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June, 2018

US tech giants under fire for partnering with Huawei

Original article: The Wall Street Journal

Members of the U.S. Congress want to know details of Google's partnership with Chinese telecoms giant Huawei, deemed by some in Washington as a national-security threat. The probe into Google's relationship with Huawei follows an earlier Congressional investigation of Facebook's data-sharing deal with the Shenzhen-based company. 

Analysis:

The global technology industry is caught in the crossfire of an escalating Sino-U.S. digital cold war. As recently as two years ago, nobody on Capitol Hill would have launched a probe into Google's cooperation with Chinese smartphone vendors. It was taken as a given. Every major mobile-device maker besides Apple uses the Android operating system. 


What a difference The Donald makes. By hammering China on unfair trade practices and misappropriation of American intellectual property, Trump has ushered in a more confrontational era in Sino-U.S. relations. To be sure, the relationship was flagging in the twilight of the Obama presidency, but Trump has accelerated the process, upending 45 years of American foreign-policy tradition. 


We don't think Trump realized the Pandora's box he was opening - especially when he almost put ZTE out of business. Not only did he enrage Beijing, he irked fellow Republicans with his eagerness to cut a deal to reverse the ban. 


Unlike the President, Congress isn't eager to strike a deal with China. And while ZTE is dominating the headlines, Huawei - the world's largest telecoms equipment and No. 3 smartphone maker - is more important. Facebook recently acknowledged that it had shared user data with Huawei and other Chinese handset makers as early as 2007. It appears that the data sharing continued even after Washington named Huawei a national-security threat in 2012. 


U.S. lawmakers worry that the data may have ended up on Chinese servers or been handed over to Beijing. Facebook insists that didn't happen, but has promised to "wind down" the deal expeditiously. If user data was only on Huawei smartphones, the company couldn't easily access it, said Jia Mo, an analyst at Canalys, in a June 7 Bloomberg report. It would have been more feasible to "explore the data" if it had been uploaded to servers, he said.  


Meanwhile, tech analysts say that Congress's investigation of Google's partnership with Huawei could be fruitless. "If Congress is going to waste time investigating Google’s RCS [rich-communication services] partnership with Huawei, it’s going to have to do the same for all the other Chinese OEMs Google wants on board, like Xiaomi, Oppo, and even ZTE," Android Authority wrote in a June 7 commentary. "All Google wants is to make texting on Android devices a similar experience to texting on iPhones." With that in mind, it wants to partner with the world's No. 3 smartphone maker: Huawei. Otherwise, a large chunk of the world's Android users won't have access to Google's RCS service. 


According to Android Authority, "Google partnering with Huawei to get RCS messaging on smartphones has nothing to do with Chinese tech dominance." Android Authority is right. However, the more U.S. lawmakers learn about Huawei, the more concerned they become. 


In a February report assessing Huawei's risk profile, RWR Advisory pointed out that allegations proliferate of Huawei's "close working relationship" with notorious Chinese hackers and "bad cyber actors." RWR acknowledges that there is not much evidence - at least in the public domain - showing that Huawei knowingly engages in espionage on behalf of the Chinese state. That would be a worst-case scenario. "At best, Huawei seems ignorant to the company it keeps, rather than complicit in their indiscretions...While the truth is probably somewhere in between, neither scenario is attractive for prospective partners and customers," RWR observes. 


Ironically, as Washington turns up the heat on Huawei, the company's star continues to rise back home. A survey of 30,000 Chinese consumers published in May by the Reputation Institute found that Huawei was the No. 2 brand in China, well ahead of Apple (No. 12). Consumers lauded the company's transparency, genuineness and our favorite - its "ability to stand out from the crowd," according to a May report by The Drum. 

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