What Huawei’s comeback says about US-China tech war

China’s biggest technology company, Huawei Technologies Co., rose to global prominence as a leader in 5G wireless networks and smartphones before delving into chip design and artificial intelligence. In 2019, it became a US target when the Trump administration blacklisted the firm and leaned on allies to ban its equipment over spying concerns. The sanctions almost wiped out Huawei’s consumer mobile business. But the company bounced back with the support of China’s government, and it’s now at the center of national efforts to achieve technological independence from the West. The campaign against Huawei and its subsequent comeback raise questions about whether US efforts to contain China’s geopolitical ascent have been effective or adequate, and which of the two superpowers will take the lead in future industries such as AI.

1. Why does the US have an issue with Huawei?

US government officials said Huawei could use its substantial presence in the world’s telecommunications networks to spy for the Chinese government. In 2012, a report by the US House Intelligence Committee singled out Huawei and ZTE Corp., another Chinese communications equipment maker, as potential security threats; the Federal Communications Commission in 2020 designated the companies as such and ordered US carriers to pull Huawei and ZTE equipment from their networks. Already in 2018, concerns about Huawei drove then-President Donald Trump to block a hostile takeover that could have curtailed American investments in chip and wireless technologies and handed global leadership to the Chinese company. Such concerns grew as carriers spent billions of dollars on 5G networks, which will collect data and enable services on an unparalleled scale.

2. How important is Huawei?

In just over three decades it’s grown from an electronics re-seller into one of the world’s biggest private companies, with leading positions in telecom gear, smartphones, cloud computing and cybersecurity, and substantial operations in Asia, Europe and Africa. US sanctions have hammered its business. In August, Huawei reported a third consecutive quarter of revenue growth after new businesses like cloud services and resurgent smartphone sales helped mitigate the fallout from the US-led sanctions. It’s continued to plow money into 5G, breaking into the top 10 recipients of US patents in 2019, and has helped to build 5G networks across the world. The sanctions scared off some Huawei customers and suppliers globally, but Chinese consumers and carriers rallied to its side. The company is one of the country’s biggest investors in research and development. In August 2023, an examination of its latest Mate 60 Pro smartphone revealed a Huawei-designed 7-nanometer chip that’s just a few years behind the world’s most cutting-edge technology. Huawei was also said to be establishing a network of factories to manufacture its chips after sanctions blocked its access to many advanced facilities.

3. Why is its equipment a security issue?

The US government — like the Chinese and others — is wary of employing foreign technology in vital communications for fear that manufacturers could install hidden “backdoors” for spies to access sensitive data, or that the companies themselves would hand it over to their home governments. 5G networks are of particular concern because they go beyond making smartphone downloads faster. They also will enable new technologies like self-driving cars and the Internet of Things. UK-based carrier Vodafone Group Plc was said to have found and fixed backdoors on Huawei equipment used in its Italian business in 2011 and 2012. While it’s hard to know if those vulnerabilities were nefarious or accidental, the revelation dealt a blow to Huawei’s reputation.

When Chinese tech giant Huawei learned it was set to lose a $200 million contract, a run-of-the-mill equipment deal spiraled into a saga of hidden microphones, drone encounters and covert surveillance, according to investigators for a Danish telecoms firm. Bloomberg reporters crisscrossed Copenhagen for the tale of TDC’s 5G showdown, in which technology, business and national security collide.

4. Who’s using Huawei and who’s not?

Japan and Australia joined the US boycott early, while Canada barred Huawei from 5G in 2022 after wavering for more than three years. The UK prohibited its telecom operators from buying Huawei 5G equipment starting in 2021, and equipment already installed must be removed by 2027. Sweden banned Huawei and ZTE from its 5G network in 2020. While Germany has avoided an outright ban, its carriers decided not to use Huawei in the critical core of their 5G networks. But the company has won 5G customers in Russia, the Middle East, Africa and Asia, including the Philippines and Thailand. Huawei’s equipment has tended to be cheaper than that of Nordic rivals Nokia Oyj and Ericsson AB and it’s invested more in research and development. In Malaysia, the prime minister has said his country will use Huawei “as much as possible.” South African President Cyril Ramaphosa has also defended using Huawei equipment. “We cannot afford to have our economy to be held back because of this fight,” he said in 2019.

