What’s really behind Huawei CFO’s arrest?

By the turn of the millennium, Huawei, the Chinese telecommunication equipment and consumer electronics company, was making its presence felt around the world. It bought a US-based business that made optical fibers, outbid Ericsson and Alcatel to perfect a transmission network in France and opened research labs in India.

Then in 2003 it began talks for a joint venture with American company 3Com, a networking equipment supplier. But the deal was stonewalled. Politicians in Washington said Huawei’s founder Ren Zhengfei could not be trusted as he used to work for China’s People’s Liberation Army (PLA). 

At the time 3Com’s board of directors came out in support of Zhengfei. 

“If military service precludes someone from being a CEO, over half of America’s CEOs would not have a job today,” it said, according to Yang Shaolong’s book The Huawei Way. 

Ren’s military career came into focus once again this week with the arrest of his daughter Meng Wanzhou, Huawei’s Chief Financial Officer. She was detained in Canada following a US extradition request. 

While the charges have not been made public, Huawei has reportedly been under investigation for violating US sanctions against Iran. 

The arrest of top company executives for breaching US sanctions is an exception. Generally, companies are just fined for these transgressions. 

Major publications that reported the news also highlighted Ren’s military background. But none bothered to explain that the 10 years he spent in the PLA’s Engineering Corps as a technician between 1974 and 1984 were lowkey and uneventful.

Huawei has been a target of speculation for policymakers in English-speaking countries such as the US, the UK and New Zealand for years. For more than a decade politicians have viewed the company suspiciously, labeling it as a front for China’s Communist Party.

There is, however, another reason for the attention that Huawei garners and that has to do with its exponential growth.

From switch-boards to smartphones 

Ren, along with a few friends, founded Huawei Technologies in the mid-1980s as a company that bought and sold telephone exchange switches. 

Within a few years it became a major tech firm in China, transitioning from selling landline telephone products to broadband and then venturing into integrated circuits.

Now ranked as the world’s largest telecommunication equipment supplier, Huawei has global sales of more than $75 billion. Earlier this year, it beat Apple to became the second largest smartphone maker in the world, despite restrictions imposed by many governments. 

The 3Com deal was scuttled in 2008. Two years later Huawei’s bid for a $5 billion contract to supply 3G equipment to another US company, Sprint Nextel, was rejected on national security grounds. 

In January this year, AT&T and Huawei were close to signing an agreement that would have allowed the US carrier to sell Huawei phones in the US market, but AT&T faced immense pressure from US politicians, which eventually forced them to pull out of the deal. 

This week BT, Britain’s telecom firm, said it will remove Huawei’s equipment from its core communications network. On Monday, Alex Younger, head of MI6, Britain’s intelligence agency, joined the chorus questioning the safety of Chinese technology.

The arrest of Huawei’s CFO coincided with an ongoing trade war between China and the US, which has seen both countries impose tariffs on each other's imports. 

But at the core of the trade war could be China's growing technological prowess, with the communist state generously backing companies to invest in innovations such as artificial intelligence. 

There isn't much between what China is doing on the technology front and what the Defense Advanced Research Projects Agency (DARPA), a branch of the US defense department, has done over the years to finance products and programmes such as Siri, the voice of Apple’s iPhones. 

Fear in age of tech

When computer programmer Edward Snowden leaked top secret files in 2013, the one tech company that came under the spotlight for espionage was not Chinese. It was San Jose-based Cisco Systems. 

The documents revealed that the National Security Agency (NSA) used Cisco’s internet routers to transmit data back to them, Olav Lysne, a Norwegian professor of technology and author of the book The Huawei and Snowden Questions, told TRT World. 

“Whereas the western countries are very concerned about Huawei, the only smoking gun we have here is American,” he said. “There has been no evidence against Huawei for spying.”

The espionage concerns associated with Huawei’s products are mainly the result of confusion about the extent to which the government is involved with Chinese companies. 

“What is unclear with these Chinese companies is to what extent these are de facto or actually being controlled by the Communist Party or Chinese state, even though they appear to be commercial businesses,” Lysne added.

The fast-changing technological landscape, in which consumer products come with complex integrated circuits and algorithms, has made studying them difficult, Lysne said. 

His research into the question of whether an electronic equipment can be audited to detect if its being used for spying has led him to a definitive answer: it’s almost impossible. 

“Even if someone chose to give me 1 million years and as much funds as I can possibly want, I will still not be able to prove that phone is not working against my will.”