Huawei Battles Reigned in 2019

Huawei struck back at a new report that claims the China-based vendor benefitted disproportionately from government subsidies that bolstered the vendor’s operational advantage compared to its competitors. The discourse also puts a fitting bow on what has been a dizzying mix of hits and misses for Huawei in 2019. Huawei struck back at a new report that claims the China-based vendor benefitted disproportionately from government subsidies that bolstered the vendor’s operational advantage compared to its competitors. The discourse also puts a fitting bow on what has been a dizzying mix of hits and misses for Huawei in 2019. The Wall Street Journal this week reported that Huawei received “tens of billions of dollars” in financial assistance from the Chinese government in the form of grants, credit facilities, tax breaks, and other forms of relief. The report notes that these benefits have helped Huawei become the world’s largest telecom equipment vendor. The report was based on The Wall Street Journal review of public records “including company statements and land-registry documents. The Journal verified its methodology with subsidy analysts, including Usha Haley, professor at Wichita State University, and Good Jobs First, a Washington, D.C., organization that criticizes some tax incentives and provides widely consulted subsidy data.” Huawei in a statement said the report is “based on false information and poor reasoning.” It countered that the vendor has attained its current market dominance by investing heavily into research and development that towers over that of rivals like Cisco, Nokia, and Ericsson. However, it also notes that its “relationship with the Chinese government is no different than that of any other private company that operates in China,” which includes “some policy support from the Chinese government.” It added that research and development subsidies over the past decade have amounted to less than 0.3% of total revenues. The Wall Street Journal report does show that the U.S. (Cisco), Finland (Nokia), and Sweden (Ericsson) have all provided some sort of financial assistance to those respective vendors. And the U.S. government has reportedly looked at broadening that assistance to Nokia and Ericsson. Huawei also claims that The Wall Street Journal has “published a number of disingenuous and irresponsible articles” about the company that have damaged its reputation. And then threw in a legal disclaimer that it “reserved the right to take legal action to protect our reputation.” The Wall Street Journal earlier this year reported that U.S. prosecutors were looking into allegations that Huawei had stolen intellectual property from multiple people and companies over the past several years. The latest report further clouds what has been a tumultuous 2019 for Huawei. While ranked by many as the market’s most dominate provider of 4G LTE and 5G equipment, the use of its equipment by Western Countries has come under scrutiny. The U.S. government has led the argument that the vendor is directly linked to the Chinese government, which in turn makes the vendor a security risk. This dates back to early 2018 when reports surfaced that the U.S. government was looking at building a national 5G network. Those efforts were based on fears that China has achieved a dominant position in the manufacture and operation of network infrastructure. The government has since backed away from those plans but has pressured domestic operators to not use any equipment from Chinese vendors. That includes a more recent direct ban by the Federal Communications Commission from using any government money to purchase Chinese telecom equipment. The U.S. government has also used its influence in trying to prevent other Western nations from using Huawei equipment. The most recent push came just this week when U.S. National Security Advisor Robert O’Brien warned the United Kingdom about allowing the use of Huawei equipment in that country’s 5G networks. Other Western countries have wavered on their plans to allow the use of Huawei equipment. The U.S. government and Huawei have also spent most of 2019 throwing legal bards at one another. The Department of Justice (DoJ) in January dropped a 13-count indictment that charged Huawei and its CFO with conspiring to violate sanctions on Iran. And, in a separate grand jury indictment, Huawei was tagged for stealing robotic technology from T-Mobile US. Shortly after the indictment was released, Huawei filed a lawsuit against the U.S. government challenging a section of the 2019 National Defense Authorization Act (NDAA) that bans the U.S. government, its contractors, and suppliers from purchasing Huawei equipment and services. President Donald Trump countered that with an executive order that effectively used national emergency powers to target Chinese vendors. Huawei came out several months later with allegations that the U.S. government was using “every tool at its disposal” to disrupt it and its partners’ business operations. This includes threatening and arresting employees, using cyberattacks against the company, and “a host of other unscrupulous means.” And earlier this month, Huawei filed a legal petition against the FCC’s move to bar rural U.S. operators from using equipment from the China-based vendor because of national security concerns. Huawei argued in its claim that the FCC order fails to offer the vendor “due process protections in labeling Huawei a national security threat.” “Banning a company like Huawei, just because we started in China – this does not solve cybersecurity challenges,” Huawei’s Chief Legal Officer Song Liuping said at a press conference. Song stated that the FCC did not present any evidence showing that Huawei was a security threat and “ignored the facts and objections raised by Huawei and rural carriers after the FCC first made the proposal in March, 2018.” Huawei’s legal and operational challenges obviously did not subside in 2019, though their impact does appear muted to this point. The vendor noted in its most recent financial release that it was ahead of its guidance of producing $100 billion in revenue for the year despite a predicted $30 billion revenue hit tied to its challenges.