5. What else has the US done?

It moved to curb Huawei’s ability to sell equipment in the country and, more significantly, to buy parts from American suppliers by adding Huawei to a Commerce Department blacklist in 2019. Accusing the company of seeking to “undermine” those export controls, the department imposed further restrictions on chipmakers using American technology to design or produce semiconductors used by Huawei, meaning suppliers such as Taiwan Semiconductor Manufacturing Co. had to cut off Huawei unless they get a waiver from Washington — or potentially face penalties. Under President Joe Biden, conditions on some export licenses were tightened on such components as semiconductors, antennas and batteries, barring their use in Huawei 5G devices. Other, earlier measures included the black-listing of 38 Huawei affiliates in 21 countries. The FCC said it would establish a list of proscribed equipment domestically and set up a program to reimburse US carriers for implementing the “rip and replace” order.

6. Who else has accused Huawei?

In 2003, Cisco Systems Inc. sued Huawei for allegedly infringing on its patents and illegally copying source code used in routers and switches. Huawei removed the contested code, manuals and command-line interfaces and the case was dropped. Motorola sued Huawei in 2010 for allegedly conspiring with former employees to steal trade secrets. That lawsuit was later settled. In 2017 a jury found Huawei liable for stealing robotic technology from T-Mobile US Inc., and in January 2019 the US Justice Department indicted Huawei for theft of trade secrets related to that case. The same month, Poland, a staunch US ally, arrested a Huawei employee on suspicion of spying for the Chinese government. Huawei fired the employee and denied any involvement in his alleged actions.

7. What does Huawei say?

It says the US restrictions are not about cybersecurity but are really designed to safeguard American dominance in global technology. It has repeatedly denied that it helps the Beijing government to spy on other governments or companies. The company, which says it’s owned by founder Ren Zhengfei as well as its employees through a union, began releasing financial results, spent more on marketing and engaged with foreign media. Ren became more outspoken as he fought to defend his company. While he said he was proud of his military career and Communist Party membership, he rejected suggestions he was doing Beijing’s bidding or that Huawei handed over customer information. The technological achievements behind the Mate 60 Pro have ignited nationalistic fervor across China and it’s become a symbol of the country’s fight against US sanctions. State-backed media including the Global Times have declared the emergence of the smartphone a breakthrough in the face of American restrictions.

8. Are other Chinese companies feeling the heat?

Yes. In late 2020 the Pentagon added four more firms, including China National Offshore Oil Corp. and Semiconductor Manufacturing International Corp., to a list of those it says are owned or controlled by China’s military, exposing them to increased scrutiny and potential sanctions. Other Chinese tech giants have been blacklisted for allegedly being implicated in human rights violations against minority Muslims in the country’s Xinjiang region. They included Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co., which by some accounts control as much as a third of the global market for video surveillance; SenseTime Group Ltd., the world’s most valuable artificial intelligence startup; and fellow AI giant Megvii Technology Ltd. ZTE almost collapsed after the US Commerce Department banned it for three months in 2018 from buying American technology. The US added Pengxinwei IC Manufacturing Co., better known as PXW, to its Entities List in 2022.

The Reference Shelf

• QuickTake explainers on how China aims to counter US efforts at “containment,” why the prospect of a US-China “decoupling” is getting serious, more on 5G, and another explainer on intellectual property theft.
• Bloomberg Opinion’s Howard Chua-Eoan says the Huawei chip breakthrough shows no one has a monopoly on innovation, while Tim Culpan says Chinese chipmakers have done well to bypass US-led sanctions, but that won’t be repeated often.
• China’s cybersecurity laws vex foreign companies.