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Home / Business / Arrest shakes Huawei as global skepticism of its business is growing

Arrest shakes Huawei as global skepticism of its business is growing



It is one of China's proudest corporate success stories, a colossus of state-of-the-art technology that expands Western rivals to become the biggest hardware supplier that connects our modern world.

Now, all over the world, the walls go up for Huawei.

The United States, which has for years considered the Chinese telecommunications giant a security risk, aimed at a straight shot in the company's leadership when it secured the arrest of Canada by Huawei's chief financial director.

But in recent times, Huawei's setback has come across several fronts, from New Zealand and Australia to Britain and Canada. China sees the company as an important driving force for its ambitions for global technological leadership. To a large extent, much of the rest of the world sees it as a potential channel for espionage and sabotage.

The Canadian government announced Wednesday that it had arrested Huawei chief finance director, Meng Wanzhou, on Saturday in Vancouver, British Columbia, while she transferred aircraft. The United States Seeks Ms. Meng's extradition, but did not say what was asked for the arrest.

"To arrest someone without giving a clear reason is an obvious breach of human rights," said Mr. Geng.

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Meng Wanzhou, Huawei Chief Financial Officer and a daughter of the founder were arrested on Saturday in Canada at the request of the United States. Credit Maxim Shipenkov / EPA, via Shutterstock

Huawei said Thursday that there was no known misuse of Ms. Meng, who is a daughter of the company's founder, and that it complied with the law wherever it operated. The company has long refused to spy on behalf of Beijing.

For many years lost distrust around Huawei was a problem that was largely restricted to the United States. Major US mobile operators like AT & T have avoided using Huawei's equipment in their networks ever since a 2012 Congress report highlighted the security risk.

In response, Huawei focused on his business efforts elsewhere. Its success in wealthy locations such as Europe and Japan has helped it become the world's largest telecommunications equipment manufacturer, and number 2 of the smartphone. Of the more than 90 billion dollars in revenue it achieved last year, came over a quarter from Europe, the Middle East and Africa.

Now it appears to be a wider patch of the world as siding with Washington against Chinese technology. A turn as opposed to the company, led by governments in many of the key markets, would have serious consequences for its business.

Australia prevented Huawei earlier this year from supplying technology to the country's fifth generation or 5G mobile network. New Zealand blocked one of its leading mobile operators last week from purchasing Huawei's 5G equipment. The UK intelligence manager, in a rare public appearance this week, said the country had a difficult decision to let Huawei build its 5G infrastructure.

And Canada's top spy echoed these concerns without mentioning Huawei or China, in a speech on Tuesday. Huawei has tested 5G equipment with major mobile operators in both Canada and the UK.

Canada seemed to be another safe haven. "The Canadian government is very sensible and open, which gives us great confidence in our investments in this country," wrote Mr. Ren.

This was all before Washington almost joined Huawei's main Chinese rival, ZTE. [19659002] In April, the trade department forbade ZTE to use components made in the United States after saying that the company had failed to punish employees who violated US sanctions against Iran and North Korea. The movement was actually a death sentence because ZTE was strong on American microbriquets and other technology.

In its case against ZTE, the US government also began to investigate Huawei.

When the trade department first announced its findings against ZTE in 2016, it released an internal ZTE document that illustrates best practice to escape US sanctions.

By describing the access, the document cited a company called the F7 as a model for how to pull it off. The description of F7 in the document matches Huawei.

A few months later, the Department of Trade rejected Huawei and requested all information about export or re-export of US technology to Cuba, Iran, North Korea, Sudan and Syria, according to a copy of the application set by The New York Times.

The probe expanded this year when the treasury and trade departments asked the Ministry of Justice to investigate Huawei for possible sanctions. Prosecutors in the East District of New York took on the case.

Finally, the Trump Administration decided to ease ZTE's punishment in an attempt to cool tensions with China's leader, Xi Jinping, before a historic meeting in North Korea. But the power that Washington was wearing over fate of Chinese technology companies was made very clear to people on both sides of the Pacific. In October, the Ministry of Commerce launched export controls at Fujian Jinhua, a state-owned semiconductor company that has been accused of stealing US chip design.

Should Huawei be subject to a ban on the use of US technology, the consequences will be significant, but perhaps not as life threatening as they were for ZTE.

An important difference is that, unlike ZTE, Huawei does not rely on external suppliers such as Qualcomm for the most important microchips in smartphones. About two thirds of the phones that Huawei sells contain chips internally, said Sean Kao, a hardware analyst at IDC.

US companies still supply other types of chips in Huawei equipment, as well as optical equipment for their fiber cable networks and other specialized parts.

"I do not know exactly how many suppliers are affected," said Stéphane Téral, senior researcher at data provider IHS Markit. But one thing is for sure, he said: "They will not be easily substitutable."


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