Criminal Company

How Huawei became America’s enemy No. 1
By Tripti Lahiri & Mary Hui

Since it was founded by former People’s Liberation Army engineer Ren Zhengfei in 1987, Huawei has grown to become the world’s top provider of telecom equipment, with over $100 billion in revenue and 180,000 global employees. 

That extraordinary success has come with barely a footprint in the US market, where the company has been a target for anxiety about Chinese hacking since the 2000s. 

Today, Huawei is the poster child for that anxiety, and finds itself in the eye of a global storm.
Huawei’s troubles in the US started early: It was met with with suspicion not long after it started competing with US router firms in the aughts, and kept hitting snags after that. 

In 2003, networking firm Cisco accused Huawei of intellectual property theft. 

In 2008, a deal with 3Com collapsed over concerns about Huawei’s ties in China. 

In 2014, T-Mobile sued Huawei for stealing, among other technology, part of a robot’s arm.
But in 2017, US president Donald Trump took office, and since then actions against Huawei have come fast and furious. 

On May 15, Trump signed an executive order that effectively bans Huawei from accessing US supply chains, his strongest action yet against the company. 

Less than a week later, Google pulled Huawei’s Android license—after a grace period allowed by the Trump administration for current users, the company’s future phones will be cut off from the most widely used operating system in the world and the Google universe. 

Suppliers from Britain, such as chip maker ARM, are set to follow Google’s lead.
Trump’s endgame is still unclear. 

Is the only safe Huawei a “dead” Huawei? 

Or is this another gambit in his ongoing trade negotiations with China? 

It may be too soon to tell: On May 23, Trump called Huawei “very dangerous” but also said the dispute might be resolved a trade deal.
What is clear is that this showdown has been a long time coming.

2001
Huawei, then a 14-year-old company with sales of $3 billion, sets up offices in the US (pdf). It also opens its first office in Britain.

2003
January: Router-maker Cisco sues Huawei for copyright violations, alleging its source code turned up in Huawei products. It later drops the suit.
November: Huawei’s joint venture with California-based networking company 3Com to make and sell routers and switches begins operations.

2005
The idea that Huawei is linked to the Chinese military surfaces prominently in a Rand Corporation report commissioned by the US Air Force. 

The think tank notes that major IT players like Huawei appear to be private-sector actors (pdf, pages 217-8), but “many of these electronics companies are the public face for, sprang from, or are significantly engaged in joint research with state research institutes.” 

It adds:
Huawei maintains deep ties with the Chinese military, which serves a multi-faceted role as an important customer, as well as Huawei’s political patron and research and development partner.
The report also says sales linked to the Chinese military could be anywhere from less than 1% of Huawei’s revenues to as high at 6%. 

2007
In July, the FBI interviews Huawei’s founder, Ren, in relation to violations of US trade sanctions on Iran.

2008
Huawei’s efforts to take a 16% stake in 3Com collapse amid lawmakers concerns (paywall) about Huawei’s ties to the Chinese military, forcing Huawei and its partner in the acquisition to abandon the bid. 

3Com was a provider of anti-hacking software for the US military, among other contracts. Lawmakers cited the 2005 Rand report.

2009
February: At Barcelona’s Mobile World Congress, Huawei releases its first Android smartphone, under license from Google.
October: Huawei hires an American, Matt Bross, from British Telecom to be its CTO, and to help it make a real foray into the US market. 

Bross apparently runs operations from his basement in St. Louis. 

“I am looking to create an environment where we can grow trust,” he tells Bloomberg in 2011. 

“The fact of the matter is that Huawei is here to stay.” (He leaves Huawei in 2012.)
November: Huawei signs a lease in Plano, Texas, for 100,000 square feet of office space for its North America sales and marketing headquarters. 

“We are honored that Huawei will grow and prosper in Plano for years to come,” the town’s mayor says in a statement.

