the US and to buy parts from American suppliers by adding Huawei to a Commerce Department blacklist. In 2020, accusing the company of seeking to “undermine” those export controls, the department imposed further restrictions on chipmakers using American technology to design or produce semiconductors used by Huawei, meaning suppliers such as Taiwan Semiconductor Manufacturing Company could no longer sell to the Chinese company.
Then, in 2022, President Joe Biden levelled the most extensive restrictions yet on the export of technology to China, ratcheting them again in 2023.
Despite the web of sanctions, Huawei still stunned Washington with a made-in-China chip contained in the Mate 60 smartphone (and since employed in other high-end devices). The Biden administration considered blacklisting a number of Chinese semiconductor firms linked to that breakthrough.
3. What is Huawei doing now that’s of concern to the US?
The company is now Beijing’s most important weapon in a battle over semiconductors that’s poised to shape the world economy for decades to come. And while the US measures hobbled Huawei’s growth outside China, the company has become increasingly dominant in its vast domestic market. In March, Huawei reported a 65 per cent surge in profit after the Mate 60 helped it gain market share from Apple and other rivals in China.
An association of global chip companies has said Huawei is establishing a network of factories to manufacture its chips after the US sanctions blocked its access to many advanced facilities. An examination of its latest Mate 60 Pro smartphone revealed a Huawei-designed 7-nanometre chip that’s just a few years behind the world’s most cutting-edge technology.
Chinese state media hailed the advance as a victory against sanctions, and the US Commerce Department said it was investigating the processor, which is made by China’s Semiconductor Manufacturing International Corporation (SMIC), a company that – such as Huawei – was also blacklisted by the US and restricted from accessing American technology.
Huawei’s ambitions now reach beyond hardware. Its homegrown operating system HarmonyOS – aimed at getting around a US ban on the use of Google’s Android – has connected more than 800 million devices. It’s also expanded into electric vehicles, clinching patent deals with top auto brands including Mercedes-Benz and BMW.
4. What triggered the initial ban on Huawei?
Over three decades, the company grew from an electronics re-seller into one of the world’s biggest private companies, with leading positions in telecom gear, smartphones, chips, cloud computing and cybersecurity, and substantial operations in Asia, Europe and Africa. It ploughed money into 5G networks, breaking into the top 10 recipients of US patents in 2019, and helped to build 5G networks across the world.
But the US government – such as the Chinese and others – was wary of employing foreign technology in vital communications for fear that manufacturers could install hidden “backdoors” for spies to access sensitive data, or that the companies themselves would hand it over to their home governments.
5G networks are of particular concern because they go beyond making smartphone downloads faster. They also will enable new technologies such as self-driving cars and the Internet of Things. UK-based carrier Vodafone Group was said to have found and fixed backdoors on Huawei equipment used in its Italian business in 2011 and 2012. While it’s hard to know if those vulnerabilities were nefarious or accidental, the revelation dealt a blow to Huawei’s reputation.
5. Who else accused Huawei?
In 2003, Cisco Systems sued Huawei for allegedly infringing on its patents and illegally copying source code used in routers and switches. Huawei removed the contested code, manuals and command-line interfaces and the case was dropped. Motorola sued Huawei in 2010 for allegedly conspiring with former employees to steal trade secrets. That lawsuit was later settled.
In 2017 a jury found Huawei liable for stealing robotic technology from T-Mobile US, and in January 2019 the US Justice Department indicted Huawei for theft of trade secrets related to that case. The same month, Poland, a staunch US ally, arrested a Huawei employee on suspicion of spying for the Chinese government. Huawei fired the employee and denied any involvement in his alleged actions.
6. What did Huawei say?
It said the US restrictions were not about cybersecurity but were really designed to safeguard American dominance in global technology. It’s repeatedly denied that it helps the Beijing government to spy on other governments or companies.
The company, which says it’s owned by founder Ren Zhengfei as well as its employees through a union, began releasing financial results, spent more on marketing and engaged with foreign media. Ren became more outspoken as he fought to defend his company.
While he said he was proud of his military career and Communist Party membership, he rejected suggestions he was doing Beijing’s bidding or that Huawei handed over customer information. After the company released its Mate 60 Pro in August 2023, its executives kept the breakthrough relatively low-key, even as Chinese state media and influential bloggers hailed the phone as a groundbreaking achievement.
7. What other Chinese companies are feeling the heat?
In late 2020, the Pentagon added four more firms, including China National Offshore Oil and SMIC, to a list of those it says are owned or controlled by China’s military, exposing them to increased scrutiny and potential sanctions. Other Chinese tech giants have been blacklisted for allegedly being implicated in human rights violations against minority Muslims in the country’s Xinjiang region.
They included Hangzhou Hikvision Digital Technology and Zhejiang Dahua Technology, which by some accounts control as much as a third of the global market for video surveillance; SenseTime Group, the world’s most valuable AI startup; and fellow AI giant Megvii Technology. ZTE almost collapsed after the US Commerce Department banned it for three months in 2018 from buying American technology. The US added Pengxinwei IC Manufacturing, better known as PXW, to its Entities List in 2022.
By: BLOOMBERG
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