Huawei Spying Smartphones

Huawei dealt a devastating blow, loses Best Buy as smartphone retailer

The Chinese company can't catch a break in the US. It's already shut out by the US carriers.
By  ROGER CHENG

It's going to get harder for Chinese telecommunications giant Huawei to sell its smartphones in the US.
Best Buy, the nation's largest electronics retailer, has ceased ordering new smartphones from Huawei and will stop selling its products over the next few weeks, according to a person familiar with the situation. 

Best Buy made the decision to end the relationship, the person said.
The retailer didn't provide any additional details.
"We don't comment on specific contracts with vendors, and we make decisions to change what we sell for a variety of reasons," said a Best Buy spokeswoman.
A Huawei spokeswoman called Best Buy a valued partner. 

But "as a policy, we do not discuss the details of our partner relationships," she said.
The move is a critical blow to Huawei, which is the world's third-largest smartphone vendor behind Apple and Samsung but has struggled to establish any presence in the US. 

Best Buy was one of Huawei's biggest retail partners, and one of the rare places you could see its unlocked smartphones in person. 

Huawei's Android-powered phones aren't sold by any US carriers, which is how a majority of Americans typically buy their phones.
Global Data analyst Avi Greengart called it "devastating for Huawei."

Huawei was widely expected to announce a partnership with AT&T in January at CES to carry the Mate 10 Pro smartphone, but the carrier reportedly backed out because of political pressure. 

A few days later, Verizon reportedly nixed its own plans to sell Huawei phones. 

Instead, Richard Yu, CEO of the company's consumer business, spent his time talking about the phones, which were already in the market elsewhere, as well as touting the Porsche Design variant of the smartphone.
While on stage during his CES keynote in January, Yu acknowledged that the lack of a carrier partner hurt, but said that it was "a bigger blow to consumers" who lose out on a strong alternative for an Android phone in the Mate 10 Pro. 

AT&T declined to comment on the reports, but noted it has never publicly committed to selling a Huawei phone. 

Verizon couldn't be reached for comment but has previously declined to weigh in on the matter.
Security concerns have long dogged Huawei in the US. 

In 2012, the House Intelligence Committee released a report accusing Huawei and fellow Chinese vendor ZTE of making telecommunications equipment that posed national security threats, and lawmakers banned US companies from buying the gear. 

Sprint, for instance, has earlier considered using Huawei to supply equipment to its network, but opted not to work with the company.
Following the report's release, the committee stressed that the report didn't refer to its smartphones.
Huawei had spent the last few years slowly building a fan base by selling unlocked phones through retailers like Best Buy, Amazon and Newegg. 

But most US consumers have still never heard of the company -- or even know how to pronounce its name.
The tolerance for its smartphones has changed in the last few months. 

Following the reports of political pressure exerted in January, the directors of the FBI, CIA and NSA all expressed their concerns about the risks posed by Huawei and ZTE phones during a Senate Intelligence Committee hearing last month.
Huawei, for its part, has noted that its products are sold elsewhere around the world and with different global companies.
While ZTE is roped into the conversation, the company does sell its smartphones through US carriers. 

It has touted the amount of US components and resources that go into its products. 

And it has more of an established presence in the US, with AT&T selling its Axon M foldable smartphone and with various phones sold through prepaid carriers.
Amazon declined to comment on the move, but the online retail giant is still offering Huawei products -- which include phones and Android Wear smartwatches -- on a Huawei-specific page. Newegg didn't respond to a request for comment, but Huawei phones are listed on its site.

