In the sparsely settled forests of eastern Oregon, Huawei Technologies is hardly the big bad wolf of China that US officials have depicted. It is 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 to 30 percent less than its competitors do, said 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 about 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.
Illustration: Yusha
“Their equipment is very, very good,” said Franell, who chairs the Oregon legislature’s Broadband Advisory Council. “We haven’t found equivalent equipment on the market.”
US President Donald Trump’s administration 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 that 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 would not 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 that Huawei might 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.
Former US president Barack Obama’s administration stopped Huawei from acquiring US technology assets and exerted pressure that reportedly helped nix a US$5 billion equipment deal with Sprint that would have saved the struggling US carrier US$800 million in its first year.
The US Congress last summer barred federal agencies and contractors from buying Chinese networking gear, and the Trump administration is preparing an executive order that could 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 of its annual revenue of US$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 and ahead of Apple.
However, in the US, the consumer market has effectively closed for Huawei.
Verizon and AT&T last year said they would no longer offer Huawei smartphones due to government pressure.
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 have said that it is a private company, owned by employees, not the state.
“I love my country, I support the [Chinese] Communist Party, but I will not do anything to harm the world,” Huawei founder and CEO Ren Zhengfei (任正非) said in a rare interview at company headquarters in Shenzhen, China, on Jan. 15.
However, current and former US officials have said classified information that they cannot discuss proves that Huawei would 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, Jeffrey Ding of the University of Oxford’s Future of Humanity Institute said.
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,” said James Clapper, who served as director of national intelligence for Obama and is 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 cybertheft, 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 confrontation and containment approach was outlined by the Trump administration in the 2017 National Security Strategy.
“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 liberalize China. Contrary to our hopes, China expanded its power at the expense of the sovereignty of others,” the document says. “We will work with our partners to contest China’s unfair trade and economic practices and restrict its acquisition of sensitive technologies.”
The Trump administration believes that Huawei is the tip of the spear. In the past few 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 would communicate instantly via antennae, facilitating automation on a transformative scale.
Digital networks would become an even more integral part of 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 have said.
“This will be the first major deployment of Internet technology that creates more risk than benefit if not properly controlled,” says a memo written by retired US Air Force Brigadier General Robert Spalding, who served on the US National Security Council in 2017 when it issued the National Security Strategy.
The crux of the administration’s argument is that Huawei could not say no to demands from Beijing, 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 and any of its employees have done so in the past is incidental, given Huawei’s lead in developing 5G technologies for the future, China hawks have said.
“When people realized Huawei is effectively the only provider of 5G, they had to do something,” said James Mulvenon, a China specialist who works for defense contractor SOS International of Reston, Virginia. “Nobody is looking for a smoking gun anymore. If the [People’s Liberation Army] comes to them, they have no way of saying no.”
Ren said he would decline any request from Beijing for sensitive information on clients, and stressed the potential for cooperation with the US and other countries on 5G.
“Huawei firmly stands on the side of customers when it comes to cybersecurity and privacy,” he said.
The executive order under consideration, for possible issuance next month, would not mention specific companies such as Huawei and would not ban US sales by the companies, but it would empower the US Department of Commerce to review products and purchases by companies connected to adversarial countries, including China, a person familiar with the matter said.
A bipartisan bill introduced in Congress would take the more draconian step of banning sales of US parts to Huawei and its Chinese counterpart, ZTE, which could drastically curtail their businesses. Another bill would set up a White House office to coordinate federal efforts to blunt technology threats from China.
The Trump administration is also stalking Huawei in other ways. Its most provocative act so far was asking Canada to arrest Huawei chief financial officer Meng Wanzhou (孟晚舟) in Vancouver last month on fraud charges linked to alleged Iran sanction violations, which Huawei denies.
Her arrest “would never, never, ever have happened” before the Trump pivot to confronting China, Spalding said.
US investigators in Seattle are looking into possible criminal charges against Huawei for the alleged theft of trade secrets from US partner T-Mobile.
The probe includes allegations that a Huawei engineer stole information when visiting a T-Mobile lab in Bellevue, Washington, to see a diagnostic robot that simulated a person’s phone use, one person familiar with the matter said.
In a 2014 lawsuit, T-Mobile said that a Huawei engineer allegedly slipped one of the robot’s fingertips into his laptop bag during the visit and left with it.
The jury in 2017 sided with T-Mobile, saying that T-Mobile should get US$4.8 million in damages for breach of contract. The parties later agreed to drop the case after settlement talks.
Polish authorities on Jan. 11 arrested a former Polish intelligence official and a Chinese employee of Huawei, accusing them of spying for China. Huawei fired the employee the next day and said the incident brought disrepute upon the company.
In other foreign capitals, US officials are playing hardball over Huawei, telling allies that the US would re-evaluate what intelligence it shares with them if they do not end cooperation with the company, a US official said.
US officials, mindful of Huawei’s market advantages, are even trying to develop packages of US-made gear to provide foreign companies an alternative to buying Huawei, an official involved in that effort said.
The campaign to blunt Huawei’s rise appears to be one of Trump’s most successful diplomatic initiatives. Australia, New Zealand and Japan have acceded to US requests to bar Huawei’s 5G equipment.
In Britain, BT Group has been pulling Huawei equipment out of its core structure since the 2016 acquisition of mobile carrier EE, which used Huawei gear throughout its systems. It is also removing Huawei products from the emergency-response network that EE is building in Britain.
Germany has said it is considering restricting Huawei’s role in its telecom infrastructure, while Czech officials have expressed concerns that China is preparing an economically damaging reprisal against the country after Czech authorities issued warnings about Huawei’s risk to national security.
The French government has been warning about Huawei for some time, according to Orange CEO Stephane Richard, who said that the company would work with Ericsson and Nokia, not Huawei.
Following the arrests in Poland, officials there urged the EU to find a common approach toward Huawei, rather than leaving each country to act alone and face possible Chinese retribution.
Some of Huawei’s apparent misconduct is not classified.
Every night for five years, equipment installed in the Chinese-built headquarters of the African Union in Addis Ababa transmitted data from midnight to 2am back to servers in Shanghai, the French newspaper Le Monde reported last year.
Subsequently, microphones hidden in desks and walls were stripped from the US$200 million building, which was financed by China, and Huawei’s servers were replaced, the Australian Strategic Policy Institute said.
After the Le Monde report, China called the espionage allegations “ridiculous,” and African Union Commission spokesperson Ebba Kalondo said it was a “non-story.”
Huawei’s English Web site still boasts of the “greatly enhanced security” that its systems provided the Addis Ababa headquarters.
The African Union’s “legacy PCs were proving too vulnerable to hackers, phishing, viruses and other forms of compromise,” a Huawei post says.
Bonnie Girard, who lived in China for a decade while working for a string of European telecom companies, remembers visiting a contract manufacturer in the mid-1990s and seeing Huawei engineers brazenly photographing printed circuit boards being built for Alcatel.
The Huawei employees could never have accessed the facility without government approval, said Girard, who runs consulting firm China Channel.
Still, Huawei has always been completely transparent with Eastern Oregon Telecom about its hardware and software, said Frannel, adding that he has never seen “a shred of evidence that would indicate to me that Huawei is a problem.”
In today’s global economy, US and European suppliers rely on Chinese-made parts nearly as much as Huawei does, he said.
“Banning a brand doesn’t solve our security problem,” Frannel said.
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