What did Huawei do to land in such hot water with the US?

Ties to Iran, security concerns

By David Goldman, CNN Business
Rishi Iyengar/CNN

WASHINGTON, D.C. - Huawei has endured a tenuous relationship with the United States for a decade, reaching a boiling point last week when the Trump administration banned American corporations from doing business with the Chinese company.

Although the United States has long suspected Huawei of engaging in illegal activity, it's not clear that Huawei did anything specific recently to become the object of such concern. The ban came as something of a surprise to observers.

The Trump administration temporarily eased up — just a bit — on its restrictions Monday. But the reprieve was narrow and aimed at a small group of rural American network providers that use Huawei equipment. For Huawei and most American companies, the ban remains firmly in place.

What landed Huawei in such hot water with US officials?

 

The US-China trade war

 

The United States and China have been embroiled in a bitter trade war for more than a year, and Huawei has been stuck in the middle of it.

Huawei could serve as an enormous bargaining chip: It is a gigantic Chinese telecommunications company with ambitions to become the world's No. 1 smartphone maker and one of a small handful of companies that makes 5G networking equipment for wireless companies. Huawei posted $105 billion in sales last year, more than IBM.

President Donald Trump has suggested that he could consider easing up on Huawei as part of ongoing trade talks with China.

 

Ties to China's government

 

In 2012, the US House Intelligence Committee published a report following a year-long investigation that found Huawei posed a security threat to the United States. The report concluded that Huawei and fellow Chinese telecom company ZTE acted on behalf of the Chinese government, and they should not be allowed to operate critical US infrastructure that controls the country's wireless networks.

Huawei says it operates independently of the Chinese government, but the United States has long suspected the company of spying on the networks its technology operates. Huawei has repeatedly denied allegations of spying, but the United States has passed over Huawei for broadband and wireless contracts, and the Trump administration has tried to pressure global to stop buying telecommunications equipment from Huawei.

The company declined to comment for this article but has repeatedly denied ties to the Chinese government and disputed claims that its equipment poses a risk. ZTE denied the allegations but last year agreed to US government oversight.

 

Ties to Iran

 

The Trump administration filed criminal charges against Huawei earlier this year, claiming that the company schemed to circumvent US sanctions on Iran.

As part of that case, Canada has detained Huawei Chief Financial Officer Meng Wanzhou. She faces possible extradition to the United States.

Huawei allegedly deceived financial institutions and the US government about its business in Iran. Among the charges against Huawei, the United States claims Huawei's founder, Ren Zhengfei, falsely told the FBI in 2007 that the company did not violate any US export laws, and that it had not dealt directly with any Iranian company.

Huawei pled not guilty, and has denied the charges. China called the charges a smear campaign. Meng denies the charges. Ren has not commented on the charges but told CNN he does not plan to travel to the United States, where he could face prosecution.

 

Alleged intellectual property theft

 

The Trump administration also sued Huawei for allegedly stealing trade secrets from T-Mobile.

According to the federal lawsuit, Huawei worked for years to steal T-Mobile's proprietary phone testing technology, known as "Tappy." Huawei supplied phones to T-Mobile, and had access to some information about Tappy because of that relationship, according to the lawsuit. The company's employees were allegedly asked to send information such as photos, measurements and the serial numbers of various components.

The US government alleges Huawei's management promised bonuses to employees who collected confidential information on competitors.

Huawei pleded not guilty, and has denied the charges in that case too.

 

Battle for the future of technology

 

Huawei's technology is essential to the future of 5G, a technology the United States desperately wants to dominate.

Huawei is the 5G leader, providing technology that supports wireless networks' 5G rollouts. Its only substantial competitors are Nokia and Ericsson, and Huawei is a much larger company, capable of providing the technology faster and cheaper.

Although the United States has mostly avoided Huawei's networking technology, it remains prevalent in rural areas of America. It is also deeply entrenched in Europe, Asia and other regions.

The United States wants to ensure that its telecommunications companies are at the forefront of the new technology. 5G could help usher in the next wave of economy-changing technologies, including driverless cars.

 

Hope for the future?

 

Despite the recent impasse between Huawei and the United States, a previous spat between the Trump administration and a Chinese technology company shows a potential path forward for Huawei.

In April 2018, the US Commerce Department said that ZTE lied to American officials about punishing employees who violated US sanctions against North Korea and Iran. The United States banned American companies from selling components to ZTE, preventing the company from buying chips and glass from its key suppliers.

Yet a month later, Trump said he would personally work with Chinese President Xi Jinping to get ZTE "back into business, fast." He said the US punishment was costing too many Chinese jobs. The Trump administration lifted those sanctions in July after ZTE agreed to oversight.

If the Trump administration is using Huawei — a much bigger company than ZTE — as a similar bargaining chip in its trade war with China, it could demand political concessions from China in exchange for easing restrictions on the company.

Huawei, however, isn't waiting for the two countries to resolve the problem. Huawei sued the US government in March to fight back against America's efforts to curb its global influence. US government officials have not commented on the case.

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