Huawei and Its Reputational Challenges

Meng Wanzhou, the CEO of Huawei, was arrested in Canada and held for extradition to the U.S.  She will be charged with fraud, for telling “financial institutions that Huawei had no connection to a Hong Kong-based company, SkyCom, which was reportedly selling U.S. goods to Iran in violation of U.S. sanctions.”   The evasion of sanctions on Iran could be punished by up to 30 years for Huawei’s CEO, likely with stiff fines and commercial penalties for her company.  It could be a major problem for Huawei.

Huawei has 180,000 employees and operates in 170 countries. Huawei makes a broad range of enterprise and consumer products, such as telecom switches, internet routers, servers, wireless LANs, smart phones, health trackers and laptops. Examples are available for sale at Amazon and Walmart in the U.S.

For telecom carriers, Huawei makes products for wireless and fixed networks, cloud and core networks, and carrier software. Huawei has publicly announced its ambitions to be a force in the 5G infrastructure marketplace.  These intentions, and the Chinese government’s influence over Huawei, is a foundation for the second major problem – fear of high-tech spying.

Huawei faces a lengthy reputation fight over allegations by Canada, UK, Australia, New Zealand, and the U.S (the Five Eyes).  They claim its products are national security risks.  Some of the specifics of the risks remain classified but a few have been made public.

The Pentagon reviewed its policy on fitness apps and wearable exercise-logging equipment, after supplier (Strava) posted a map of its wearer’s activities.  That information could be used for targeting troops near bases, especially in the Middle East.  It is doubtful whether Huawei and ZTE gear is unique in that regard.

The more troublesome allegation is that Huawei’s carrier gear can be configured to aid in surveillance. The Chinese government could direct Huawei to include backdoor access in equipment shipped to networks used by China’s military rivals.  Such spyware could leak covert copies of data or conversations to Beijing. Most switches and routers used by the Five Eyes could also be arranged to perform that kind of eavesdropping, so their fears are well founded.

Huawei tried to allay the suspicions of the UK  by building a research facility in the UK that dissected its Huawei’s switch software looking for spyware elements.  Unfortunately, Huawei insisted that the engineers must all be Chinese nationals.  The “research” was not persuasive to the UK.  It seems notable that China welcomes no foreign telecom manufacturer to build networks in China.

The U.S. House and Senate have issued investigative reports on Huawei and ZTE and concluded they represent security risks.  Unclassified versions of the reports provide no hard evidence nor conclusive answers.  “The Five Eyes countries could provide clear evidence of security risks at some point. It’s also possible doing so would reveal too much classified information. We may never know the truth behind the claims.

Huawei is determined to be a major player in 5G networks, so it is aggressively trying to repair its reputation problem.  If it is convicted of cheating on Iran sanctions, Huawei’s task will be even more difficult.

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