Thursday 17 October 2019

Adrian Weckler: Inside HQ of Huawei, the most controversial tech giant in the world

Adrian Weckler gets exclusive access to the company at the epicentre of a war of words between east and west  – and at the heart of the Chinese behemoth is an executive from Donegal

Sign of the times: An employee in front of a 5G networks sign at Huawei’s headquarters in Shenzhen
Sign of the times: An employee in front of a 5G networks sign at Huawei’s headquarters in Shenzhen
Huawei’s vice president for corporate communications, Joe Kelly, from Donegal, says it is no surprise the company is getting support from countries and suppliers with whom it has a long-term relationship. Photo: Adrian Weckler
Huawei staff queue in the massive canteen. Photo: Bloomberg
Fighting back: Founder and chairman Ren Zhengfei has always insisted Huawei would resist any spying requests. Photo: Bloomberg
Sign of the times: An employee in front of a 5G networks sign at Huawei’s headquarters in Shenzhen. Photo: Bloomberg
Adrian Weckler

Adrian Weckler

Walking through Huawei’s test facilities and research and development centres in Shenzhen, southern China, there is a note of defiance among senior Huawei staff. “We’re not a cyber-security threat to anybody,” says Joe Kelly, a Donegal expat who has risen to become one of the most senior western executives working in the Chinese headquarters.

“More than three billion people use our technology around the world. If Huawei was doing something bad, somebody would definitely collect evidence. But there is no evidence. In 32 years in business there have been no cyber-security incidents, never a backdoor found, even though everyone is constantly checking our technology.”

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Kelly, a former journalist, is now Huawei’s vice president for corporate communications.

He lists off numerous examples of how Huawei is tested and analysed by industry and security bodies to a level almost no one else is.

But the problem facing Huawei is unlike that of almost any other tech company in modern times.

Pitted against it is the lobbying apparatus of the world’s most powerful country.

Huawei’s vice president for corporate communications, Joe Kelly, from Donegal, says it is no surprise the company is getting support from countries and suppliers with whom it has a long-term relationship. Photo: Adrian Weckler
Huawei’s vice president for corporate communications, Joe Kelly, from Donegal, says it is no surprise the company is getting support from countries and suppliers with whom it has a long-term relationship. Photo: Adrian Weckler

American officials — from President Trump to Mike Pompeo and security agency bosses — are relentless in driving home their claim to allied governments and other big companies that Huawei is a ‘dangerous’ company that could jeopardise security interests through forced access or control from Chinese state authorities.

It has had limited success, persuading a handful of allies (Japan, Australia and New Zealand) to block the rollout of critical Huawei telecoms networking equipment.

But it hasn’t managed to persuade European countries. Even its closest ally, the UK, says that its own security agencies believe the Huawei threat may be overstated.

“In every other country, they’ve got 15 years’ experience working with Huawei,” says Kelly. “They know who we are. They know what we build. So it isn’t much surprise that we’re getting support from customers and politicians in those countries.”

Nevertheless, there is no question that the affair has produced damaging results for the Chinese company.

The biggest blow has been the announcement that Google would cease providing Huawei with its App Store or crucial Google software apps.

Fighting back: Founder and chairman Ren Zhengfei has always insisted Huawei would resist any spying requests. Photo: Bloomberg
Fighting back: Founder and chairman Ren Zhengfei has always insisted Huawei would resist any spying requests. Photo: Bloomberg

Google took this action following an executive presidential order in the US, placing Huawei on a list of companies that US firms cannot trade with.

Even though the executive order has been waylaid by a 90-day temporary licence, the move threatens to devastate Huawei’s handset business outside the China.

However, the handset market is only one of Huawei’s divisions.

Walking through the recently built European-style research and development campus in Shenzhen, it becomes clear just how big and varied the company’s telecoms operations are.

Huawei spends more on research into things like 5G mobile networks and backbone broadband infrastructure for operators than any other company. Most industry analysts put it ahead of rivals such as former kingpins Ericsson and Nokia in the technology.

As such, Huawei is perceived both in and outside China as a symbol of Chinese industrial progress. From nothing 25 years ago, it now has revenues of almost €100bn and is winning key telecoms contracts in countries more used to their own companies dominating.

This, Kelly believes, may inform some of the animus behind the US moves against Huawei.

Huawei staff queue in the massive canteen. Photo: Bloomberg
Huawei staff queue in the massive canteen. Photo: Bloomberg

“I think is because the company was born in China,” he says over coffee in one of the sprawling campus’s cafés.

“Part of that is a political difference. If you go back to the 20th century, the world of technology — whether processors or the internet or social media channels — were all American-headquartered companies. America owned the world of technology. Now, China as an economy is staking its own claim in the world of technology.”

Critics of the company take a different line. They say that it is either naive or blinkered to think that Huawei stands completely apart from Chinese authorities.

