Huawei in trouble: can the Chinese tech giant survive its latest skirmish with the United States?
You might be listening to this podcast on a Huawei phone. If so, the maker of your phone is in trouble. The Chief Financial Officer of Huawei was arrested in Canada on suspicion of avoiding financial sanctions with Iran. And that is having a negative effect on its business around the world.
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Huawei in trouble after CFO’s arrest
Huawei is in deep trouble. The Chinese firm is one of the world’s largest manufacturers of smartphones and, most importantly, of the complicated telecommunications equipment that makes internet and phone service possible. They are making a big push to develop the so-called 5G wireless networks that will be even faster and more reliable than the 4G cellular networks we currently use. So, in addition to the phones, they make the complicated commercial equipment that your providers use in the background.
But Huawei has hit some stormy waters. That means they are in dangerous times. They have long been banned in the United States. The government here in the US believes that the Chinese government could potentially use Huawei equipment to spy on customers. The US believes that the Chinese government has a great deal of influence over Huawei, and that if too much of our own communication infrastructure were tied to a company controlled by a foreign government, then that would pose a national security risk. The specific worry is that code embedded deep in the equipment could give sensitive national data back to Beijing. There is also the risk—in the eyes of the US, at least—that malicious code could do harm in the future. Think about a future where self-driving cars and trucks, for example, are on 5G networks, and you can see why that has some people worried.
Huawei, for its part, says it is not controlled by the Chinese government—that in fact, it is employee-owned. It also says that it has 46 out of the top 50 telecommunications companies as customers—and that violating their trust would not make commercial sense.
The United States is not alone in its suspicion of Huawei. Australia, New Zealand, and Taiwan have all banned the company from selling equipment in their countries, but Britain allows it. Britain has a special committee that reviews all the code in Huawei equipment to make sure there are no dangers to national security buried in the code. Huawei says this committee’s work ensures that there is no malicious code in the equipment it sells abroad.
Then came the latest bombshell. Meng Wanzhou, the company’s Chief Financial Officer, or CFO, was arrested in Canada a couple of weeks ago, at the request of American authorities. They have charged her with purposely avoiding international sanctions against Iran.
The US and Europe placed sanctions on Iran—essentially they said companies in the US and Europe could not do business with Iran. So what, you may ask? Huawei is a Chinese company. They don’t have to follow American laws about doing business in Iran. That’s true, except that they used the big international banks that do have to follow American laws. The international bank HSBC discovered that Huawei tricked it into processing payments in Iran, which is against the law in the US. HSBC worked with the US government once they discovered that they had been deceived.
That’s why the Canadian authorities arrested Ms. Meng when she stepped off a plane in Vancouver. The specific charges against her personally are still confidential. However, it’s likely that she is going to be accused of bank fraud, or some similar charge.
Ever since her arrest, Huawei has seen its support across the world dry up. The French telecommunications company Orange has said it will not use Huawei products in its 5G implementation. Deutche Telekom, a big provider in Germany, is reviewing its purchases of Huawei equipment. BT, a provider in Britain, said the same thing: they would not be using Huawei products. Those companies are making the decision that doing business with Huawei at this point is too much of a reputational risk for them.
China has retaliated against Canada by arresting two Canadians living in China: a former diplomat and an entrepreneur. Both have been held for questioning. One of their friends has described their interrogation as a “nightmare.”
This has become a three-way international incident. China and the United States are now rivals in many respects, and their conflict over Huawei is just one of many ways in which the two countries are in a power struggle. Canada is a close ally of the United States, and a trading partner of Canada, but they probably want nothing to do with the rivalry between the US and China. As one person put it, Canada is “caught in the battle between two elephants and we have our hands tied.”
How bad is this for Huawei? It’s bad that they’ll lose business in Europe. That’s for sure. But the big market for 5G equipment and handsets will be in China itself, so their biggest growth market is probably not in doubt at all.
I get the sense that this is the kind of thing we’ll need to get used to in the future, as the rivalry between America and China intensifies.
Today I want to say hi to Daniel from Brazil, who listens on Spotify and reads the transcripts on the web site. He’s looking to improve his accent, listening and grammar with Plain English. Thanks for being with us Daniel. And that just reminds me that on our web site, not only do we have a transcript, but we have a transcript that shows you the definitions of the hardest words in your own language. Right now we support Portuguese—that’s probably the one Daniel reads—Portuguese, Spanish, Japanese, French, Italian, Chinese, and Japanese. So if you go to the web site, just hover your mouse over a highlighted word—or tap on it if you’re on a tablet of smartphone—do that, and it shows you the definition of the word, instantly. No stopping to look up the word in a dictionary. No re-typing the word. No looking for the right context. We do it by hand, with individual translators in all the languages, so you’re getting the context of about a hundred English words and phrases in each episode. Check out today’s by going to PlainEnglish.com/114.
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