2010
July: Phone-maker Motorola files a lawsuit accusing Huawei of corporate espionage, but later settles with the company.
November: Citing security concerns, Sprint excludes Huawei (paywall), as well as Chinese telecom ZTE, from bidding for a contract worth hundreds of millions of dollars to modernize its network. Huawei had been hoping this would be its first major US equipment contract win.

2011
February: The Committee on Foreign Investment in the United States tells Huawei to sell (paywall) the assets of bankrupt startup 3Leaf Systems, which it had acquired the previous year. 

Huawei says it didn’t flag the deal to CFIUS because it had only bought some of 3Leaf’s assets, but the panel decides to engage in a retroactive review.

April: Huawei opens a 200,000-square-foot R&D facility in Silicon Valley. 

It continues to grow revenue from equipment sales to mid-tier telecoms in remote areas of the US.

2012
October: A House committee issues a 52-page report (pdf) warning against using equipment from Huawei and ZTE. 

The report states:
In sum, the Committee finds that the companies failed to provide evidence that would satisfy any fair and full investigation. 

Although this alone does not prove wrongdoing, it factors into the Committee’s conclusions below.

Further, this report contains a classified annex, which also adds to the Committee’s concerns about the risk to the United States. 

The investigation concludes that the risks associated with Huawei’s and ZTE’s provision of equipment to U.S. critical infrastructure could undermine core U.S. national-security interests.


2013
Reuters reports that a Hong Kong-based company that tried to sell US computer equipment to Iran’s largest cellphone carrier, in violation of US trade sanctions, is closely linked to Huawei. 

The story says that Ren Zhengfei’s daughter Meng Wanzhou, “a rising star” at Huawei, served on the board of the Hong Kong firm, among other links.

2014
March: The New York Times reports (paywall) that the NSA infiltrated the servers in Huawei’s Shenzhen headquarters, obtaining sensitive information about its giant routers and complex digital switches, and monitoring the communications of top executives.

September: T-Mobile files a lawsuit against Huawei, accusing it of stealing technology, including part of a robot’s arm, from its headquarters. 

Huawei workers spied on and stole part of Tappy, a robot developed by T-Mobile in 2006 to test smartphones. 

Huawei admits that two of its employees had acted "inappropriately".

2015
January: Speaking at the World Economic Forum in Davos, Switzerland, Huawei founder Ren seeks to play down his connection with the Chinese army, saying it was “quite by chance” that he entered the military. 

“We are a Chinese company,” Ren says. 

“Of course we support the Chinese Communist Party and love our country. We comply with the laws of every country we operate in.”
September: Huawei and Google join forces (paywall) to make the Nexus 6p phone.

2016
June: The US Commerce department issues a subpoena (paywall) to Huawei as part of a probe into whether the company violated US export controls on the export or re-export of American technology to Cuba, North Korea, Syria, and Sudan over the previous five years.
December: The Treasury department gets involved with the investigation (paywall) and issues its own subpoena. 

The subpoena comes shortly after the US government restricts sales of American technology to ZTE, saying the Chinese phone-maker violated sanctions against Iran. 

US officials also release internal ZTE documents detailing how the company managed to do business with Iran, and how it modeled its approach off of a rival’s efforts in that country. 

The rival company is not named in the documents, but its description matches Huawei (paywall).

2017
A Seattle jury rules in favor of T-Mobile in its case against Huawei, determining that the latter misappropriated T-Mobile’s trade secrets, and breached a handset-supply contract between the two companies that stipulated each would protect secrets learned through their partnership. 

The jury awards T-Mobile $4.8 million in damages for the breach of contract, but does not award damages for T-Mobile’s trade-secrets claim.

2018
January: AT&T, America’s second-largest wireless carrier, is on the verge of becoming the first carrier in the US to offer Huawei’s handsets, which would be a major breakthrough. 

But it abandons the plan after lawmakers and federal regulators lobby against the idea. 

