Wed | Jul 17, 2019

Huawei calls on US, others to show proof of security risk

Published:Wednesday | December 19, 2018 | 12:00 AM
Huawei's research and development centre in Dongguan in south China's Guangdong province, yesterday.
Huawei chief financial officer and heir Meng Wanzhou. AP
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The chairman of Huawei challenged the United States and other governments to provide evidence for claims that the Chinese tech giant is a security risk, as the company launched a public relations effort Tuesday to defuse fears that threaten its role in next-generation communications.

Talking to reporters who were invited to Huawei Technologies Limited's headquarters, Ken Hu complained that accusations against the biggest global maker of network gear stem from "ideology and geopolitics". He warned that excluding Huawei from fifth-generation networks in Australia and other markets would hurt consumers by raising prices and slowing innovation.

Australia and New Zealand have barred Huawei in 5G networks on security grounds. They joined the United States and Taiwan, which have broader curbs on Huawei. Japan's cybersecurity agency says suppliers, including Huawei, that are deemed high-risk will be excluded from government purchases.

 

GLOBAL SALES

 

The curbs have had little impact so far on Huawei, which says global sales are on track to top US$100 billion this year. But the normally press-shy company's decision to hold Tuesday's event appeared to reflect growing concern the accusations could hurt it in an emerging 5G market that industry analysts say could be worth US$20 billion a year by 2022.

Hu, who appears at industry events but rarely gives interviews, talked for two hours and 20 minutes with American, European and Asian reporters.

"If you have proof or evidence, it should be made known," said Hu. "Maybe not to Huawei and maybe not to the public, but to telecom operators, because they are the ones that buy Huawei."

Huawei, founded in 1987 by a former military engineer, rejects accusations that it is controlled by the ruling communist party or designs equipment to facilitate eavesdropping. But foreign officials cite a Chinese law that requires companies to cooperate with intelligence agencies and express concern telecom equipment suppliers might be required to modify products.

The emergence of 5G has heightened those fears. The technology is meant to support a vast expansion of telecoms networks to connect self-driving cars, factory robots, medical devices and power plants. That has prompted governments increasingly to view telecoms networks as strategic national assets.

"There has never been any evidence that our equipment poses a security threat," said Hu. He added later, "We have never accepted requests from any government to damage the networks or business of any of our customers."

Hu's comments echoed previous denials by company spokespeople. But they marked the first time such a senior figure has directly addressed foreign security complaints, underscoring the company's sensitivity to them.

Hu noted a Chinese foreign ministry spokesman said on December 10 that no law requires companies to modify equipment to permit secret access.

"We haven't received any request to provide improper information," he said. "In the future, we will also act in strict accordance with the law in dealing with similar situations."

The lack of public evidence to support accusations against Huawei has prompted industry analysts to suggest they are an excuse to shield US or European competitors against the rise of a Chinese challenger.

Asked about that, Hu said reducing competition would hamper innovation and raise costs for consumers.

Hu cited what he said was a forecast by a research firm, Frontier Economics, that the cost of installing 5G wireless base stations in Australia would be 15 to 40 per cent higher without competition from Huawei. He said the total cost could be several billion dollars higher.

"You can't make yourself more excellent by blocking competitors from the playing field," he said.

Despite "efforts to use politics to interfere with industry growth", Huawei has signed contracts with 25 telecom carriers for commercial or test use of 5G, according to Hu. He said the company has shipped more than 10,000 5G base stations.

"We are proud to say that our customers continue to trust us," he said.

 

US ACCUSATIONS

 

Huawei suffered another setback when its chief financial officer was arrested on December 1 in Canada in connection with US accusations that the company violated restrictions on sales of American technology to Iran.

Hu said he couldn't discuss the Iran accusations because the executive, Meng Wanzhou, is in the midst of court proceedings in Vancouver. Meng, the daughter of Huawei's founder, Ren Zhengfei, faces possible US charges of lying to a bank to conceal Huawei's dealings with Iran.

However, Hu said Huawei is "very confident in our trade compliance management". Echoing earlier company statements, he expressed "confidence in the fairness and independence" of courts involved in Meng's case.

Asked whether Meng's arrest made Huawei executives reluctant to leave China, Hu laughed and said, "There is no impact on our travel plans. At this time yesterday, I was on a plane" returning from Europe.

Another Chinese company, ZTE Corp, was nearly forced out of business this year after Washington blocked it from buying US components and technology over its exports to Iran and North Korea. President Donald Trump restored access after ZTE paid a US$1 billion fine, replaced its executives and hired US-selected compliance managers.

Asked whether Huawei would be hurt if it faced similar curbs, Hu said he couldn't talk about something that hadn't happened. But he said the company has a global network of 13,000 suppliers and a "diversified supply strategy" that allowed it cope with Japan's 2011 tsunami and other disruptions.

Huawei is China's first global tech competitor, making it politically important to a ruling communist party that wants to transform the country from a low-wage factory into a leader in fields from robotics to clean energy to biotech.

The company has a workforce of 180,000 and China's biggest corporate research-and-development budget. It operates in 170 countries and dominates developing markets in Asia, Africa and Latin America.

Analysts have warned Huawei's political importance to Beijing would make any US attempt to impose ZTE-style controls an explosive issue. Relations already are strained over Trump's tariff hikes on billions of dollars of Chinese imports in a fight over complaints Beijing steals or pressures companies to hand over technology.

Hu promised repeatedly to expand efforts to respond to "legitimate concerns" from regulators, telecom carriers or the public.

"We will step up our efforts in communicating and collaborating with governments around the world," he said.

Huawei has opened centres in Britain, Germany and Canada for governments to test its equipment and software. Its newest "security transparency centre" is due to open in Belgium in the first quarter of 2019.

Huawei plans to invest US$2 billion over the next five years to improve its software development, according to Hu. That follows a report in July by the board that oversees the testing centre in Britain that faulted Huawei for weak software engineering.

Tuesday's event for reporters included tours of two research-and-development laboratories at Huawei's headquarters in Shenzhen, which abuts Hong Kong, and a cybersecurity testing centre at a newly built campus in Dongguan, an hour's drive to the west. The company said it was the first time reporters had been allowed to see those facilities.

The cybersecurity lab's director, Martin Wang, said it has facilities used by customers including Spain's Telefonica to carry out their own tests on Huawei equipment and software.

"We are open to any discussion with customers about how we can improve cybersecurity," said the company's director of cybersecurity and privacy, Sean Yang.