The US sanctions against Huawei Technologies, a telecom giant in China, have hurt the company in more ways than one. For starters, the company has been effectively driven out of the global smartphone market and is now facing domestic problems. The sanctions have also damaged Huawei’s demand for 5G infrastructure around the globe.
Huawei chairman Eric Xu recently said that the company’s smartphone profits would drop by at least $30-$40 billion in 2021 from the $136.7 billion that it reported in 2020 and that the company has no path to recover the losses over the next few years. Xu simply said that the company’s primary goal is to survive.
The sanctions came when Huawei was beginning to dominate the 5G market across the globe through its low-priced infrastructure equipment. This set off alarm bells in Washington because of a 2017 Chinese Law that forced all domestic companies to help the Chinese intelligence services on demand- through Huawei has claimed it wouldn’t comply with any requests and doesn’t feel it is legally forced to do so.
Huawei has long been suspected of having deep ties to the Chinese Communist Party. The company was founded in 1987 by a former People’s Liberation Army officer and party member. The company made waves by reverse engineering telephone switching equipment from Hong Kong. China applauded Huawei as a “national champion” to help build the county’s ability to compete against other nations’ industrial giants.
Years later, the company was accused of stealing Western intellectual property, supplying sensitive telecom equipment to Iran and North Korea, and undercutting Western telecom equipment prices by as much as a third, effectively expanding its global market share. Huawei benefits from a few Chinese government policies that act as subsidies for the telecom giant.
But what’s most concerning is Huawei is accused of installing backdoors in its software that would allow the Chinese government to monitor data flowing through its international networks or shut down networks if there was ever a war. Huawei denies these claims, but the US has pressured its allies to stop doing business with Huawei.
Roger Entner, the founder of Recon Analytics, a telecommunications research company, said, “Huawei is slow in fixing their vulnerabilities,” he continued, “It’s very difficult to tell the difference between sloppy programming and deliberate backdoors.”
This is a huge concern regarding 5G because this new era of wireless technology will change how we connect to the world around us. Cloud-based applications won’t live on an edge device, such as a phone, but will be able to process and receive data from those devices in real-time. 5G devices, however, can connect to each other through radio networks creating an edge cloud.
A former US official involved with the issue said, “Data is going to travel along that edge at the speed of light,” he continued, “the edge is not distinct from the core” in the way that it has been for previous generations of wireless technology. This is the problem for all the governments connected to the network.
Gilman Louie, a commissioner to the National Security Commission on AI, recently said on Eye on AI’s podcast, “If you can’t trust the company that’s providing you that infrastructure, even if you tried to push it out to the edge, you’re still attaching it to the network.”
The NSA, CIA, and other US intelligence agencies have all said that if Huawei equipment is embedded even at the edge of 5G networks, this could spell big trouble for anyone connected. China could theoretically write in code, siphon data, and cover their tracks minutes later by writing out that code- all virtually undetected. This is why the US banned American companies from using Huawei equipment, though some allies have been less convinced.
One of the biggest reasons some countries aren’t aligning with the US on banning Huawei is the lack of updating infrastructure to support 5G services. In particular, Huawei would provide equipment for countries lacking certain parts of the wireless spectrum that could power 5G. Like other operators such as Ericsson or Nokia, Huawei products are customized for each operator. Once an operator starts with Huawei, it isn’t easy to switch, not to mention expensive. This is why many operators are “locked-in” with Huawei because the company had previously set up their 4G networks. Additionally, Huawei saw a considerable increase in growth during the housing boom resulting in many companies worldwide using Huawei equipment to build 5G networks.
Glenn Schloss, a Huawei spokesperson, dismissed the claim, saying only employees would have access. However, problems with Huawei’s software and hardware could allow employees-or of the Chinese government- access to all of the data on whoever’s operator’s network. Even that is under strict supervision under network operators with every employee keystroke recorded for verification.
In 2018, the UK evaluated Huawei’s 5G technology and reported that it could give “only limited assurance” that Huawei’s technology didn’t pose any national security threats. However, in 2019, that same center found “critical, user-facing vulnerabilities” and asked Huawei to fix these issues. But in 2020, the center reported that it had found a vulnerability “of national significance” and that the telecom company had been lackluster in instilling any confidence that any vulnerabilities would actually be fixed or even addressed.
In 2020, a 10-year-old confidential report from KPN, a Dutch telecommunications company, leaked to the press, claiming that the Chinese government could listen in on any phone conversation a user on its Huawei-built network was having. Both companies deny this claim, but Huawei has been banned from doing business in the Netherlands.
The US tightened sanctions on Huawei even further in 2020 by forbidding vendors worldwide from using US technology to make products for Huawei. The UK initially dug its heels into the ground regarding the pressure from the US to stop doing business with Huawei but eventually banned Huawei 5G equipment and ordered that all operators get rid of any existing equipment by 2027. UK’s ban now makes it the fourth nation out of five (Australia, New Zealand, UK, US, and Canada) in the Five Eyes intelligence-sharing network to ban Huawei, with Canada effectively banning the telecom giant as well, with orders for telecom companies to seek other vendors. Other countries are following the same path, though Huawei still holds strong in Africa and Southeast Asia.
Huawei’s equipment business isn’t the only thing taking a hit; the company’s smartphone business has also greatly suffered. Because of the business ban, Huawei is no longer the most prominent smartphone supplier globally and has even dropped out of the top five.
The sanctions even cut Huawei off from TSMC, a Tawainese semiconductor company responsible for making its 5G chips, forcing the company to buy as many chips as possible before April 1, 2020, ban deadline.
Huawei has been unable to release any new phones with 5G technology, and with the way things are going, it’s not looking great.
Source: IEEE Spectrum