Besides security, another reason US fears Huawei: Its gear actually work

In the sparsely settled wildlands of eastern Oregon, Huawei Technologies is hardly the big bad wolf of China that US officials have depicted. It’s a lifeline to the 21st Century.

China’s largest tech company makes high-quality networking gear that it sells to rural telecommunications operators for 20 per cent to 30 per cent less than its competitors do, says Joseph Franell, chief executive officer and general manager of Eastern Oregon Telecom in Hermiston, a watermelon-growing hub of 18,000 people. Huawei’s equipment has helped some two dozen US telecom companies provide landlines, mobile services and high-speed data to many of the poorest and most remote areas in the country. Some of these companies have received federal subsidies, but not Franell’s, which was spun out to senior management last year by the electric cooperative that founded it in 1999. Huawei makes the magic happen.

“Their equipment is very, very good,” says Franell, who chairs the Oregon legislature’s Broadband Advisory Council. “We haven’t found equivalent equipment on the market.”

The administration of President Donald Trump is escalating a fight with a formidable adversary — a face-off that intelligence and cybersecurity officials say has significant implications for the safety and security of the US and its allies. Huawei has become a world leader in manufacturing networking equipment and is striving to dominate the next generation of wireless technology, known as 5G. The Trump administration, convinced Huawei is a Trojan horse for Chinese intelligence, is determined to blunt its growing sales and influence. The heightening tension, which is said to include a potential presidential order that won’t name Huawei but would greatly limit its and other companies’ US business opportunities, stems from a fundamental hardening of US policy toward China that took place in 2017 during Trump’s first year in office.

For a decade, US officials have said Huawei may be acting as an arm of the Chinese state, a private company in name only whose ulterior mission, they claim, is to steal government and corporate secrets through conventional espionage and back-door bugs in its telecom gear. The Obama administration stopped Huawei from acquiring US technology assets and exerted pressure that reportedly helped nix a $5 billion equipment deal with Sprint that would have saved the struggling US carrier $800 million in its first year. Last summer, Congress barred federal agencies and contractors from buying Chinese networking gear, and now the Trump administration is preparing an executive order that could significantly restrict all Chinese telecom sales in the US, two people familiar with the matter said earlier this month.

Through it all, Huawei has prospered. The company garners about half its annual revenue of $92 billion outside China, led by Europe, the Middle East and Africa, where cutting-edge technology at affordable prices has endeared the Chinese company to budget-strapped purchasers. Huawei has also become the world’s second-biggest mobile-phone maker, after Samsung Electronics and ahead of Apple In the US, however, the consumer market has effectively closed for Huawei. Last year, Verizon Communications and AT&T said they would no longer carry Huawei smartphones because of government pressure, after the FBI, CIA and NSA had warned that the phones were unsafe.

Huawei, for its part, has repeatedly denied any kind of spying or even talking with the Chinese government, let alone acting on its behalf. Executives insist it is a private company, owned by employees, not the state. “I love my country, I support the Communist Party, but I will not do anything to harm the world,’’ said Ren Zhengfei, Huawei’s founder and CEO, in a rare interview at company headquarters in Shenzhen, China, on Jan. 15.

Trust us, say current and former US officials: Classified information they can’t discuss proves Huawei will purloin customer secrets any time it can. Out in the open, Huawei, after becoming the world’s largest telecom-equipment manufacturer, has elevated surveillance systems to be one of its “strategic business lines,’’ a phrase mentioned 23 times during an August event in Guangzhou, China, to release 30 new types of cameras, according to Jeffrey Ding of the University of Oxford’s Future of Humanity Institute. Already in 230 cities – including many in China as well as in Mauritius, Serbia, Kenya and elsewhere — Huawei has installed what it calls its “Safe City’’ technology, which involves a network of cameras that can match faces and license plates to central databases.

Cybersecurity experts from both the Obama and Trump administrations agree on the risk. “These companies need to be considered as functional extensions of Chinese intelligence,” says James Clapper, who served as director of national intelligence for President Barack Obama and is now a frequent Trump critic. “This is one case where I agree with this administration.”

The difference is what to do about it. Obama pursued diplomacy to rein in Chinese cyber-theft, signing a landmark agreement in 2015 in which the US and China agreed not to hack each other’s economic secrets. The Trump team scrapped the whole idea of engaging China and supporting its economic development as a means of moderating the country’s conduct. This administration’s approach, confrontation and containment, was outlined in Trump’s first “National Security Strategy,” published in December 2017.

“For decades, US policy was rooted in the belief that support for China’s rise and for its integration into the post-war international order would liberalise China. Contrary to our hopes, China expanded its power at the expense of the sovereignty of others,” the document declared. “We will work with our partners to contest China’s unfair trade and economic practices and restrict its acquisition of sensitive technologies.” Huawei is the tip of the spear, the administration believes. In recent months, the US has dispatched lawyers, diplomats and intelligence officials to corporate and government offices around the world to press its case that Huawei must not be allowed to run their 5G networks.

The technology’s next generation is expected to facilitate connections that are 10 to 100 times faster than current standards allow. Everything from grocery shelves to surgical robots to supertankers on the high seas will communicate instantly via antennas, facilitating automation on a transformative scale. Driverless cars will ping each other to avoid collisions as they whiz within centimeters of one another at high speeds. Factories, drones and mobile phones will coordinate home deliveries in an algorithmic chain without a single human being. Entire movies will download onto a laptop in seconds.

Digital networks will become even more integral in everyday life – and more susceptible to serious mischief. A malevolent state with control over an adversary’s 5G network could wreak mass industrial sabotage and social collapse, US officials say.

“This will be the first major deployment of internet technology which creates more risk than benefit if not properly controlled,” according to a memo written by retired Air Force Brigadier General Robert Spalding, who served on Trump’s National Security Council when it issued the 2017 National Security Strategy.

The crux of the administration’s argument is that Huawei couldn’t say no to demands from China’s government, even if it wanted to. China’s National Intelligence Law of 2017 requires all Chinese companies and citizens to "assist in and cooperate in national intelligence work" if requested. Whether Huawei or any of its employees have done so in the past is now incidental, China hawks argue, given Huawei’s lead in developing 5G technologies for the future.