The Huawei inflection point
US-China trade war are the real reasons behind the ban
PHOTO: REUTERS
Sometimes it feels like my generation will have the misfortune of witnessing some of the worst inflection points in our history. The worst because the self-destructive power at mankind’s disposal today is just ungodly. It is true that we did not witness either of the two world wars. But in Afghan Jihad, we saw the height of the cold war. Then the collapse of the Soviet Union, which despite being a momentary relief to the liberal order, caused huge suffering to the citizens of the former Soviet republics. Then 9/11. The war on terror. The rise and now endless fall of the European Union. The invasion of Iraq and the Arab spring which broke the Middle East. The rise and further rise of Narendra Modi that defies every logic. Also, Donald Trump. And this is just the journey so far. Think of what is to come.
A little indication of that future came with the decision of the US Department of Commerce to include the smartphone behemoth Huawei (literally Chinese achievement) in its entity list. Huawei is the world’s second largest smartphone manufacturer. For its operating system (OS), it relies on Google’s open source software Android. Within days of the blacklisting, Google announced that it was severing ties with the Chinese smartphone vendor, casting doubt on the reliability of its existing phones too. Now consider the implications for the current users. The most popular apps available in Google’s Android ecosystem are usually based in the US. Not only would that mean that Huawei users would lose access to Google apps but also to a whole host of most used applications. This in any other case would have been a death sentence for the company. But not for Huawei.
Buried deep down somewhere in the mess that is the US-China trade war are the real reasons behind the ban and they are varied, not entirely about trade. Consider the fact that back in February 2018, six US intelligence chiefs — including those of the FBI, the CIA and the NSA — recommended to the Senate Intelligence Committee that the American people should be discouraged to use products made by the Chinese tech giants Huawei and ZTE. Reason? Proximity to the Chinese state. The intelligence chiefs feared that the technology could be used to spy on the American people. It was in the light of this opinion that the US even threatened its Nato allies that it would stop intelligence sharing if they did not halt the use of such Chinese technology. Interestingly when Canada arrested Huawei’s CFO, who incidentally is the daughter of its CEO, the accusation was that the company was instrumental in violating the US sanctions against Iran. Go figure.
Then there is the matter of corporate espionage. Chinese companies have often been accused of intellectual property theft. Copycat industries have been very common in the Chinese tech world. Consequently, there is no dearth of such allegations against Huawei. But frankly it is difficult to scapegoat a single company for such practices which are considered a norm in the industry. Samsung and Apple were locked in a legal battle for years after all. Samsung, a South Korean company, eventually prevailed. But even as the lawsuit dragged on, there was no doubt in anyone’s mind that Samsung had borrowed (of course it is a euphemism) the sync technology from Apple. So, the long story short, it is not unusual to see tech companies stealing from each other. Otherwise the market would still be dominated by Apple, the true pioneer of the smartphone technology. And yet Huawei managed to beat it last year to relegate it to the third position in the mobile sales.
Also since Huawei also supplies other equipment related to networks and communication and has been around for a long time, it is ideally placed to take advantage of the technological lead in the field of 5G technology. So advanced, in fact, is the company in the field that since the US decision not to involve it in setting up of its domestic 5G infrastructure that its companies have struggled to step up to the plate and the UK has chosen to earn America’s ire but not to lose business with Huawei. Did it have anything to do with Theresa May eventually throwing in the towel and announcing stepping down? We wouldn’t know. But this is a high stakes game and the US is adamant.
Shortly after Google, other US and western companies followed suit. Microsoft (Huawei also manufactures excellent laptops), Qualcomm, Gorilla Glass manufacturer Corning, Broadcom and many other manufacturers have announced their boycott of Huawei. SD alliance and Wi-Fi alliance both seem to be leaning in the same direction. Huawei may not be able to use SD cards in its phones pretty soon.
But should it not be the death of the company then? Why do I insist on calling it an inflection point? The biggest one of the recent history at that. Because it will not die. And in the US case it is a lose-lose-lose proposition. First possibility: Huawei loses its international market. Since half of its business is in China where Google apps have long been replaced by imitation software, it will survive. There are dozens of other Chinese players which will gladly take its place in the international arena. Second possible outcome: that as Donald Trump has indicated, both sides may come to terms as a part of a broader trade deal. Result? Validation of Huawei practices. Third and most dangerous outcome: That Huawei develops its own OS and app ecosystem. Result? End of the US OS monopoly (Google and Apple) and a world locked in a technological cold war. And while it might be a prolonged and painful fight for both sides, it will end in China’s victory owing to sheer brute force.
Make no mistake. I am not saying that everything Huawei, or Chinese companies, do is beyond reproach. The growth of Chinese AI and its access to data owing to its domestic market and now BRI gives me cold sweats. But one, America is very late in responding to a war China has won a decade ago. Two, the only way to keep some semblance of control is to work with China and encourage it to be part of a rule-based economic and technological order.
