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Huawei is currently fighting for the right to sell 5G equipment in the U.S. along with the rest of its product line and has sued the U.S. Government in court recently to do so.  The U.S. government not only forbids it from selling in the U.S., but also has put it on a blacklist that bars companies from supplying it with computer chips, software, and other components without its approval.


Why has this company become a pawn in the Trade Wars between China and the United States and is there anything it can do to obtain the right to sell its products and services in the U.S.?  In order to better understand its current situation, we need to look at its history and the interplay and relationship between Huawei and the Chinese government.


Huawei Technologies Co. Ltd. (its full name) was founded in 1987 by Ren Zhengfei, a former Deputy Director of the People's Liberation Army, and established its base in in Shenzhen, China.  Although it initially concentrated only in manufacturing phone switches, it slowly acquired a complete telecommunications portfolio.  According to media reports, Huawei started growing after Zhengfei met with then-Party general secretary, Jiang Zemin, and told him that "switching equipment technology is the basis of national security and a nation without its own switching equipment is like one that lacks its own military."  This background is one of the reasons why many governments around the world, including the U.S., believe that Huawei has intimate relations with the Chinese government and that it uses its technology to spy on its behalf.


Additionally, although Huawei says it spends billions of dollars on R&D, many competitors claim that it has acquired most of its technology through theft of technology.  Many entrepreneurs and inventors claim that after they met with Huawei and demonstrated their equipment to it, Huawei asked for samples and then reverse engineered the products in its laboratories without telling them or admitting to doing this.  The reasons for these actions, according to competitors and telecommunications entrepreneurs, are two-fold.  First, by doing so, it does not need to pay patent licensing fees to them.  Secondly, it can then work freely in coordination with the Chinese government without any external influence or oversight that would take place if it had to license products.


Recently, many governments, especially in Western Europe, have started taking contracts to develop the new 5G technology (supposedly the future highway of telecommunications and the internet) away from Huawei and giving the contracts to Ericsson and Nokia.  These governments claim that, although these companies' technologies are not as advanced as Huawei's, they have confidence that there will be no concerns regarding espionage, since these companies are Nordic and, by implication, more ethical and can be trusted.  Huawei, on the other hand, accuses the U.S. of "unfairly influencing competition" by forcing governments to buy from Ericsson and Nokia or threaten them with retaliations and tariffs.  These accusations have been compounded by the on-going Trade War between the Trump administration and China.


Regarding Huawei's ability to overcome these concerns and eventually gain the right to market its products/services in the U.S. and other countries, I doubt that it will succeed.  The reasons for my belief are the following:


​1) Huawei cannot escape the accusations that it spies on behalf of its government, since it could only achieve this by operating completely transparently.  Due to its founder's cultural background and ties with the government, it is hard to believe that it will do this in the near future.  


2)  The U.S. and the Chinese government are locked in a Trade War and continuously accuse each other of spying and trying to disrupt each other's business policies.  Fairly or not, Huawei is considered to be part of the Chinese government and part of the problem.


3)  Huawei's CFO (who is also Zhengfei's daughter) was recently detained in Toronto and charged with violating U.S. sanctions against Iran.  It is unlikely the Trump administration will retract these charges.  Instead, it is more likely that it will add more.  This situation creates an almost impossible environment for Huawei to do business in the U.S.  Again, the fact that this is a Chinese company means that, due to its cultural beliefs, it would not want to "lose face" in the United States by doing business while being humiliated by the U.S. in this manner.


4)  In February of 2018, officials from the FBI, the NSA, and the CIA advised Americans, in front of a Senate committee, against using Huawei products.  In the year since this took place, nothing has changed materially.  Thus, this advice stands.


The reality is that it will take a combination of improved U.S. - China relations, a change in the belief that Huawei spies on behalf of its government, and proof that Huawei acts transparently, to change this situation.  Currently, there is no evidence that any of these three events will happen in the near future.


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Please do not hesitate to call me at 1 (617) 391-0347 or e-mail me at mariocastaneda@bluesailconsulting.com to talk about this or any other subject.  I always like to hear from clients and readers.  

 

Also, please don't forget to read my interview with BostonVoyager magazine.  To read it, click here.

 

Additionally, please do not hesitate to contact us if you need help in planning and creating a profitable company that is culturally transparent.  We can help you to create a solid and ethical business strategy - and execute it.

 

I look forward to seeing you here again in July.

 

​Mario

Mario's Corner - June 2019.

Why Huawei Is Fighting For The Right To Sell 5G And Its Products In The United States - And Failing!