For a number of years now, the nations known as the Five Eyes (United Kingdom, United States, Australia, New Zealand, Canada), have been grappling with the possibility than one of the world’s leading technology companies may be an agent of the state where it is based.
That company would be Huawei Technologies Co. Ltd., and the state in question is China.
Our own country has taken on an outsized role in dealings with China because Canada acted on a U.S. arrest and extradition warrant and arrested Huawei CFO (and daughter of the founder) Meng Wanzhou during a flight layover at Vancouver airport. Shortly thereafter, two Canadians with longtime business interests in China were detained and subsequently charged with espionage.
Recently, the Trump administration ramped up pressure on Huawei by effectively prohibiting corporate America from dealing with the technology giant, ostensibly because of transfer of U.S. technology to Iran. It is early days still but already the likes of Google (for whom Huawei produced the Nexus 6P phone in 2015), Intel, Microsoft, and Qualcomm have signalled they are ready to comply on hardware, software, and on licences.
Most discussed in the popular press is the potential loss of the Android operating system and various Google tools such as Gmail, Maps, and YouTube on Huawei handsets. Although that isn’t happening immediately, and although the Android operating system is licensed through the Android Open Source Project (AOSP), the mere mention of the possible loss of these services has sent a pall over Huawei handset sales.
Japanese carriers announced May 22 they were delaying the launch of the new P30 Lite smartphone, citing uncertainty from the fallout over Donald Trump’s action placing Huawei on a “banned entity” list.
Even though the U.S. government issued a temporary three-month reprieve for American companies doing business with Huawei, the leading Japanese mobile phone carriers decided to halt further deployment of Huawei handsets.
Uncertainty is never good for business but there are signs Huawei has been preparing for this eventuality for a long time, both in terms of its supply chain as well as the operating system for its handsets.
At its core, the Huawei dispute seems to be about control of the 5G space and about whether or not the company installs security backdoors in its gear. Cell phone networks were first developed in the United States, and that country has led the way through to so-called 4G (fourth-generation) phones and networks. This year, the first 5G handsets have appeared on the market. Back-end 5G infrastructure is still to be deployed, and Huawei is arguably the leader for this technology with its network switches.
(Before I continue, gentle readers, please don’t bombard me with nonsense about the potential impact of 5G radio signals. There is more than enough fake news to go around without invoking needless fears about the deployment of 5G networks. Before I know it, someone will be warning me to be wary of radiation in the 380-740 nm wavelength range. Don’t believe the line about the higher the frequency, the greater the danger to living organisms. Higher frequencies are in fact less penetrating of the human skin than lower ones.)
Although talk of 5G focuses on phones, it is really about control of automation in the home, the so-called Internet of Things. To be sure, the handset remains key, as it will be used to communicate with everything from door locks to shower temperature sensors. And 5G communication will be important for self-driving cars, for robots, and for drones.
Most immediately, little of consequence will happen to Huawei handsets currently in use in Canada, or to those already in the distribution channel here.
However, such handsets will presumably suffer an immediate drop in resale value. Down the road it is not clear if Huawei will be able to update these devices with new versions of the Android operating system. Watch for Huawei-branded devices to show up on various Internet marketplaces in large numbers and with “open to offers” pricing.
Unless the unpredictable Trump administration reverses course, something it did in an earlier action against another Chinese firm, ZTE, the Huawei name may be irreversibly damaged.
Just to underscore the way the brand can be affected, the SD Association revoked Huawei’s membership just as this column was being written. Effectively this means Huawei devices going forward cannot contain SD or micro SD card slots.
Bottom line: Huawei devices are heavily dependent on American-made components and technology. Without these, the company will have to resort to alternatives which are far less developed and which will noticeably impact the customer experience.
Follow me on Facebook (facebook.com/PeterVogelCA), on Twitter (@PeterVogel), or on Instagram (@plvogel)