Concerns around Huawei deepen as the rollout of next-generation wireless technology approaches; a leaked White House memo on 5G names the company a strategic threat. 

Lawmakers want AT&T to cut all commercial ties with Huawei, ending their collaboration on 5G network standards.
April: Huawei lets go of several US staff (paywall), including its vice president of external affairs, William Plummer, a Nokia veteran who joined Huawei in 2010. 

Plummer goes on to detail the company’s (and some of his own) PR missteps in a memoir called Huidu.
May: The Pentagon bans the sale of Huawei and ZTE phones in stores on military bases over concerns that the Chinese government could order the companies to track soldiers’ movements or spy on their communications.
August: The National Defense Authorization Act, which includes language barring government agencies from buying equipment or services from Huawei and ZTE, goes into effect.
October: Two leading US lawmakers—Mark Warner, a Virginia Democrat, and Marco Rubio, a Florida Republican—urge Canadian prime minister Justin Trudeau to bar Huawei from helping build its 5G networks, saying it could pose dangers for US networks. 

The call is part of a broader US effort to get foreign allies to shun Huawei, the Wall Street Journal later reports (paywall), warning the UK, for example, it could be forced to cut off intelligence sharing. 

In November, New Zealand bans Huawei from supplying technology to the country’s 5G rollout, following in the steps of Australia earlier in the year.
December: Huawei’s chief financial officer and the daughter of its founder, Meng Wanzhou, is arrested in Canada at the request of US law enforcement on suspicion of violating trade sanctions on Iran. 

The arrest is seen as a serious escalation of US action against Huawei. 

Trump is criticized for suggesting he could intervene in the Justice Department case against her if it would help secure a trade deal from China. 

2019
January: The US files criminal charges against Huawei, slamming it with two dozen allegations that include conspiring to evade US trade sanctions and steal trade secrets, and also formally seeks Meng’s extradition from Canada. 

Meanwhile, Poland arrests a Huawei employee on allegations of spying for China. 

May 15: Trump signs an executive order banning US telecommunications firms from using the equipment of “foreign adversaries.” 

The order does not name Huawei, but effectively blacklists the company and cuts it off from US supply chains. 

Days later, Google makes a shock announcement that it will terminate Huawei’s license to the Android OS, which powers 86% of the world’s phones and all of the phones sold by Huawei. 

Huawei says it’s developing its own OS, but being cut off from Google’s email and app universe would drastically reduce its appeal overseas. 

Already, mobile carriers are holding off on Huawei 5G phone sales (paywall).
May 20: The restrictions are temporarily eased: The Commerce Department says it will allow Huawei to buy US goods through Aug. 19. 

But that same day, top US chip companies including Intel and Qualcomm cut off vital Huawei supplies, while Microsoft is also said to have stopped taking software orders from the firm.
This month’s moves present the most serious threats yet to Huawei’s future.

Global Thief

From university funding to computer hacking: How China steals Western innovation
By James Cook

China is seeking to "steal its way up the economic ladder" at the expense of Western innovation

