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Dec. 16, 2018, 7:09 p.m. EST

Security fears could stymie Huawei’s global ambitions

Chinese telecom vying to be leader in next-generation 5G technology

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By Associated Press


Reuters
Several nations, including the U.S., worry Huawei Technologies equipment will be used to spy on them.

BEIJING — While a Huawei executive faces possible U.S. charges over trade with Iran, the Chinese tech giant’s ambition to be a leader in next-generation telecoms is colliding with security worries abroad.

Australia and New Zealand have barred Huawei Technologies Ltd. as a supplier for fifth-generation networks. They joined the United States and Taiwan, which limit use of technology from the biggest global supplier of network switching gear. Last week, Japan’s cybersecurity agency said Huawei and other vendors deemed risky will be off-limits for government purchases.

None has released evidence of wrongdoing by Huawei, which denies it is a risk and has operated a laboratory with Britain’s government since 2010 to conduct security examinations of its products. But the accusations, amid rising tension over Chinese technology ambitions and spying, threaten its ability to compete in a sensitive field as carriers prepare to invest billions of dollars.

“This is something that’s definitely concerning Huawei at this stage, because there is a political angle to it and a business angle,” said Nikhil Bhatra, a senior researcher for IDC.

Huawei is no ordinary electronics supplier. The company founded in 1987 by a former military engineer is China’s first global tech brand and a national champion at the head of an industry Beijing is promoting as part of efforts to transform this country into a technology creator. It has China’s biggest corporate research-and-development budget at 89.7 billion yuan ($13 billion) in 2017 — 10 percent more than Apple Inc.’s /zigman2/quotes/202934861/composite AAPL -1.21%   — and foreign customers can draw on a multibillion-dollar line of credit from the official China Development Bank.

That puts Huawei at the heart of strains over the ruling Communist Party’s technology aspirations, competition with Western economies and ties between companies and government, including possibly spying.

A European Union official, Andrus Ansip, expressed concern that Chinese rules requiring telecom equipment suppliers to cooperate with intelligence services would involve possible “mandatory backdoors” in computer or telecom systems.

“Do we have to be worried about Huawei and other Chinese companies? Yes, I think we have to be worried,” said Ansip, the trade bloc’s vice president for a digital single market.

The company says it is employee-owned and operates independently. It denies it designs equipment to allow eavesdropping or that it is controlled by the Communist Party — a stance critics including some U.S. senators say is doubtful in China’s state-dominated system. The company notes it uses the same global components suppliers as Western manufacturers.

“Not a single shred of evidence against the company has ever been presented,” Huawei said in a written response to questions.

The company is the “most examined telecoms equipment vendor,” the statement said. It said foreign officials visit regularly to see “the lengths we go to assure them of the integrity of our technology.”

Huawei, headquartered on a leafy campus in Shenzhen, near Hong Kong, has been working on 5G since 2009 and is one of the major suppliers of the technology, along with Sweden’s LM Ericsson /zigman2/quotes/208932705/composite ERIC -1.11%   and Finland’s Nokia Corp. /zigman2/quotes/207421390/composite NOK -1.11%  .

The company whose technology winds up being adopted stands to reap billions of dollars from sales and license fees.

5G promises more than just faster mobile phone service. It is designed to support vastly expanded networks of devices from internet-linked cars and medical equipment to factory robots and nuclear power plants. Annual sales of 5G network gear are forecast to reach $11 billion by 2022, according to IHS Markit.

That makes it more politically sensitive, raises the potential cost of security failures and requires more trust in suppliers.

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