Opinion: Focus is on Huawei tech as China launches 5G | Business| Economy and finance news from a German perspective | DW | 01.11.2019
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Opinion: Focus is on Huawei tech as China launches 5G

The People's Republic of China has launched Huawei 5G networks, but the telecoms giant cannot shake off the view it is too close to the Chinese government, argues DW's Clifford Coonan.

Months ahead of schedule, Chinese telecoms behemoth Huawei has unveiled its next-generation 5G networks. China is on track to become the world's biggest 5G market and this ascent is powered by Huawei tech.

Huawei remains one of the most controversial companies in the world and a central combatant in the trade war between China and the US. The world's two biggest economies are battling for technological supremacy, and 5G is a key tactical weapon — it will provide 10 to 20 times faster download speed than 4G.

There is growing concern among cybersecurity experts that countries like Germany will make decisions to adopt Huawei 5G technology based on economic incentives and trade deals, rather than national security implications.

Against this complex geopolitical backdrop, you have to ask: Just how good is Huawei really?

Huawei has few true global alternatives. The Shenzhen-based company is one of only three major global companies that analysts say can supply a broad range of advanced mobile network equipment at scale.

The other two are Ericsson and Nokia. And Huawei has a reputation among telecom operators for supplying cost-effective equipment promptly. Company revenues jumped almost 20% to $107 billion (€96 billion) last year.

Huawei has competitive technology and the political backing of Beijing, which hails Huawei as a "national champion." But Huawei's technology has some vocal critics.

"China has been better at marketing, offering cheaper prices on all the 5G technology, and its ability to stand up the network. However, the recent EU assessment on 5G showed that their software engineering is shoddy, rushed, and has vulnerabilities at multiple levels," said Nate Snyder, a cybersecurity expert who worked for the US Department of Homeland Security under Barack Obama.

Not just tech

Watching Huawei's rise, it's hard to not look at Europe's big players like Ericsson and Nokia and feel an opportunity has been lost.

The reasons for Nokia and Ericsson trailing Huawei are not simply technological.

After losing the race to introduce 4G technology, which is a major loss in competitive advantage, China started to invest billions of dollars in Huawei by way of subsidies and grants. These have included direct aid, cheap loans from state banks like China Development Bank, subsidized land from the local government as well as export credit.

"Huawei's efforts have been accelerated due to the government subsidizing Huawei's technology and providing similar incentives to expedite infrastructure development," said Snyder.

Because of EU competition rules, Ericsson and Nokia have not had the same benefits. This lack of level playing fields is one of Donald Trump's key complaints in the trade war.

Back in May, the US government added Huawei to its "entity list," which effectively bans American companies from selling components to the Chinese group.

That same month, Ericsson and Nokia both won 5G contracts from SoftBank Group's Japanese telecoms unit, replacing Huawei and its fellow Chinese peer ZTE. And Ericsson signed a similar pact in March with Denmark's biggest phone company, TDC, which had worked with Huawei since 2013 to modernize and manage its network.

DW business reporter Clifford Coonan

DW business reporter Clifford Coonan

Faced by US bans, Huawei is making major efforts to reduce its dependence on foreign technologies. It is king of the patents. Last year, it set a new record for the number of patent applications filed a single corporation in one year, with 5,405.

A study by the Tokyo-based research company Patent Result shows that only 21% of patents filed by Huawei could be classed as highly innovative. This is far lower than Intel's 32% and mobile chipmaker Qualcomm's 44%.

Tom Uren, a senior analyst at the Australian Strategic Policy Institute (ASPI), believes assessing the security risk is a paramount concern. He is certain that state actors will try to compromise 5G networks to enable spying.

"We should be thinking about risk and about taking decisions in our own national interest. Is it a good idea to let a critical underpinning technology be controlled by a state that has a history of wide-ranging cyberespionage and supply-chain attacks?” Uren said.

How does Huawei work?

Despite a massive publicity campaign, Huawei has yet to really explain who exactly owns the company, how it is run and if it is independent of the ruling Communist Party.

When Meng Wanzhou, daughter of Huawei founder Ren Zhengfei and the company's CFO, was arrested last year in Vancouver, Beijing swiftly imprisoned Canadians Michael Spavor and Michael Kovrig in apparent retaliation.

Huawei has been collaborating on security technology in the Xinjiang region, where over 1 million mostly Muslim people are being held in forced education camps.

Huawei has been sued by Cisco and Motorola over intellectual property theft. Earlier this year, it was indicted by the US over allegations it tried to steal information about the design of a T-Mobile robot called Tappy. Plus Huawei was linked to espionage at the failed North American telecoms company Nortel.

Merkel raises eyebrows

German Chancellor Angela Merkel raised a lot of eyebrows when she decided to allow Huawei to take part in the rollout of Germany's 5G network.

Her decision came after a European Union report assessing risks to its planned 5G cybersecurity networks.

"What the EU assessment report shows, however, is that while China's/Huawei's solution may be first to market and cheapest, it is unstable, full of flaws, and leaves itself open to potential exploitation by various threats and actors," said Snyder.

Merkel's move also annoyed the US, which has threatened to roll back some cooperation on intelligence. But Washington is not the ally it once was. Surveys show Germans see China as more reliable than the US as a partner and industry has lobbied successfully for a deeper relationship with China.

In an effort to calm her critics, Merkel insisted on a "no-spying pact" from Huawei.

How this will be enforced is unclear. Under China's National Intelligence Law from 2017, companies are required to "support, cooperate with and collaborate in national intelligence work" as demanded by Beijing. It also instructs them not to reveal their cooperation with intelligence services.

For now, Huawei is poised to dominate the 5G universe, but it is unlikely to shake off the view it is too close to the Chinese government. At the same time, China is Germany's biggest trading partner. By adopting Chinese 5G technology, Merkel can keep Beijing onside.

Watch video 07:01

Huawei 'not excluded' from German 5G network

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