China is seeking to "steal its way up the economic ladder" at the expense of Western innovation.
Those were the damning words of FBI Director Christopher Wray who last week said that China poses a "multi-layered" threat to US interests.
His comments were made as Washington's campaign to ban Chinese telecoms firm Huawei intensified.
"China has pioneered a societal approach to stealing innovation in any way it can from a wide array of businesses, universities and organisations," he said.
"They're doing it through Chinese intelligence services, through state-owned enterprises, through ostensibly private companies, through graduate students and researchers, through a variety of actors all working on behalf of China."
It's something known only too well by businesses desperate to crack China's lucrative market of 1.3bn people.
Among them is Apple, who saw Chinese electronics business Xiaomi spend years replicating its iPhone designs.
Its chief executive even modelled himself on Apple founder Steve Jobs, wearing similar clothing and copying his presentations.
For Apple design chief Jony Ive, the constant replication was a source of frustration.
“You spend seven or eight years working on something, and then it’s copied. I have to be honest, the first thing I can think, all those weekends that I could have at home with my family but didn’t. I think it’s theft, and it’s lazy,” he said in 2014.
While Xiaomi was a brazen example of a Chinese business copying Western designs, there are far more advanced ways which Chinese businesses have used to copy Western innovation.
Huawei has been at the centre of a political row over concerns that its closeness to the Chinese government could introduce espionage risks if its hardware is used in the development of 5G networks around the world. 
Many countries, including the US, have taken a firm stance against Huawei’s involvement in the new networks, but other nations including the UK have taken a softer approach.
The political row around Huawei often overlooks the company’s historic practice of stealing Western innovation, however.
Over 15 years ago, Huawei took part in a costly legal battle with US technology firm Cisco over allegations that Huawei copied Cisco’s software for its routers.
Huawei eventually admitted that it had cloned the software and pledged to remove it from its products.
Huawei had been systematically reverse-engineering Cisco’s routers, a practice which would have allowed the Chinese telecoms company to peer into the inner workings of Cisco’s software and cherry pick sections to use in its own products.
Cisco sued Huawei for patent infringement in 2003, only settling the case after Huawei admitted to using Cisco’s source code.
The US government has also accused Huawei employees of attempting to copy “Tappy,” a smartphone-testing robot built by US network T-Mobile.
Huawei employees with access to the robot took photographs of Tappy and one employee has been accused of removing one of its arms. 
Concern around Chinese replication of technology doesn't end with reverse-engineering.
As businesses like Huawei have become more successful and expanded around the world, they have begun investing in academic research.
Huawei has spent millions of pounds in the UK alone funding research into technologies such as mobile phone networks. 
But experts have warned that these donations risk handing British innovations to China.
“China is using broad research relationships with universities and other entities to try and fill in any technological gaps,” said Michael Wessel, a commissioner on the US-China Economic and Security Review Commission.
Companies are trying to “advance Chinese standards so that Huawei and other Chinese-produced equipment will be the equipment of choice as networks get built out,” he said.
The issue of Huawei funding university research has been particularly sensitive in Canada, which has seen a political debate over the hundreds of patents Huawei has been granted thanks to Canadian research it has funded.
A similar debate has not yet taken place in the UK, although Oxford University suspended all research grants and donations from Huawei following a Telegraph report into the financial backing published last year.
Apart from the continued practice of university funding, other Chinese businesses have for years been systematically cloning Western software and hardware for sale in the Chinese market.
Earlier this month, it was reported that a cloned version of popular Nintendo smartphone game Fire Emblem Heroes had been approved by the government and was available for download on iPhones and Android phones.
The app had been reverse-engineered, with the only substantive change being the translation of the game’s text into Simplified Chinese.
Chinese businesses have also grown adept at copying hardware manufactured in Chinese factories.
These factories are given the blueprints for technology hardware, as well as prototype devices that can help to create cloned devices.
Quartz reported in 2016 that an entrepreneur who invented a smartphone case that folds out into a selfie stick was shocked to find a copy of his product on sale through Chinese websites at a cheaper price.
It’s an extremely common issue seen in Chinese factories, which are used to produce counterfeit products that have been designed to be as similar as possible to the original products. 
Often, the cloned products are sold online for a cheaper price.
The nature of China’s laws around foreign businesses are key to helping transfer technology from Western companies to China.
A report to the US Congress by the Department of Justice published in 2018 said that “China uses foreign ownership restrictions, such as joint venture requirements and foreign equity limitations, and various administrative review and licensing processes, to require or pressure technology transfer from US companies.”
Forcing the creation of joint ventures has meant that businesses wishing to operate in China have to transfer information to Chinese businesses, raising concerns that the products may be copied.
The report to Congress also described widespread hacking of computer networks in order to gain access to confidential information that would be extremely useful to Chinese businesses.
In 2014, the US government indicted five members of the Chinese military over charges that they hacked into the networks of large US power and steel companies in order to steal trade secrets.
These hacking attacks are a far cry from the more prosaic copying of devices like crowdfunded selfie sticks, but the ongoing hacks show a continued effort to promote Chinese businesses by handing them closely guarded trade secrets.
The promise of a new law that could grant businesses “fair treatment” inside China is seen as a step in the right direction, but Western businesses don’t anticipate an immediate end to the copying, cloning and hacking which has gone on for years.

