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Huawei: what no-one wants to tell you

There’s more to the Western restrictions on Huawei than meets the eye.

Behind the headline news story there’s another story. It’s one you don’t hear or see in the mainstream media.

There has been plenty about Australian and US claims the company spies.

You may also have heard something about a possible hidden kill switch that could allow Huawei or the Chinese government to disrupt or even halt communications.

This week US prosecutors filed criminal charges against the firm.

These actions, and others, may or may not be justified. It’s hard to know for sure.

Protectionism

At least some of the ill-will towards Huawei comes down to trade protectionism. US prosecutors launched their latest action days before the trade negotiations. That timing is no accident.

The scare stories will frighten off some customers even if, in the long term, we find out it was all a false alarm.

Huawei’s reputation is already damaged. Mission accomplished. It’s the ultimate non-tariff trade barrier.

Let’s put all these matters aside for the moment and look at something else.

Huawei too good for its own good

Many in the West fear Huawei because the company is too good at its core business.

By the way, Huawei’s core business is not making mobile phones. The big money comes from designing and building communications networks. This includes old school telephone, fibre broadband and cellular networks.

Huawei has a clear technology lead over its main rivals in this sector. Off the top of my head, I’d say from what I’ve seen and heard from Huawei, the company is anything up to 18 months ahead of rivals.

The company also has a cost advantage over its competitors. Whether you think this is a fair cost advantage or not is neither here nor there. When has business success even been about fairness?

China’s tech success story

This adds up to Huawei having better technology, better products and services at a lower cost. That’s a hard trifecta to beat. It sums up the problem.

A decade ago almost no-one in the West had heard of Huawei. Companies like Nokia, Cisco, Ericsson and Alcatel-Lucent dominated network equipment.

Since then Ericsson dropped out of sight. Nokia merged with Alcatel-Lucent. Cisco is not the force it once was.

In round numbers, Huawei accounts for a third of the global telecommunication network equipment market. It is the biggest IT network equipment company with about a quarter of the market.

Big in 5G

Before these recent actions, Huawei looked set to win the lion’s share of contracts to build next generation 5G mobile networks.

Huawei’s total market share continues to grow at the expense of its rivals. It is already the dominant telecommunications network hardware player. If things were to continue as they have in the past, in a few years Huawei would be unassailable. It is not unreasonable to talk about a potential monopoly.

That’s what scares Western governments. Telecommunications networks are strategic infrastructure. They are as important, some say more important, than roads, railways or shipping lanes.

Forget kill switches

Forget kill switches. Allowing one company to dominate strategic infrastructure is bad full stop. It’s like the plot of a James Bond movie.

Older readers might remember the computer business when IBM was the only game in town. Less ancient readers might remember when Microsoft and Intel called the shots in PCs. This could be worse.

Then you get to the part where we mention that Huawei is a Chinese company. China’s emergence as a global power has taken longer than Huawei’s rise to the top of network hardware. It threatens many people and governments on various levels.

Huawei is a threat even if China doesn’t pull its strings. Add this to fears about China’s ambitions and you have a potent mix.

Geopolitics

In that case, dominating critical infrastructure isn’t about business, laws or trade disputes. It becomes a geopolitical challenge.

There’s another aspect to this. Huawei is a Chinese national champion. The company reflects China’s prestige. It’s not a direct comparison, but is some ways Huawei is the Apple of China’s eye.

Diminishing Huawei’s prestige has to be part of what’s going on.

This whole episode is far from over. It may take us into places no-one expected.

Disclosure: Bill Bennett has travelled to China and elsewhere as Huawei’s guest on three occasions.

Published by Bill Bennett

Not actually a geek, more a chronicler of geekdom. Still mainly a journalist, sometimes a blogger.

3 replies on “Huawei: what no-one wants to tell you”

  1. This adds up to Huawei having better technology, better products and services at a lower cost. That’s a hard trifecta to beat. It sums up the problem.

    And only possible because of China’s maipulation of their exchange rate.

    Telecommunications networks are strategic infrastructure. They are as important, some say more important, than roads, railways or shipping lanes.

    I’d go for the ‘more important’. Telecommunications is becoming more and more important in trade but, even more important, it’s becoming more and more important in our democracy. Having our democracy open to manipulation by a foreign power, be that power a company or a country, is something that we must avoid.

    It’s one of the reasons why I say we need to renationalise telecoms and make all the infrastructure for it here in NZ. And, yes, we do have the resources.

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