Why the US won’t let China’s biggest smartphone maker enter the US market

Huawei has faced scrutiny over security concerns as they attempt to grow their presence in the US.
Huawei had their CFO Meng Zhou arrested, their hardware banned from US government use, and now Huawei is suing the US government.
Huawei has also lost essential carrier partners like AT&T and Verizon.
Huawei is the biggest smartphone manufacturer in China but their phones like the Huawei P20 Pro and the Huawei Mate 20 Pro are largely unknown in the US.
Business Insider’s Shona Ghosh breaks down what’s going on with Huawei.

Following is a transcript of the video.

Shona Ghosh: Things have got really difficult for Huawei over the last few months, but the situation’s actually been building up for many years. Huawei is a big Chinese company. It’s probably best known in the West for making mobile phones, but it’s also a massive telecommunications equipment firm. Around 2012, a US intelligence committee warned that Huawei and other Chinese companies might have the power to spy on US communications because they provide a sort of core network kit that’s available.

If you fast forward to 2018, there were all these intelligence chiefs that gave evidence in the US and sort of suggested that maybe people shouldn’t really trust Huawei and, again, other Chinese companies, and they even suggested that you shouldn’t use Huawei phones. They didn’t really explicitly state why, but the suggestion is essentially that these phones might let the Chinese government spy on you. The Canadian government arrested Huawei’s chief financial officer, who’s a lady called Meng Wanzhou. She was passing through Canada in December and was arrested at the request of the US authorities, and now she’s sort of awaiting potential extradition to the US. She’s facing charges over Huawei potentially illegally doing business with Iran, which is forbidden under US sanctions. There’s also a lot of other charges around whether Huawei may have stolen trade secrets from US tech companies. So the picture’s quite complicated at the moment, but suffice to say that Huawei’s reputation globally is taking a bit of a dent.

Huawei has become a lot more aggressive about defending its reputation against accusations of spying. It’s now launched a lawsuit against the US government where it says it’s being treated unfairly and that the US government doesn’t have any proof that it might spy on behalf of the Chinese government. They’re coming back very robustly in this lawsuit.

Huawei is massively popular in China, predominantly because of its smartphones. It is the biggest phone maker in China. About one in every five smartphones sold in China is a Huawei phone, and that compares to about one in nine smartphones for Apple’s. Huawei in 2018 had, or said it had, agreements with two carrier partners in the US, that means two mobile networks who would sell Huawei devices, and this is kind of important because lots of people in the US tend to buy their phones through a carrier. And then in the run-up to the launch of the Mate 10 in 2018, which was really this big flagship phone, both carriers seemed to renege on that agreement with Huawei, and Huawei was left without any carrier partners in the US. So Huawei phones are very much still available for people to buy even if you are in the US, but, obviously, it is much tougher to buy a Huawei device if you are in the US, but, you know, if you’re in Europe or many other countries around the world, you can still get ahold of a Huawei device. Having said that, if they were to totally disappear from the market, it would be a bit of a shame because clearly they’re a really, really popular smartphone maker. They’re the second biggest in the world after Samsung, and so if Huawei phones were to just disappear off the shelves around the world, there’d be a big chunk of people who would be unhappy.

The US has taken action against Huawei. It’s effectively locked Huawei out of its 5G networks. It’s pressuring its allies and other governments to also do the same thing and lock Huawei out of their 5G network. There are some concrete developments that we’re waiting for. So one is Huawei’s chief financial officer, Meng Wanzhou, is currently in Canada, and the US requested to extradite her to face trial in the US. That could be a big trial. It’ll be a really big deal in terms of proving the US’ case against Huawei. Another development is that the UK is currently working on a report about whether Huawei’s equipment is trustworthy in mobile networks. Obviously, the UK is a key ally of the US, and so if the UK decides, actually, Huawei is trustworthy, that would be potentially a big upset. Even if it decides Huawei isn’t trustworthy, that will also be a big upset because Huawei’s equipment is present in many British networks. And so there are a few things in 2019 that could really sort of swing Huawei’s fate and what the public feel about Huawei.

So something that’s important to remember is that the US hasn’t offered an awful lot of proof that Huawei may be using its equipment to spy on people on behalf of the Chinese government. That’s not to say the US is compelled to provide that proof. You know, it may have evidence that’s secret, but it’s sort of important to know that the public doesn’t have a lot of information at its disposal when it comes to deciding whether to trust Huawei or not. There’s a worry that Huawei, being one of the most successful Chinese companies there is, must have ties to the Chinese government because it’s very difficult to become a very large, very successful company in China without some sort of connections to the government. The ties between private enterprise and government are much closer in China than they might be in another country. And so, there’s a sense that maybe Huawei wouldn’t be able to resist if the Chinese government forced it to spy on foreign citizens on its behalf, even if Huawei wanted to resist.

Huawei has pretty consistently denied that it does anything wrong. It’s denied that it spies on behalf of the Chinese government. It also points out that in some countries, such as the UK, it actually allows UK intelligence here to sort of test out its equipment for flaws. So it says it is being transparent, that it does show that it’s trustworthy. It also says that its equipment is actually key to the development of new networks like 5G networks and that locking it out of the 5G market is probably not a very good idea because it kinda makes the whole process less competitive.

I think given the number of years that US politicians and other intelligence officials have been warning about Huawei, it’s hard to see why anything would change around Huawei in the near future and it will suddenly have access to the US market. It’s possible that a new president may change things, but it seems unlikely given these issues around Huawei and China precede Donald Trump. And so it’s very difficult to see how the situation will change. And actually, I think Huawei is gonna be dealing with these issues with the US perhaps for several years to come.