Many of us have heard of Huawei, the Chinese tech giant that dominates China’s domestic mobile market and is the second largest smartphone maker in the world (after Samsung but beating Apple).[1] Huawei has a vast and super-fast 5G network around the globe, allowing it to potentially become the world’s tech superpower due to the availability of its network.[2] Some countries, including the United States, ban the sales of Huawei’s equipment within their borders due to national security concerns.[3] However, contracting with Huawei remains attractive to many other countries because it might be cheaper.[4] According to Huawei’s recent announcement, it has “won more than thirty 5G contracts globally, including eighteen from European countries.”[5]
On December 1st, 2018, Meng Wanzhou, the company’s CFO and daughter of the company’s CEO, was arrested at the Vancouver airport on the orders from U.S. intelligence agencies.[6] On January 28, 2019, the United States District Court for the Eastern District of New York released a thirteen-count grand jury indictment against four Huawei-related defendants: Huawei Technologies Co. Ltd., Huawei Device USA Inc., Skycom Tech Co. Ltd., and Wanzhou herself.[7] The defendants were charged with bank fraud and conspiracy to commit bank fraud, wire fraud and conspiracy to commit wire fraud, conspiracy to defraud the United States, conspiracy to violate and substantive violations of the International Emergency Economic Powers Act (“IEEPA”), and conspiracy to commit money laundering.[8] At the crux of the indictment is the government’s allegation that Huawei falsely claimed to have complied with U.S. laws and regulations by operating through Skycom in Iran, which is Huawei’s Iranian subsidiary.[9] However, Huawei insists that Skycom is only acting as a third-party.[10]
Many have commented that these recent events are likely to negatively impact US-China trade talks. Even though President Trump’s trade team tried to separate their trade talk efforts from the federal case against Huawei, they might find it difficult to properly discuss trade issues for fear of straining trade relations between the world’s two largest economies.[11] Canada also cautioned President Trump not to turn Wanzhou’s arrest into a bargaining chip in his trade talks with China.[12] Per Canadian Foreign Minister Chrystia Freeland, Canada arrested Wanzhou because they were merely following its extradition treaty with the U.S..[13] Nevertheless, Huawei is undeniably important to China. It is number 72 on Fortune’s Global 500 list.[14] It has over 180,000 employees and fourteen research centers.[15] In its own words, Huawei “invests heavily in basic research, concentrating on technological breakthroughs that drive the world forward.”[16]
Despite the political uncertainties and international pressures, Huawei continues to engage in basic research, which has always been the reason why it has a powerful 5G network while other companies do not.[17] The fact that Huawei is still a private company is indicative of its leaders’ dedication to research and development. Ren Zhengfei, Huawei’s 74-year-old CEO and Meng Wanzhou’s father, says the company will not expose itself too much to distracting events.[18] After all, the company is deeply focused on basic research, firmly committed to educating younger generations, and aims for nothing but technological advancements.[19] Amid political complications in today’s world, Zhengfei and his company seek to attract as many talents as possible, regardless of their racial backgrounds or national origins.[20] Huawei is substantially dedicated in its research efforts, with 45% of its employees and 14.9% of the company’s total revenue committed in 2017.[21]
We do not know where the Huawei case will lead because the likelihood of the U.S. prevailing on the Huawei case depends on complex legal processes including discovery of evidence, etc. However, today’s Huawei reminds us of the AT&T Bell Labs in the 1920s. In a similar way, AT&T devoted substantial capital to sponsoring basic research in these engineering labs, believing that explorations in fundamental areas of science would shape the future of the telecommunication industry.[22] As a result, the whole world saw the booming scientific results brought by Bell Labs’ research efforts. Despite any potential political involvements, today’s tech companies, like Huawei, will surely see its research commitments come to fruition. For companies like these, the key to long-term success is its leadership’s vision and strategy to prioritize R&D over other distracting factors.
[1] Julia Horowitz, What Is Huawei, and Why the Arrest of Its CFO Matters, CNN Business (Dec. 9, 2018), https://www.cnn.com/2018/12/06/tech/what-is-huawei/index.html.
[2] Id.
[3] Id.
[4] David Tweed & Gao Yuan, US Message to World With Huawei Case: Don’t Trust China on 5G, Miami Daily Bus. Review (Jan. 30, 2019), accessed from LexisNexis Legal News.
[5] Id.
[6] Emily Rauhala, Huawei Executive Wanted by U.S. Faces Fraud Charges Related to Iran Sanctions, Could Face 30 years in Prison,The Wash. Post (Dec. 7, 2018), https://www.washingtonpost.com/world/the_americas/huawei-executive-wanted-by-us-scheduled-for-bail-hearing-in-canada/2018/12/07/0a08c602-fa31-11e8-863a-8972120646e0_story.html?utm_term=.dab8f8994409.
[7] Grand Jury Indictment, United States v. Huawei et al., Cr.No. 18-457 (S-2) (AMD) (E.D.N.Y. 2019)
[8] Dep’t of Justice: News Release, Chinese Telecommunications Conglomerate Huawei and Huawei CFO Wanzhou Meng Charged with Financial Fraud (Jan. 28, 2019), https://www.justice.gov/usao-edny/pr/chinese-telecommunications-conglomerate-huawei-and-huawei-cfo-wanzhou-meng-charged.
[9] See id.
[10] Id.
[11] Shawn Donnan & Jenny Leonard, Trump Team Works to Insulate China Talks from Huawei Case, Bloomberg: Economics (Dec. 9, 2018), https://www.bloomberg.com/news/articles/2018-12-09/trump-trade-rep-tries-to-insulate-china-talks-from-huawei-case.
[12] Julia Horowitz, Canada Warns Trump Administration Against Politicizing Chinese Executive’s Arrest, CNN: Politics (Dec. 13, 2018), https://www.cnn.com/2018/12/12/politics/canada-huawei-meng-wanzhou/index.html.
[13] Id.
[14] Fortune: Global 500 List, http://fortune.com/global500/list/(last accessed on Feb. 8, 2019).
[15] Huawei: About Huawei, Corporate Information, https://www.huawei.com/en/about-huawei/corporate-information (last accessed on Feb. 8, 2019).
[16] Id.
[17] See CGTN, Exclusive Interview of Huawei Founder Ren Zhengfei: Technological Competition Is Peaceful Game (Jan. 21, 2019), https://www.youtube.com/watch?v=TUqg4yrs-Po.
[18] Id.
[19] Id.
[20] Id.
[21] Huawei Investment & Holding Co., Ltd. 2017 Annual Report, 49, https://www.youtube.com/watch?v=TUqg4yrs-Po (last visited on Feb. 8, 2019).
[22] Nokia Bell Labs: History, https://www.bell-labs.com/about/history-bell-labs/ (last visited on Feb. 8, 2019).
