Inside Huawei’s (rather awkward) charm offensive to convince the world it’s OK.
SHENZHEN, China — Huawei Technologies Co. Ltd. rotating chairman Eric Xu seems frustrated when asked why the telecom equipment maker, the world’s largest, should be trusted amid accusations of espionage, intellectual property theft, conspiracy and fraud, charges that could damage its global expansion plans just as telecoms are poised to spend billions on 5G equipment.
Even so, it’s odd framing for a company embarking on a charm offensive to convince the public it’s not a national security threat. Self-promotion doesn’t come naturally for Huawei, which traditionally eschews media attention and vies to win customers on merit. But it feels forced to defend itself against suspicions it believes are based on its identity as a Chinese company, not evidence. The 5G stakes are high, and Huawei is straining to stay on top of its game.
In apparent retaliation, China arrested two Canadians and upgraded a third man’s drug-related prison sentence to a death sentence. Its foreign minister warned of “serious consequences” if Canada didn’t release Meng, who remains under house arrest in her Vancouver mansion fighting extradition. The ongoing trade wars between China and the U.S. and Canada aren’t helping either.
Huawei is also beefing up its public relations team in places such as Canada, where telecom operators poised to choose 5G suppliers are waiting for a government review that will decide whether Huawei is in or out. Huawei invests about US$30 million annually in basic research at Canadian universities. It also does business with Telus Corp. and BCE Inc., both of which have used its radio access network equipment in their 3G and 4G networks.
Yet for a company touting the benefits of its surveillance gear, it appeared less comfortable with cameras pointing its way. A representative pressed a switch to hide the camera map when reporters started photographing the screen.a Huawei spokesman Minutes into the tour, a Huawei spokesman who said he wasn’t allowed to be named for the article, stated that most media outlets have a bias against the company.
The tour took place days before the U.K. released a new report on its Huawei Cyber Security Evaluation Centre, the oversight facility set up to test the company’s gear for vulnerabilities. It revealed “serious and systemic defects in Huawei’s software engineering and cybersecurity competence.” The report said the U.K. security system could only provide limited technical assurance for the equipment, but it “does not believe that the defects identified are a result of Chinese state interference.
Two of the big three operators use Huawei gear while Rogers Communications Inc. uses Sweden’s Ericsson. Huawei’s growth mirrors Shenzhen’s. In the 1980s, only a tiny fraction of government officials had phone lines and state-owned phone companies were only expanding in the biggest cities. Ren took on the rural markets. In 1991, he decided to focus on research and development, producing the company’s first switch in 1994.
Europe clearly made an impression on the founder. Huawei recently completed a new campus with 12 sections modelled after European cities, including Paris and Burgundy, copied down to the statues. A bright orange, electric train connects the sections at the campus designed for 24,000 workers, with company-chartered buses lining up to take them home around quitting time at 6 p.m.
There’s a perception that Huawei’s gear is the cheapest and least effective, but that hasn’t necessarily been true since the shift to 4G. Huawei’s new systems are light enough that one person can position the antennae and equipment that may have previously required a crane, said Peter Richardson, research director at Counterpoint Research and former head of competitive intelligence at Nokia.
The willingness to invest in improvement resulted in opening a university in 2005 where, for $50 million annually, 75,000 employees rotate through to update their skills. There’s even a “strategic elite team” for 5G. Blimmeger said there is a very high bar for conduct when it comes to cybersecurity and privacy protection.
The lab workers sift through Huawei’s products to ensure coding meets standards. If it doesn’t, the director can veto the product. In 2013, 58 products were vetoed. That dropped to zero in 2017 and 2018, which Huawei credits to improved security practices across the organization. The pitch for 5GTelus, for one, is considering Huawei equipment in its 5G networks. Huawei is the most customizable vendor, according to a senior Telus executive who spoke on condition of anonymity. He likened buying from Huawei to going to a hamburger restaurant where you can pick the toppings versus going to McDonald’s, where Big Macs are made the same way every time.
Canada was one of the few countries that acknowledged the risks and did something about it, the Telus executive said. Ericsson and Nokia both conduct research and development in China. Ericsson employs more than 12,000 people in Northeast Asia and is hiring for 5G in China, while Nokia has 54 offices in Mainland China, Hong Kong and Taiwan, according to their websites.
Counterpoint’s Richardson suspects the political drama and resulting business uncertainty took Huawei by surprise.
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