Like rats abandoning a sinking ship

Why foreign companies are shutting shop in China
By Jane Li

A person walks past a Best Buy logo on February 22, 2011 in Shanghai, China. The U.S. consumer electronics retailer closed all of its stores in China in 2011.
U.S.-based Seagate, the world's biggest maker of hard disk drives, closed its factory in Suzhou near Shanghai last month with the loss of 2,000 jobs, in a move that justifies fears that China is becoming increasingly hostile towards foreign firms operating in the country.
A speech presented by Xi Jinping at the World Economic Forum meeting in Davos in early January had been hoped to address the issue, and "reassure" investors that China's remained open to foreign investment.
Xi defended globalization and "promised" improved market access for foreign companies.
Yet, Seagate joined a spate of foreign companies to shutter operations in China in recent years, for various reasons, but most have attributed the country's high tax regime, rising labor costs and fierce competition from domestic companies.
Panasonic, for instance, stopped all its manufacturing of televisions in the country in 2015 after 37 years of operating in China.
When it first opened in 1979, the Japanese home electronics corporation was the country's first foreign firm, tempted by generous benefits not offered to its Chinese competitors, including lower taxes and land prices and easier access to local governments.
But almost four decades down the road, this certainly isn't the case anymore.
In November last year, Japanese electronics conglomerate Sony sold all its shares in Sony Electronics Huanan, a Guangzhou factory that makes consumer electronics, and British high-street retailer Marks & Spencer announced it was closing all its China stores amid continuing China losses.
Add to that list Metro, Home Depot, Best Buy, Revlon, L'Oreal, Microsoft, and Sharp and we start to see more than a trend developing.
Once considered Beijing's most-welcomed guests, bringing with them the money, management skills, and technical knowledge that the country so badly needed, foreign companies now have fallen out of favor.
"China doesn't need foreign companies in terms of acquiring advanced technology and capital as in previous years," said Professor Chong Tai-Leung from the Chinese University of Hong Kong, "so of course, the government is gradually phasing out more of these preferential policies for foreign firms."
Echoing Chong's comments, Shen Danyang, a spokesperson for China's Ministry of Commerce accused foreign corporates last September of only wanting to make "quick money", had become too dependent on preferential government policies in China, and were starting to feel the pain of what he called a "deteriorating environment for business" in the country.
But for those who had "insight and courage", Shen insisted China is still a good place to invest.

Pedestrians walk past the Marks & Spencer flagship store on December 21, 2015 in Beijing, China. The retailer has since exited the Chinese market.

While it's still open to discussion whether those who have now retreated from China lacked "insight and courage", there are certainly some common factors emerging on why.
Keith Pogson, a senior partner at Ernst & Young who oversees financial services in Asia, said the major one is quite simply fierce competition from Chinese rivals.
"We are seeing more Chinese companies becoming champions in other countries, and of course that adds a lot of pressure on foreign corporates." he said, agreeing that the gradual phasing out of preferential policies for foreign firms was certainly in China's self-interest.
Chinese TV brands, for example, for the first time overtook their South Korean rivals last year, ranking first in global sales, with the market share of TCL – a household name in the domestic home electronics market – increasing more than 50 per cent in Northern American market in the past year.
With the rise of such home-grown firms, the Chinese authorities have been leaning towards their own "children", said Pogson, and this gradual phasing out of preferential policies for foreign companies is likely to continue.
Preferential treatment towards foreign firms goes back to 1994 when they were included under the country's general tax regulations.
Until 2007, firms that received foreign investment were subject to 15 per cent income tax while domestic companies paid 33 per cent tax.
But in recent years Beijing has stepped up its efforts to tighten such policies, with the new Enterprise Income Tax Law and Implementation Rules, effective since 2008 unifying the rate for domestic and foreign companies at 25 per cent.
Unclear laws and inconsistent interpretation of them have also been blamed for the flight of foreign firms.
A survey last year by consulting firm Bain & Company and the American Chamber of Commerce in China (AmCham-China) highlighted those were the two top factors hindering foreign firms' ability to invest and grow in China.
High labor costs and a lack of qualified employees were also among the top five challenges, the study showed.
An example of the type of regulation that is now hindering foreign progress is the new cyber security law, approved by parliament last November.
It sparked fears that foreign technology firms would be shut out and subjected to contentious requirements for security reviews, and for data to be stored on Chinese servers.
Despite more than 40 international business groups signing a petition to amend some sections of the law, the final draft approved by the parliament remained unchanged – a clear indication of Beijing's determination to toughen its stance against foreign firms.
A quarter of the AmCham-China's 532 member firms taking part in the survey said they had either moved or were planning to move operations out of China by the end of last year, with almost half moving to parts of "developing Asia".
"If more overseas companies want to develop in China at this stage," Chong said, "I would suggest they consider second- and third-tier cities."