Martins Hile, Editor, Financial Nigeria magazine

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Who is afraid of Huawei? 07 Mar 2019

Meng Wanzhou
Huawei's Chief Financial Officer, Meng Wanzhou

Beneath the intensifying trade war between the two largest economies in the world is a competition for technological dominance. Competition can be good or bad, depending on the stakes. The high-stakes competition between the United States and China is about economic and military hegemony. And the two countries understand the central role of new technologies in advancing their economic power and ensuring their national security.
Huawei, the standard bearer of China's advancements in technology, is directly in the crosshairs of the U.S. government. Founded in 1987 by Ren Zhengfei, Huawei Technologies Co. Ltd is currently the world's biggest telecommunications equipment manufacturer. It is ahead of Ericsson and Nokia, the much older European makers of telecom equipment.

Huawei is also a juggernaut in the consumer business segment of the telecoms sector. At the end of the second quarter of last year, the Chinese technology firm overtook Apple Inc – one of the lodestars of American tech dominance – to become the world’s second-largest smartphone maker by market share.

One of the advantages of competition is that it promotes innovation. To prove how firmly it is at the cutting edge of innovation, the Shenzhen-based Huawei is a global leader in the 5G race that is already underway. 5G is the next-generation of mobile communications. It is called the internet of the future because of its capability to increase the performance of industries and consumers in the future. 5G connectivity will transform the digital economy – connecting everything to the internet and enhancing service delivery through digital solutions and applications that are dependent on high-speed data transfers.             

Experts say Huawei is at least one year ahead of its rivals. This puts the company on track to provide 5G coverage in China ahead of the United States and accelerate the development of 5G-dependent technologies such as driverless car. But this is not as much a source of worry for the U.S. as Huawei’s internationalisation, having signed over 30 contracts to deploy 5G network equipment in various markets around the world.    

With worries that the company's telecom equipment could be vectors for surveillance activities by the Chinese government, the U.S. has warned its allies not to use Huawei's equipment. Last month, U.S. Secretary of State, Mike Pompeo, said it would be difficult for the American government to cooperate with any country that allows the deployment of Huawei’s equipment where important American assets are collocated.

The main reason for Pompeo's peremptory statements is unambiguous. The U.S. top diplomat said pointblank that there are dangers in “allowing China to gain a bridgehead." Huawei has also been blocked by the U.S. Congress from participating in the country's telecommunications equipment market. Personnel on U.S. military bases are not allowed to buy or use phones and other gadgets manufactured by Huawei and ZTE Corporation, also a Chinese telecoms manufacturer.

In the ensuing offensive against Huawei, the company’s chief financial officer, Meng Wanzhou, was arrested in December by Canadian authorities in Vancouver, following a request from U.S. authorities. The request, made under an extradition treaty between the U.S. and Canada, cited a violation of American sanctions on Iran, intellectual property theft, among other allegations.

To be clear, the concerns over digital snooping or the use of Huawei's equipment by Chinese authorities to spy on other countries should not be overlooked. After all, documents leaked by Edward Snowden, a former contractor of the U.S. National Security Agency (NSA), shows governments do conduct digital surveillance. One of the NSA's programmes, according to the leaked documents, involved infiltrating Huawei’s servers in China in an attempt to find any connections between the company and the Chinese military.

Huawei has refuted allegations that it shares information with the Chinese government and also denied its equipment and devices have 'back doors' that could allow intelligence agencies to spy on customers. Moreover, there has been no direct evidence that the company has ever acted to compromise the security of its clients. The British National Cyber Security Center has concluded, following an investigation, that the security risks of using Huawei equipment for the United Kingdom’s 5G network are “manageable.”

German Chancellor Angela Merkel said the country would approve the use of Huawei's equipment to build its 5G mobile network if the company guarantees it would not share information with Chinese authorities. Despite running the risk of being at odds with the U.S., these countries realise the overall benefit of 5G connectivity would outweigh the risks.

Indeed, technology poses a huge risk, especially with regard to data privacy. Many are still sore over the scandal involving the unauthorized and unethical exploitation of Facebook's user data by Cambridge Analytica, which carries out political disinformation campaigns a few years ago. The hyperconnectivity that will come with the rollout of 5G wireless networks will heighten the risk of user data 'weaponisation.' 5G will supercharge the data arms race, giving countries and organisations access to a torrent of data and the ability to analyse them to gain competitive advantage either for economic performance, national security or for sinister reasons.

5G technology presents an opportunity for African countries to leapfrog into the future, notwithstanding the low coverage of 3G and 4G networks on the continent, compared to other regions. While some Western countries have suspended contracts with Huawei, the company is currently conducting 5G trials in partnership with MTN, Vodacom, and Safaricom in Africa. The deployment of 5G infrastructure in Africa could increase the continent’s ability to compete in global supply chains.  

Through Huawei and other Chinese telecom companies, China’s investment in the Nigerian telecoms sector has increased in recent years. Chinese investment in the sector includes infrastructure and skills development. Huawei recently donated a $1 million ICT laboratory to the Digital Bridge Institute, which is owned by Nigerian Communications Commission (NCC).

Given its head start in the 5G race, Huawei has gone ahead to start developing 5G phones. The Huawei saga shows how innovation can give organisations a competitive edge and a strong first-to-market advantage, which can be exploited to achieve higher market share and business success. It also proves that through strategic investment in research and development, developing countries can favourably compete – and even outcompete – developed countries in technology.