And the fear of foreign espionage is a lost cause. Consider three things. 1) Wikileaks. 2) Mueller Report’s conclusions on foreign involvement. 3) Three men of Indian origin who are now heading Google (Sundar Pichai), Microsoft (Satya Nadella) and the US Federal Communications Commission (Chairman Ajit Pai) which regulates interstate communications by radio, television, wire, satellite, and cable. They are not there by sheer coincidence. It is much too different, complexly integrated world where no secrets are possible. China is a concern which is visible to the US. The real threats usually overtake you with remarkable stealth and by total surprise.
Published in The Express Tribune, June 1st, 2019.
A little indication of that future came with the decision of the US Department of Commerce to include the smartphone behemoth Huawei (literally Chinese achievement) in its entity list. Huawei is the world’s second largest smartphone manufacturer. For its operating system (OS), it relies on Google’s open source software Android. Within days of the blacklisting, Google announced that it was severing ties with the Chinese smartphone vendor, casting doubt on the reliability of its existing phones too. Now consider the implications for the current users. The most popular apps available in Google’s Android ecosystem are usually based in the US. Not only would that mean that Huawei users would lose access to Google apps but also to a whole host of most used applications. This in any other case would have been a death sentence for the company. But not for Huawei.
Buried deep down somewhere in the mess that is the US-China trade war are the real reasons behind the ban and they are varied, not entirely about trade. Consider the fact that back in February 2018, six US intelligence chiefs — including those of the FBI, the CIA and the NSA — recommended to the Senate Intelligence Committee that the American people should be discouraged to use products made by the Chinese tech giants Huawei and ZTE. Reason? Proximity to the Chinese state. The intelligence chiefs feared that the technology could be used to spy on the American people. It was in the light of this opinion that the US even threatened its Nato allies that it would stop intelligence sharing if they did not halt the use of such Chinese technology. Interestingly when Canada arrested Huawei’s CFO, who incidentally is the daughter of its CEO, the accusation was that the company was instrumental in violating the US sanctions against Iran. Go figure.
Then there is the matter of corporate espionage. Chinese companies have often been accused of intellectual property theft. Copycat industries have been very common in the Chinese tech world. Consequently, there is no dearth of such allegations against Huawei. But frankly it is difficult to scapegoat a single company for such practices which are considered a norm in the industry. Samsung and Apple were locked in a legal battle for years after all. Samsung, a South Korean company, eventually prevailed. But even as the lawsuit dragged on, there was no doubt in anyone’s mind that Samsung had borrowed (of course it is a euphemism) the sync technology from Apple. So, the long story short, it is not unusual to see tech companies stealing from each other. Otherwise the market would still be dominated by Apple, the true pioneer of the smartphone technology. And yet Huawei managed to beat it last year to relegate it to the third position in the mobile sales.
Also since Huawei also supplies other equipment related to networks and communication and has been around for a long time, it is ideally placed to take advantage of the technological lead in the field of 5G technology. So advanced, in fact, is the company in the field that since the US decision not to involve it in setting up of its domestic 5G infrastructure that its companies have struggled to step up to the plate and the UK has chosen to earn America’s ire but not to lose business with Huawei. Did it have anything to do with Theresa May eventually throwing in the towel and announcing stepping down? We wouldn’t know. But this is a high stakes game and the US is adamant.
Shortly after Google, other US and western companies followed suit. Microsoft (Huawei also manufactures excellent laptops), Qualcomm, Gorilla Glass manufacturer Corning, Broadcom and many other manufacturers have announced their boycott of Huawei. SD alliance and Wi-Fi alliance both seem to be leaning in the same direction. Huawei may not be able to use SD cards in its phones pretty soon.
But should it not be the death of the company then? Why do I insist on calling it an inflection point? The biggest one of the recent history at that. Because it will not die. And in the US case it is a lose-lose-lose proposition. First possibility: Huawei loses its international market. Since half of its business is in China where Google apps have long been replaced by imitation software, it will survive. There are dozens of other Chinese players which will gladly take its place in the international arena. Second possible outcome: that as Donald Trump has indicated, both sides may come to terms as a part of a broader trade deal. Result? Validation of Huawei practices. Third and most dangerous outcome: That Huawei develops its own OS and app ecosystem. Result? End of the US OS monopoly (Google and Apple) and a world locked in a technological cold war. And while it might be a prolonged and painful fight for both sides, it will end in China’s victory owing to sheer brute force.
Make no mistake. I am not saying that everything Huawei, or Chinese companies, do is beyond reproach. The growth of Chinese AI and its access to data owing to its domestic market and now BRI gives me cold sweats. But one, America is very late in responding to a war China has won a decade ago. Two, the only way to keep some semblance of control is to work with China and encourage it to be part of a rule-based economic and technological order.
And the fear of foreign espionage is a lost cause. Consider three things. 1) Wikileaks. 2) Mueller Report’s conclusions on foreign involvement. 3) Three men of Indian origin who are now heading Google (Sundar Pichai), Microsoft (Satya Nadella) and the US Federal Communications Commission (Chairman Ajit Pai) which regulates interstate communications by radio, television, wire, satellite, and cable. They are not there by sheer coincidence. It is much too different, complexly integrated world where no secrets are possible. China is a concern which is visible to the US. The real threats usually overtake you with remarkable stealth and by total surprise.
Published in The Express Tribune, June 1st, 2019.