Tuesday, September 11, 2018

Huawei: A Division Of People Liberation Army?

 (Staff articles from The VERGE, NEWS CORP, & ABC in June 2018.)

What's next for Chinese tech giant Huawei after being banned from Australia's 5G network? Amid all the Coalition leadership drama in Canberra this week, you could be forgiven for missing the news that Chinese tech giant Huawei will be excluded from participating in Australia's 5G mobile network.

Australia using security grounds to justify the ban is a viable legal defence Huawei could use against the Federal Government. Intelligence officials have been concerned for some time that allowing Huawei to help build the network would create national security risks. Analysts have long suggested that Huawei — as a private Chinese company — is obligated under Chinese law to assist authorities with "state intelligence work".

In a statement issued on Thursday, the Government said companies "likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law" would likely be unable to participate in the next generation network.

On Friday, Huawei — who said it will not comment further on the matter this week — criticised the decision in a statement provided to the ABC as "politically motivated" while noting that it intends to "protect [its] legal rights". "The Australian Government's actions undermine the principles of competition and non-discrimination in fair trade," it said.

"We will continue to engage with the Australian Government, and in accordance with Australian law and relevant international conventions, we will take all possible measures to protect our legal rights and interests." China's foreign ministry spokesman Lu Kang meanwhile accused Australia of attempting to "erect artificial hurdles" and "enforce discriminatory measures".

As you might expect, the announcement was not well-received by the Chinese press either. A series of fairly robust articles and editorials in the state-owned Global Times tabloid have accused Australia of "stabbing Huawei in the back", and violating its free trade obligations. "Those who wilfully hurt Chinese companies with an excuse of national security will meet their nemesis," one editorial said.

So was the decision at odds with Australia's free trade obligations? And what's next for the company's Australian operations and its 700-plus employees now that the ban has been confirmed?

'Security' defence viable under free trade deal

Andrew Godwin, an associate director of the University of Melbourne's Asian Law Centre, said there were substantial legal and treaty obstacles that would make it difficult for Huawei to take action against the Government.

This is because the company is likely to be blocked from participating in the 5G network on security grounds, which is a valid defence under both the World Trade Organisation (WTO) and the China-Australia free trade agreements.

"The WTO agreements in relation to goods and services recognise a security exception, under which states are allowed to take action to protect their essential security interests," he said. "The term 'security interests' is not defined. From a practical perspective, it is therefore up to states themselves to determine their security interests."

Professor Godwin said while Australia's decision might be legal, that doesn't mean the broader bilateral trade relationship will emerge unscathed. This concern was echoed by the Australia China Business Council's national CEO, Helen Sawczak.

"Bilateral trade is a two-way street. If we want Australian companies to prosper in the Chinese market, then we should also treat Chinese companies with respect and transparency when they operate in the Australian market," she told the ABC.

"While business remains positive about the opportunities which this important economic relationship offers, it can be challenging to conduct business when the political relationship is strained."

Huawei's prospects in Australia?

However, telecommunications analyst David Kennedy from Ovum said he did not expect Huawei to take any steps "that would compromise their position in the market". The Government's decision this week may ban Huawei from participating in the 5G network, causing a setback for future plans on Australian shores, but the company's interests in 4G and enterprise technologies will remain unaffected.

"They need to ensure there isn't mission creep [a shift in intentions] in the way that this ban actually might expand," Mr Kennedy said. "There's still a lot of 4G investment and development happening in Australia over the next few years and they would want to have a role in that market."

What's the big fuss about 5G?

The race is on to roll out 5G but let's get a few things straight — it's not like this technology will magically transform your life overnight. However, the future of mobile internet technology worldwide is 5G, and there are concerns about how Huawei's exclusion may affect Australia's network.

Vodafone's chief strategy officer Dan Lloyd said the decision "fundamentally undermines Australia's 5G future." Mr Kennedy said Huawei was considered to be the price-setter globally when it came to 5G network technology, and taking them out of the picture could drive costs up.

"The cost of rolling out 5G in Australia will be higher than it otherwise would have been, I don't see any way that you can avoid that conclusion," he said. "It all flows through to the consumer in due course."

What Is Huawei?

Huawei Technologies Co., Ltd. is a Chinese multinational networking, telecommunications equipment, and services company headquartered in Shenzhen, Guangdong. It is the largest telecommunications equipment manufacturer in the world, having overtaken Ericsson in 2012. In 2017, Huawei became 83rd of Fortune Global 500 in Fortune Magazine.

