Huawei’s Grip on the West Must Be Forced Loose

Huawei’s Grip on the West Must Be Forced Loose

It’s been a big week for European lawmakers. Not only have British representatives finally made their strident and declarative exit from Brussels, but both the United Kingdom and the EU appear to have refrained from taking any real stance against threats to regional communications networks. 

First, it was London. On Tuesday, Prime Minister Boris Johnson met with the National Security Council to discuss concerns surrounding the planned roll-out of the UK’s high-speed 5G wireless network.

Despite a year-long lobbying effort by Washington to convince Johnson of frightening links between China’s opaque intelligence network and industry leader Huawei Technologies Co., the decision was as anticipated: equipment made by China’s Huawei will likely be used in the coming nationwide 5G network roll-out. 

Then, it was Brussels, with the European Commission endorsing new guidelines that barely call for the exclusion of technology from high-risk companies in core, let alone non-core, 5G network infrastructure. The future of 5G communications networks on both sides of the Channel, it seems, will be left to the eternal wisdom of market forces. 

This is all great news for Huawei and, by extension, policymakers in Beijing. Huawei’s annual reports and public records all point to hundreds of millions in dollars in grants, subsidies, bonuses and gargantuan state loans- all courtesy of a Communist Party of China bent on reducing dependence on foreign technology. 

Huawei has received US$1.6 billion in grants alone this past decade, with more than half coming from Beijing in the form of “unconditional government grants.” Even so, the company has insisted that its relationship with Beijing is “no different” from any other private firm in the country. 

Huawei’s competitors in other countries have enjoyed substantially less reverential treatment from their respective governments. In Europe, Nokia is only just recovering from a decade-long stagnation with the help of the Finnish government, while Swedish company Ericsson signed a loan agreement for a paltry €250 million (US$275.66 million) with the European Investment Bank last year. 

Elsewhere, the story is similarly grim. South Korea’s Samsung has been fighting fires on multiple fronts as President Moon continues his crackdown on family-run business conglomerates, or chaebol, which includes a revisiting of generous government assistance since the 1960s. US Senators have only just proposed a US$1 billion fund for domestic 5G research and development. 

That’s not to say that Huawei has a total monopoly on the 5G market- at least not yet. Samsung has acquired Virginia-based network services provider TeleWorld Solutions (TWS) to assist in the coming 5G network roll-out in the US, while AT&T is using 5G network equipment supplied by Samsung, Ericsson and Nokia. 

Then there are architecture alternatives offered by the US-based Cisco and Japan’s Rakuten, with the latter claiming to offer the world’s first “cloud-native” network. If both firms are allowed a footing in the charge for 5G capabilities, they could change the way networks are built around the world. At present, neither Cisco nor Rakuten benefit from the same state backing that Huawei does. 

Before 2016, the UK, too, had skin in the 5G game. That is, until the sale of Britain’s last major technology firm and leading chipmaker ARM Holdings for £24.3 billion (US$31.9 billion) to Japan’s SoftBank. In a real twist of the knife, SoftBank in 2018 sold a majority stake in ARM’s China operations to a Chinese group of investors aligned with Beijing’s commitment to reducing dependence on Western technology. 

The agonising decision facing the British security apparatus in recent weeks, then, is sleep lost over a decision to purchase technology that the UK private sector no doubt helped develop. 

Meanwhile, British telecommunications firms like BT and Vodafone have been keen to keep the door open to foreign technology procurement. Blocking Huawei from taking part in domestic 5G projects, they say, would harm competition and delay the UK’s 5G roll-out by at least two years. 

As global firms, however, neither company has too much of an interest in cybersecurity and broader ideological concerns. Instead, they argue from the bottom line: “We cannot allow bureaucracy to get in the way of progress,” claims BT chief executive Philip Jansen, “We need full fibre, not red tape.”

Jansen’s convenient soundbite aside, the British and European parliaments both made a trade-off between security and prosperity this week. Sure, regional security bodies say they can deal with potential threats posed by Huawei in today’s market, but can they follow through in some as-yet unimagined future?

Something’s got to give, and soon. Contrary to popular belief, the race to 5G dominance has not yet been won; no single company owns everything, and deliberate, planned and targeted funding will make all the difference in coming years. For reference, Huawei’s research and development exceeding US$15 billion in 2018 and only ballooned further in 2019.

Beijing’s subsidising of Huawei is a thinly-veiled effort to undercut Western competitors, and an equivalent response is long overdue. European lawmakers cannot afford to sleepwalk on the issue of critical telecommunications funding.

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