and control internetconnected devices plus win wars? The answer, unfortunately, is many nations, even some friends of the United States. The Philippines, a U.S. treaty partner, has decided to buy Huawei 5G gear, and Italy, a NATO ally, is almost certainly going to make the same decision soon. The U.K., considered America’s closest ally, announced it too will be purchasing Huawei 5G equipment.
Moreover, America will soon be surrounded. Huawei is building Mexico’s 5G network, and Canada, although one of America’s “Five Eyes” intelligence-sharing partners, will probably go with Huawei. Huawei claims that, by the middle of 2019, it had wrapped up 50 commercial 5G contracts.
President Trump’s campaign to convince countries to not buy Huawei 5G gear, according to national security analyst Eli Lake, has already “collapsed.” “Huawei,” Goldman told the London Center for Policy Research in August 2019, “is rolling out 5G across the whole Eurasian continent – I know of not one exception, not even the U.K., and not even India.”
Nowhere is America so far behind China as in the race to build the world’s next – the fifth – generation of wireless telecommunications networks.
The Global South, he believes, “will be hard-wired” into Huawei and therefore into the Chinese economy. The firm’s practice of selling to developing countries resembles Mao Zedong’s take-the-countryside-and-then-surround-the-cities tactic, and it would leave America, Goldman believes, like Britain after the dissolution of its empire.
In sum, as Dimitris Mavrakis of ABI Research told The Wall Street Journal, “5G will be made in China.”
There’s a reason for the Chinese company’s success. Huawei offers equipment at costs far below that of competitors. Some put the Huawei discount at 20 percent, leaving competitors Ericsson of Sweden and Nokia of Finland at an almost insurmountable disadvantage. In some cases, Huawei gear is as much as 30 percent cheaper, and sometimes it pitches 40 percent below the next-cheapest bid.
The reason the Chinese company, the world’s largest supplier of telecom-networking gear, can offer such low prices can be boiled down to two words: subsidies and stealing.
As essentially a state-owned enterprise – and certainly as a “national champion” – Huawei has been the beneficiary of generous subsidies from the Chinese central government, perhaps as much as $75 billion according to a Wall Street Journal investigation. The already large subsidies are thought to have increased substantially in 2011 and again in 2018. The increase in 2018 was triggered by the realization how dependent China was on American technology following the Trump administration’s decision – quickly reversed – to cut-off a sister company, Shenzhen-based ZTE Corp., from U.S. technology.
And then there is outright theft from American and other companies. Since just about the moment it was formed in 1987, Huawei has been implicated in stealing technology, from Cisco Systems and others. The theft was so pervasive that Huawei drove out foreign competition. It is often blamed for killing off, most notably, Canada’s Nortel Networks.
Huawei, according to recent allegations, has never stopped stealing for product-development purposes. The U.S. Justice Department in January 2019 unsealed an indictment against the company charging it with taking unauthorized photographs and an arm of “Tappy,” a cellphone-testing robot of T-Mobile. The FBI, according to Bloomberg reporting, is investigating Huawei for pilfering the technology for advanced smartphone glass from Akhan Semiconductor, a small Illinois-based firm. The Wall Street Journal reported in August 2019 that U.S. prosecutors are continuing their investigation of the Chinese telecom company for intellectual property theft.
At the moment, there is no American telecom-equipment giant, no “American Huawei,” as one writer put it not long ago. The fall of U.S. competitors is all the more striking because the technology was first developed in America – Motorola, before broken into parts, engineered the world’s first cell call – and not long ago American companies like AT&T sat atop the rankings for telecome-quipment makers.
There were many reasons for the decline of equipment manufacturing in America. Huawei’s rise did not help of course, but U.S. companies also had themselves to blame. They chased high stock market valuations by deciding to get out of low-margin manufacturing. Their strategy was to concentrate on capturing the richest profits in wireless communications, licensing the technology itself.
Those big margins belong to the company that once dominated 3G and now essentially owns 4G, Qualcomm Inc. The San Diego– based giant designs and produces the chips that make the current wireless networks work. So if you buy a Huawei smartphone – it is the world’s No. 2 maker of those devices – chances are it has a Qualcomm chip inside. That’s also true for just about every other cellphone or mobile device.
But what about 5G? Qualcomm’s ability to extend its reach to the future is under attack – from Washington regulators. In May 2019, Judge Lucy Koh of the Federal District Court in San Jose sided with the Federal Trade Commission and against Qualcomm in an antitrust case the Commission brought three days before the inauguration of Donald Trump.
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