Huawei was founded in 1987 by Ren Zhengfei, a former deputy director of the People's Liberation Army’s Engineering Corp. At the time of its establishment, Huawei focused on manufacturing phone switches, but has since expanded its business to include building telecommunications networks, providing operational and consulting services and equipment to enterprises inside and outside of China, and manufacturing communications devices for the consumer market.

Huawei CEO Ren Zhengfei, 66, is a former director of the telecoms research arm of China’s three-million-strong People’s Liberation Army. As well as a former Chinese officer who served during the Cultural Revolution, Zhengfei is a high-ranking Communist Party member (Central Committee Member) with connections to China’s leadership – something that raised concerns when he tried unsuccessfully to launch telecoms ventures in both the US and India.

Huawei has over 170,000 employees as of September 2015, around 76,000 of whom are engaged in research and development (R&D). It has 21 R&D institutes in countries including China, the United States, Canada, the United Kingdom, Pakistan, Finland, France, Belgium, Germany, Colombia, Sweden, Ireland, India, Russia, Israel, and Turkey, and in 2014, the company invested $6.4 billion USD in R&D, up from $5 billion USD in 2013.

In 2014, Huawei recorded a profit of 34.2 billion CNY (5.5 billion USD).[17] Its products and services have been deployed in more than 170 countries and it currently serves 45 of the world's 50 largest telecoms operators. In June 2016, Huawei is reportedly working on and designing its own mobile OS for future usage.

In September 2017 Huawei surpassed Apple and became the second largest smartphone manufacturer in the world after Samsung. Also in September 2017, Huawei created an NB-IoT city-aware network using a "one network, one platform, N applications" construction model utilizing IoT, cloud computing, big data, and other next-generation information and communications technology (ICT), it also aims to be one of the world's five largest cloud players in the near future.

Huawei CEO Ren with China President Xi.
Early History Of Huawei

During the 1980s, Chinese government tried to modernize the country's underdeveloped telecommunications infrastructure. A core component of the telecommunications network was telephone exchange switches, and in the late 1980s several Chinese research groups endeavored to acquire and develop the technology, usually through joint ventures with foreign companies.

Ren Zhengfei, a former deputy director of the People's Liberation Army engineering corp, founded Huawei in 1987 in Shenzhen. Rather than relying on joint ventures to secure technology transfers from foreign companies, which were often reluctant to transfer their most advanced technologies to Chinese firms, Ren sought to reverse engineer foreign technologies with local researchers.

At a time when all of China's telecommunications technology was imported from abroad, Ren hoped to build a domestic Chinese telecommunication company that could compete with, and ultimately replace, foreign competitors. Eastern Economic Review also reported that it received an $8.5 million loan from a state-owned bank, though the company has denied the existence of the loan.

During its first several years the company's business model consisted mainly of reselling private branch exchange (PBX) switches imported from Hong Kong. Meanwhile, it was reverse-engineering imported switches and investing heavily in research and development to manufacture its own technologies. By 1990 the company had approximately 600 R&D staff, and began its own independent commercialization of PBX switches targeting hotels and small enterprises.

The company's first major breakthrough came in 1993, when it launched its C&C08 program controlled telephone switch. It was by far the most powerful switch available in China at the time. By initially deploying in small cities and rural areas and placing emphasis on service and customizability, the company gained market share and made its way into the mainstream market.

The company also developed collusive joint venture relationships with local authorities, whereby it would provide "dividends" to the local officials in exchange for their using Huawei products in the network. Ahrens writes that these methods were "unorthodox, bordering on corrupt," but not illegal.

Huawei also gained a key contract to build the first national telecommunications network for the People's Liberation Army, a deal one employee described as "small in terms of our overall business, but large in terms of our relationships."

In 1994, founder Ren Zhengfei had a meeting with Party General Secretary Jiang Zemin, telling him that "switching equipment technology was related to national security, and that a nation that did not have its own switching equipment was like one that lacked its own military." Jiang reportedly agreed with this assessment.

Another major turning point for the company came in 1996, when the government in Beijing adopted an explicit policy of supporting domestic telecommunications manufacturers and restricting access to foreign competitors. Huawei was promoted by both the government and the military as a national champion, and established new research and development offices.

Don’t use Huawei phones, say heads of FBI, CIA, and NSA

The heads of six major US intelligence agencies have warned that American citizens shouldn’t use products and services made by Chinese tech giants Huawei and ZTE. According to a report from CNBC, the intelligence chiefs made the recommendation during a Senate Intelligence Committee hearing on Tuesday. The group included the heads of the FBI, the CIA, the NSA, and the director of national intelligence.

