Canada won’t come to Huawei’s rescue with 5G decision

Meng Wanzhou is returning to a Huawei Technologies Co. that is suffering a severe reversal in fortunes.

The trajectory of that sharp decline roughly parallels the 1,020-day incarceration by China of Michael Kovrig and Michael Spavor.

The two Canadian nationals were detained by China just days after Meng, the chief financial officer of Huawei, was arrested in Vancouver on a U.S. extradition warrant in December 2018.

U.S. prosecutors accused Meng of fraud in covering up Huawei’s alleged dealings in Iran in violation of U.S. sanctions against that country.

China’s de facto kidnapping of the two Michaels was apparent retaliation for Meng’s arrest.

That overt link between Meng and the two Michaels removed any doubt that Huawei is a favoured child of Beijing.

Chinese President Xi Jinping is waging a campaign to rein in China’s most powerful companies. Beijing’s harsh measures have been largely aimed at the tech sector — yet Huawei, China’s biggest tech enterprise, has been spared in that crackdown.

The relentless ferocity of China’s efforts to secure Meng’s release cemented assumptions worldwide that Huawei is an instrument of Chinese geopolitics.

Beijing followed up its incarceration of the two Michaels with trade sanctions against Canadian pork, beef, and soybeans.

“The very fact that China seized Kovrig and Spavor within days of Canada detaining Meng, and the speed with which Beijing linked their cases to hers, shows the importance it places on Huawei,” Bloomberg News said Sept. 25.

“Foreign governments, and their intelligence agencies, will seize on Beijing’s negotiation (to free Meng) to make the case that Huawei is, indeed, controlled by the state.”

Huawei has always insisted that it is not influenced by Beijing. But in the wake of China’s hostage diplomacy, hardly anyone not on Huawei’s payroll believes that.

The company’s global image as a potential menace is dragging Huawei down. Its win-at-all-costs drive has long been described in the industry as a “culture of wolves.”

And Huawei has never hidden its Chinese patriotism.

In profiling Meng three years ago, the Wall Street Journal recounted President Xi’s 2015 tour of Huawei’s London office, to which Meng had relocated Huawei’s financial nerve centre.

The Huawei staff serenaded Xi, soon to be anointed China’s president for life, with “The Song of China.” Its lyrics include “All nations will come to learn from us; we, favoured by Heaven, will be stopped by no one.”

However, the privately held Huawei that Meng, 54, is poised to take over, as company founder and CEO Ren Zhengfei’s daughter and heir apparent, is now a turnaround case.

Huawei’s telecom networks still serve about one-third of humanity, though the largest portion of that business is in Huawei’s home market of China.

But during the lengthy imprisonment of the two Michaels, several of the world’s biggest economies banned Huawei equipment from their nascent fifth-generation (5G) telecom networks.

As this space earlier noted, Huawei was already struggling in its goal to expand beyond China, even in its Asia-Pacific backyard, where distrust of China is greatest. Conditions worsened for Huawei during the Meng debacle.

Last year, the U.S. severed Huawei from its supply of critical U.S.-designed components for its networking gear and its smartphones. Huawei was also banned from working with Google, Facebook and other U.S. suppliers of smartphone software.

Huawei was further impaired when it was cut off last year by Taiwan Semiconductor Manufacturing Co., the world’s biggest chipmaker, under U.S. and European pressure.

Huawei’s chief competitors in telecom networking equipment are Sweden’s Ericsson AB and Finland’s Nokia Corp. The intransigence of Beijing on the issue of the two Michaels provided a lengthy period for Ericsson and Nokia to close the gap between themselves and Huawei in quality and pricing.

With Canadian antipathy to China growing, Bell Canada and Telus Corp. last year ditched Huawei in favour of the two European firms for its nascent 5G networks. (Rogers Communications Inc. was already committed to Ericsson.)

In smartphones, Huawei’s other major business, the company has lost its status as the world’s second-largest provider to Xiaomi Corp., a Chinese upstart that Huawei once almost crushed.

And South Korea’s Samsung Electronics Co., which Huawei was determined to overtake, remains the world leader in smartphones.

A Huawei facing increased consumer resistance in global markets is also losing ground in its home market, the bulwark of its strength.

Even Chinese buyers now trust foreign-made chips more than the self-developed semiconductors that Huawei has made since losing much of its supply from outsiders. What’s more, Huawei’s smartphones lack the Google and Facebook functions still offered by Xiaomi, Samsung and other rivals.

As a result, Huawei’s global shipments of smartphones plunged 22 per cent last year, while Xiaomi's sales increased by 17 per cent.

In reporting the firm’s third consecutive drop in quarterly revenues in August, Eric Xu, a Huawei deputy chairman, said, “Our aim is to survive.”

Big Tech everywhere arouses state and personal privacy concerns. The problem is acute for Huawei, whose rivals can depict it as a data-gathering arm of the Communist Party of China (CPC).

The U.S. has spent about a decade trying to stall Huawei’s growth. Still, the Americans have only flimsy evidence for its claims that Huawei is a threat to the national security of its allies.

The treatment of the two Michaels, finally, is tangible proof of the link between Huawei and its CPC patron, which supported Huawei in its early years with subsidies and product orders.

In the first several months of the Michaels’ imprisonment, the U.K. and other countries were still undecided about a Huawei presence in their 5G networks. So were Bell and Telus, citing Huawei’s leadership in quality and pricing.

But as the Michaels’ plight dragged on, the Huawei brand went from suspect to radioactive. It was already associated with alleged rampant intellectual-property theft and Beijing’s alleged use of Huawei equipment in human rights abuses.

In 2021, eight of the world’s 10 largest economies, including Britain, have either banned or restricted Huawei from their 5G networks.

Canada isn’t one of them. Ottawa is to announce a decision in coming weeks.

But that decision has already been made by the cruelty inflicted on the two Michaels and the Canadian telecoms’ rejection of Huawei gear in their 5G networks.

The question for the Trudeau government is what to do about Huawei’s more than 1,200 researchers and engineers in Canada at eight R&D centres across the country.

Huawei uses its alliances with Canadian universities to drain this country of Canadian tech advances, which make their way to China’s hegemonic regime.

It’s difficult to see how the continued presence of Huawei’s culture of wolves on these shores is in the best interests of Canada.