The Improbable Rise of Huawei

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How did a private Chinese firm come to dominate the world’s most important emerging technology?

A decade ago, in 2009, the Swedish phone giant Teliasonera set out to build one of the world’s first fourth-generation wireless networks in some of Scandinavia’s most important—and technologically savviest—cities. For Oslo, Norway, Teliasonera made an audacious and unexpected choice of who would build it: Huawei, a Chinese company with little presence outside China and some other developing markets.

The same year, Huawei landed an even bigger and more unexpected contract to completely rebuild and replace Norway’s mobile phone network, which had first been built by the global standard-bearers: Ericsson of Sweden and Nokia of Finland. The Chinese upstart eventually completed the world’s most ambitious network swap ahead of schedule and under budget.

To many in the wireless industry, it was a coming-of-age moment for Huawei, and for China. Huawei was no longer just another Chinese catch-up clawing out market share thanks to cut-rate pricing or thriving on stolen intellectual property. Suddenly it had cutting-edge technology of its own and was elbowing aside established European giants like Ericsson and Nokia in their own backyard.

“For the first time, people realized Huawei was not just the cheap option but could compete on quality and price,” said Dexter Thillien, a telecommunications analyst at Fitch Solutions.

Fast-forward to now. In less than a decade, allegedly thanks in part to billions of dollars in support from the Chinese government, the privately held Huawei has become the world’s largest telecom equipment company, last year posting more than $107 billion in revenue from operations in some 170 countries.

More important, Huawei has, by most accounts, taken the lead in the race to develop one of the modern world’s most important technologies: fifth-generation mobile telephony. Unlike its various predecessors, which simply offered consumers the ability to send texts, then to surf the web on their phones, and finally to stream video, 5G promises to revolutionize the entire global economy.

And for perhaps the first time in China’s modern history, Huawei’s growing market share and technological prowess are putting a champion of the Chinese government in a position to dominate a next-generation technology. 5G will offer hugely faster data speeds than today’s mobile technology, which is important for consumers. But 5G will also be the technology that ensures artificial intelligence functions seamlessly, that driverless cars don’t crash, that machines in automated factories can communicate flawlessly in real time around the world, and that nearly every device on earth will be wired together.

5G will be, simply put, the central nervous system of the 21st-century economy. 5G will be, simply put, the central nervous system of the 21st-century economy—and if Huawei continues its rise, then Beijing, not Washington, could be best placed to dominate it.

5G Network Internet Mobile Wireless Business concept.5G standard of modern signal transmission technology.

Huawei’s startling ability to gatecrash what has been until now an exclusive bastion of the developed world has sent shock waves not only through the industry but also through Western capitals. Its success has turned Huawei into a target for the U.S. President Donald Trump’s administration—which is warning that the company’s growing role in global telecommunications networks could enable Beijing to use its control of the world’s digital plumbing to spy on rival nations or steal their commercial secrets.

“5G is turning more into a geopolitical battleground between the United States and China,” said Tim Ruhlig of the Swedish Institute of International Affairs, who researches 5G technologies.

And that raises a key question that remains unanswered: Who is Huawei really working for? While it prides itself on being a private company, Huawei was founded in 1987 by Ren Zhengfei, a veteran of the People’s Liberation Army’s engineering corps, and the Chinese army was an early and crucial customer for the fledgling firm.

Late last month, a critical report by Britain’s 5G watchdog also raised fears that Huawei might prove to be a high-tech Trojan horse. The report concluded that “underlying defects” left the company’s software and cybersecurity systems open to hackers, posing “significant” security issues. Even so, the report mainly blamed sloppy engineering and found no evidence that the vulnerabilities had been introduced at the direction of Chinese authorities; it also stopped short of proposing an outright ban.

Indeed the Trump administration—which has more often than not managed to alienate its longtime allies—is already faltering in its global campaign to isolate Huawei. While a few U.S. allies, such as Australia and Japan, have followed Washington’s lead and already banned Huawei technology, many others are still considering it. The United Kingdom, like Germany, is still weighing the geopolitical implications of purchasing Huawei equipment. Others such as Thailand and South Korea are pressing ahead and letting Huawei launch 5G projects. India, which the United States hopes to use as a counterweight to China, is resisting American calls to exclude Huawei from its networks.

And behind all these fresh worries over Huawei’s seemingly sudden dominance is a simpler question: How did a modest, private Chinese firm that started out three decades ago importing basic telecoms equipment emerge as the arbiter of what is arguably one of the world’s most important technologies?

Source: Foreignpolicy.com

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