During his testimony, FBI Director Chris Wray said the government was “deeply concerned about the risks of allowing any company or entity that is beholden to foreign governments that don’t share our values to gain positions of power inside our telecommunications networks.” He added that this would provide “the capacity to maliciously modify or steal information. And it provides the capacity to conduct undetected espionage.”

These warnings are nothing new. The US intelligence community has long been wary of Huawei, which was founded by a former engineer in China’s People’s Liberation Army and has been described by US politicians as “effectively an arm of the Chinese government.” This caution led to a ban on Huawei bidding for US government contracts in 2014, and it’s now causing problems for the company’s push into consumer electronics.

Although Huawei started life as a telecoms firm, creating hardware for communications infrastructure, the company’s smartphones have proved incredibly successful in recent years. Last September, it even surpassed Apple as the world’s second biggest smartphone maker, behind Samsung.


But the company has never been able to make inroads in the lucrative American market, a failure which is in part due to hostility from the US government. Last month, Huawei planned to launch its new Mate 10 Pro flagship in the US through AT&T, but the carrier pulled out of the deal at the last minute, reportedly due to political pressure.

The decision prompted Huawei’s CEO Richard Yu to go off-script during a speech at CES, describing the move as a “big loss” for the company, but a bigger loss for consumers. Huawei is still trying to sell the Mate 10 Pro unlocked in the US, but this effort seems to have pushed the company to desperate measures — including getting users to write fake reviews for the handset.

US lawmakers are currently considering a bill that would ban government employees from using Huawei and ZTE phones altogether. During Tuesday’s hearing, Republican Senator Richard Burr, chairman of the Senate Intelligence Committee, said: “The focus of my concern today is China, and specifically Chinese telecoms like Huawei and ZTE, that are widely understood to have extraordinary ties to the Chinese government.”

In response to these comments, a spokesperson for Huawei told CNBC: ”Huawei is aware of a range of U.S. government activities seemingly aimed at inhibiting Huawei’s business in the U.S. market. Huawei is trusted by governments and customers in 170 countries worldwide and poses no greater cybersecurity risk than any ICT vendor, sharing as we do common global supply chains and production capabilities.”

ZTE also issued a statement on the comments, saying: “As a publicly traded company, we are committed to adhering to all applicable laws and regulations of the United States, work with carriers to pass strict testing protocols, and adhere to the highest business standards. [...] ZTE takes cybersecurity and privacy seriously and remains a trusted partner to our US suppliers, US customers and the people who use our [...] products.”

Experts warn Huawei poses a threat to Australian security

A HUGE Chinese firm with links to the communist government has big ambitions for Australia. But cyber experts warn it’s seriously dangerous. The word Huawei may have been cropping up on your news feed a fair bit recently. Whether you’re concerned about foreign spies or faster internet, you’ll probably have an interest in this Chinese tech giant.

Huawei has been embroiled in an ongoing battle with the Australian government. The firm has been bidding to take a role as our high-speed internet provider, but faces mistrust both within Canberra and around the globe.

At the same time, a new report by the Australian Strategic Policy Institute found the company is the biggest sponsor of overseas travel for Australia’s federal politicians. So, should we trust Huawei? Should the Australian government? And why might it pose a threat?

Here’s the lowdown:

Huawei is the world’s third-largest smartphone maker, behind only Apple and Samsung. The Chinese tech giant is also the world’s largest supplier of wireless networking equipment. The company is controversial due to its reported links to the Chinese Communist Party.

It was founded in 1987 by Ren Zhengfei, a former People’s Liberation Army engineer. A spokesman for Huawei told news.com.au the Chinese government does not own any shares in the company.

A 2012 US intelligence report concluded that there were close times between the telecom giant and the Chinese government, and found “credible evidence” that Huawei “fails to comply with US laws”. Huawei is controversial due to its reported links to the Chinese Communist Party.

That same year, the Labor government banned Huawei from any role in the National Broadband Network project, based on advice from the Australian Security Intelligence Organisation (ASIO). In 2013, then-communications minister Malcolm Turnbull vowed to review the ban, but it was upheld following further advice from national security agencies.

The company currently provides some of the equipment used to deliver 4G mobile connections in Australia, but Canberra is still considering whether this should extend to 5G.


According to Australian Strategic Policy Institute (ASPI) cybersecurity expert Tom Uren, it would be impossible to employ Huawei without some degree of risk. “The main concern is that they could covertly intercept our communications, and get access to our devices — computers, phones, anything with a signal,” Mr Uren told news.com.au.

He said being on the network would give them the opportunity to hack our private data, and feed this back to the Chinese government. “There’s been a number of US reports documenting how the People’s Liberation Army has collaborated with companies like Huawei to get valuable negotiation information, or get intellectual property.”