U.S. Tech Executioners

How U.S. tech powers China's surveillance state

By Erica Pandey

American companies eager to enter China’s massive market brace themselves for potential intellectual property theft or forced technology transfers. 

But there’s another threat at play: their technology is being used for surveillance.
The big picture: China has sophisticated systems of state surveillance, and these systems have long been powered by technologies developed by American companies. 

Beijing has used U.S. tech to surveil its citizens, violate human rights and modernize its military.

The entanglement
Companies doing business in China often get caught in a web: Beijing uses its economic leverage to draw them in and then uses their technology for police-state tactics. 

As a result, "American companies are enabling and complicit in major human rights abuses," says Elsa Kania, a technology and national security expert at the Center for a New American Security.
Another concern is American universities and research institutions partnering with Chinese companies that work with state security, she says.
Thermo Fisher Scientific, a Massachusetts company, has supplied the Chinese government with DNA sequencers that it is now using to collect the DNA of ethnic minorities in East Turkestan, Human Rights Watch reports. 

At a Thursday hearing, Sen. Marco Rubio called Thermo Fisher's operations in East Turkestan "sick."
iFlyTek is a Chinese company that recently launched a 5-year partnership with the Massachusetts Institute of Technology. 

Beijing has used iFlytek’s voice recognition technology "to develop a pilot surveillance system that can automatically identify targeted voices in phone conversations," according to Human Rights Watch.
Cisco, in 2011, participated in a Chinese public safety project that set up 500,000 cameras in Chongqing, according to the Wall Street Journal.
Yahoo, in 2005, gave the personal information of a Chinese journalist to China's government. 

That information was used to put the man in jail.
Tech giants, like Facebook, Apple and LinkedIn, have faced scrutiny in the past for censoring or offering to censor content in China.
"Not all of these companies realize the extent to which their activities could be exploited," Kania says.
Companies often take on projects for the Chinese government in the name of curbing "crime", according to Scott Kennedy of the Center for Strategic and International Studies, but "the boundary between promoting public safety and protecting the state is increasingly blurred with these types of technologies."

The other side: Axios reached out to all of the companies listed above. 

The responses we received by deadline:
Thermo Fisher Scientific: "We work with governments to contribute to good global policy."
Cisco said it "has never custom-tailored our products for any market, and the products that we sell in China are the same products we sell everywhere else."
Oath, which now owns Yahoo: “We’re deeply committed to protecting and advocating for the rights to free expression and privacy of our users around the world."
LinkedIn: "In order to create value for our members in China and around the world, we need to implement the Chinese government’s restrictions on content, when and to the extent required."

The stakes
"A lot of people wanted very much to believe that once China had exposure to the outside world, political liberalization would come with economic liberalization," Sophie Richardson, China director at Human Rights Watch, tells Axios. 

"They're getting a lot richer and a lot more powerful and no more politically liberal."

What's next:
Some companies have pulled out of China of their own accord in the past. 

Google refused to censor its search engine in China in 2010, leading to its ouster from the country. Other companies may follow suit if they realize their technology is being misused, says Kania.
If companies cannot be held accountable by internal ethics guidelines, shareholders or users, the government may need to step in through export controls or limits on funding to researchers that collaborate with China, she says.
Worth noting: There's already a U.S. law that prohibits the export of crime-control products to China, but the sale of cameras and other dual use technologies that could be used for surveillance are not banned, reports the Wall Street Journal.