The company’s founder and chairman, Ren Zhengfei, is a former Chinese army engineer, a background that cannot be separated from his current position, critics claim.

Even if there is no active exchange between the company and Chinese authorities, the US hawks’ position is that Huawei — like many large firms in the country — has little choice but to yield to Chinese government demands when the occasion demands, whether publicly or privately stated.

There are also a handful of individual incidents which have occurred over the years which, while not conclusive, have raised eyebrows.

Yet Huawei has always strenuously denied the thrust of accusations levied against it.

Mr Ren has repeatedly insisted that his company would refuse any request from the Chinese government to use Huawei infrastructure as spying equipment. (The company’s Irish representatives have repeated that to this newspaper in the past.)

Furthermore, US authorities have never actually presented any substantial hard evidence to illustrate their claims. And so far, most western countries do not share US fears about the technology, despite their own security agencies testing the equipment.

Sign of the times: An employee in front of a 5G networks sign at Huawei’s headquarters in Shenzhen. Photo: Bloomberg
Sign of the times: An employee in front of a 5G networks sign at Huawei’s headquarters in Shenzhen. Photo: Bloomberg

So could there be deeper trade issues at play? Kelly says that there is a view within Huawei that the current escalation against the firm could be related to more extensive macro-economic issues.

“I think that the competitiveness of China is a component, sure,” he says.

“We’ve been getting market share. If you look at the markets in which we compete, whether it’s the carrier market, the enterprise market or even consumer devices [like smartphones], it’s very hard over the last five years to find a competitor that’s been doing well. But we’ve gone from a revenue of $35bn [€31bn] to $107bn [€95bn]. We’ve done it by bringing real innovation and competition to those markets. Now if you look at the technologies that will define the future, such as artificial intelligence and cloud computing, 5G is the underlying infrastructure of all of these things. China has been investing more over a longer period of time. China, as an economy, is staking its own claim in the world of technology.”

The view that Huawei’s security clearance hinges on other trade issues was given succour last week when US President Donald Trump suggested that the executive order banning US companies from dealing with Huawei could be rescinded if a successful outcome to America’s trade disputes with China was reached.

In the meantime, telecoms operators and smartphone owners across Europe wait to see what will happen.

In Ireland, Huawei is one of the main equipment vendors in the fibre broadband network being rolled out by Siro, the joint venture between Vodafone and the ESB.

That network has now passed over 300,000 homes.

It’s a similar story for Ireland’s biggest operator, Eir. That company uses a combination of Ericsson and Huawei to support its telecoms networks here.

Imagine Communications, which is rolling out fixed wireless broadband to rural areas, is also basing much of its infrastructures on Huawei kit.

Meanwhile, Huawei has risen to become the third-largest smartphone brand in the Irish market, based on the advanced technology the company brings to bear in the handsets, particularly with the devices’ camera systems.

The company’s flagship P30 Pro handset is widely considered to be the best cameraphone on the market and sells for slightly less than Samsung’s top phone (and substantially less than the top iPhone).

So far, the controversy over Huawei’s future has not dented its phone sales figures.

Last week, Gartner released updated tables showing that Huawei has achieved its highest year-over-year growth among the world’s top five – Samsung, Huawei, Apple and Chinese smartphone makers OPPO and Vivo. It sold 58.4m smartphones in the first quarter of this year, doing particularly well in Europe, where its sales grew by 69pc. (Samsung remains in top spot, with Apple in third place.)

Furthermore, this growth has happened in a market where total global sales of smartphones has fallen 2.7pc, to 373 million units.

However, Huawei’s difficulties may yet have a damaging impact on key commercial targets.

Other analysts claim that demand for Huawei phones has dropped sharply, with consumers worried that their devices may not work fully in a year’s time.

The product pricing comparison website and app Pricespy published figures showing that interest in Huawei handsets on its own service has fallen by 26pc worldwide and 40pc in Ireland since the US banned American tech companies from dealing with Huawei. Pricespy has around 14 million visitors a month.

While sales cycles are much slower for enterprise networks, the current controversy does not help the Chinese firm. This week, Nokia’s chairman claimed that it has caught up with Huawei in contracts for 5G network rollouts, at 42.

American officials will be hoping that the pressure they’re exerting will add to this commercial headwind facing Huawei.

Nevertheless, Joe Kelly thinks that the overall arc of Huawei’s development should see it through the current turbulence.

“We know on occasion that we’ve got things wrong,” he says. “Maybe down to occasional bad coding or whatever. But there isn’t the same validation of other vendors as us. If we were to do something that would risk the security or privacy of any customer, our business would die overnight. Our source code is validated by government officials to elaborate to a level that no other vendor is exposed to.

“This isn’t the first challenge Huawei has been exposed to. It’s a serious one, but people here take a degree of comfort knowing that the allegations made against the company are not true.”

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