It would be impossible to use Huawei without some degree of hacking risk, a cybersecurity expert warned. He warned that the Turnbull Government’s ongoing dismissal of Huawei would likely contribute to Canberra and Beijing’s already-strained relationship. That said, he noted there is no hard evidence Huawei has spied on us with the purpose of relaying that information back to the Chinese government.


Huawei is the biggest sponsor of overseas travel for Australia’s federal politicians, new research by the Australian Strategic Policy Institute (ASPI) has found. The research is based on 12 trips by Australian federal politicians to visit Huawei’s headquarters, including Foreign Minister Julie Bishop and Trade Minister Steven Ciobo.

Huawei Australia corporate affairs director Jeremy Mitchell was transparent about this, saying the company would “continue to invite and host people” to see its headquarters. “Huawei doesn’t apologise for making people more aware about who we are and what we do,” Mr Mitchell said.

“More than half the Australian population depend on Huawei’s technology for their daily communications needs.” Australian Foreign Minister Julie Bishop was among the MPs who was sponsored by Huawei to visit the tech giant’s headquarters.

But Mr Uren has called on politicians to be more transparent around these kinds of trips. “It’s good that the public data is available. It’s bad we have to spend months trawling it to produce that picture,” he said.

“Companies and groups fund trips because they want to promote a view. This is standard practice. I think it’s naive to think you can accept a trip somewhere and can still remain totally unbiased.”

ASIO is Warning AUS Parliament about Espionage.

The new ASPI research comes as the parliament considers whether to allow Huawei, which intelligence analysts say is linked to the Chinese government, to participate in Australia’s 5G network. Huawei Australia head John Lord strongly denies links to the Chinese state.

“We believe that companies like Huawei are privately owned, not owned by any committee or any government, and should be looked at and put into a competitive tendering,” Mr Lord told Fairfax Media. “We're happy to have our equipment tested, we're happy to have it analysed.”

There are politicians in both major parties who want to ban the company from the 5G network, but there is internal division. The decision will be made in the coming weeks.

“While Huawei’s sponsorship of politicians’ travel to China doesn’t breach any rules, the number of trips it has funded raises questions about whether MPs should be able to accept any funded travel from corporations,” ASPI co-author Fergus Hanson wrote in an accompanying blog.

“At a minimum, it raises questions about the appropriateness of allowing politicians to accept travel paid for by companies like Huawei that are lobbying to participate in Australia’s 5G network—a critical piece of national infrastructure.”

The ASPI researchers also recommend making the parliamentary register of interests more accessible, so politicians would be more accountable. The register is online, but contains scans of politicians’ often-scrawled handwriting and is not a searchable database. A group of journalists from a range of publications is working to properly digitise the register.

Huawei security guards (PLA soldiers?) drilling at Huawei Headquarters in China.

Huawei wants Australians to believe it is not a threat to national security. Addressing the National Press Club today, the company’s Australian chairman John Lord said it would keep Beijing from accessing data “to the best of our ability”.
The structure would be “safe to the best of our ability and it is secure,” Mr Lord said. He also said the “rise of smart China” would see more big companies contesting the Australian market. “There is no doubt more Huaweis are coming. We can’t pretend the rise of smart China is not going to happen and that it’s going to stop here,” Mr Lord said.

“We are truly global in operation. Today we do more business outside of China than inside China. We’re a clear leader in our field, and we are privately owned. “These are attributes you don’t normally associate with a Chinese company.”

Huawei’s Australian chairman John Lord said it would keep Beijing from accessing data “to the best of our ability”, in a speech delivered at the National Press Club today. Mr Lord said it was a myth that Huawei was required to assist Chinese intelligence agencies.

“We obey the laws in every country in which we operate in, over 170. In Australia, we follow Australian laws. To do otherwise in any one country would be corporate suicide.” In a recent open letter to federal MPs, Mr Lord made it clear the company abides by the laws in each country it operates in.

“Countries like the United Kingdom, Canada, Germany, Spain, Italy and New Zealand, just to name a few, have managed to embrace Huawei’s technology within their own national security frameworks,” he wrote. “We believe this can be done in Australia also.”

But Canberra is not convinced.

Queensland Nationals MP George Christensen went public with his concerns earlier this week, slamming the company as part of a wider conversation about the “slow creep” of Chinese influence. “Huawei has close links with the Chinese Communist Party and must report security information back to it,” Mr Christensen said in parliament on Monday.

The main concern is whether a tech company with ties to China’s government should be allowed to handle our 5G mobile network and National Broadband Network, with fears they may use it to spy on us and potentially feed sensitive information back to the Chinese Communist Party.