Why you should care
Because this isn’t your average tech firm.
This is an OZY Special Briefing, an extension of the Presidential Daily Brief. The Special Briefing tells you what you need to know about an important issue, individual or story that is making news. Each one serves up an interesting selection of facts, opinions, images and videos in order to catch you up and vault you ahead.
WHAT TO KNOW
What happened? The U.S. Justice Department unsealed criminal indictments yesterday against Huawei and its CFO, Meng Wanzhou, who was arrested last month in Canada. The company, which has denied wrongdoing, has been formally accused of stealing trade secrets and helping banks evade U.S. sanctions on Iran, among other charges. While Meng awaits likely extradition to the United States, Beijing has demanded that Washington end its “unreasonable crackdown” on the country’s prized tech giant as it seeks 5G dominance.
Why does it matter? The world’s second-largest producer of telecommunications equipment is no stranger to controversy. But Monday’s charges represent the most significant legal action yet against a company broadly believed to be subverting the U.S. and other Western countries, allegedly at the behest of China’s government. What happens with Huawei has major implications not only for the thorny trade spat between Beijing and Washington — but potentially for China’s global ambitions too.
HOW TO THINK ABOUT IT
Long-held suspicions. Huawei has been under international scrutiny since 2012, when Reuters first reported that it tried to do business with U.S.-sanctioned Iran through a local subsidiary. Since then, several countries have reviewed Huawei equipment — and in some cases banned it from their next-generation networks — amid fears the Chinese government was using it to spy. The privately owned company has also been suspected of pilfering U.S. trade secrets in the race toward technological prowess, prompting lawsuits from major firms like Cisco and Motorola. True or not, Huawei has become a global, ever-expanding leader in network and smartphone technology.
Who is Meng Wanzhou? The 46-year-old daughter of Huawei founder Ren Zhengfei, Meng is the company’s chief financial officer as well as the deputy chairwoman of its board of directors. Although she rose through Huawei’s ranks, any hopes Meng might’ve had for the top spot were dashed when her father announced in 2013 that none of his family members would succeed him. U.S. prosecutors allege Meng, also known as Sabrina, skirted U.S. sanctions on Iran by deceiving foreign banks about Huawei’s links to Hong Kong subsidiary Skycom. Citing her myriad health problems — she’s reportedly a thyroid cancer survivor — Meng’s lawyers successfully argued for her release on bail.
It’s a zero-sum game. Huawei executives have long blamed their rivals in the cutthroat smartphone market for stoking international criticism against their company. Last year, Richard Yu Chengdong, CEO of Huawei’s consumer business group, said, “They worry we are too strong.” AT&T and Verizon have dropped smartphone distribution deals with the company, and U.S. lawmakers are piling pressure on Huawei. A bipartisan group has introduced bills that would ban the sale of American-made components to the company — or any other sanction-violating Chinese firm — and Republican Sen. Marco Rubio has championed legislation to prohibit Huawei from conducting business in the United States.
Want to trade? The Justice Department’s charges have come at an inopportune moment, to say the least. High-level talks aimed at ending the U.S.-China trade war are set to continue Wednesday in Washington, where President Donald Trump will meet Chinese Vice Premier Liu He. Although U.S. Commerce Secretary Wilbur Ross has sought to emphasize that the charges against Huawei are totally separate from trade disputes, analysts from both countries aren’t buying that argument. Whether or not they’ll discuss the case, the clock is ticking: The two countries have until March 1 to end their spat — or else U.S. tariffs on $200 billion worth of Chinese imports will increase from 10 to 25 percent.
WHAT TO READ
The Fate of Huawei Foreshadows the Fate of China, by Michael Schuman in The Atlantic
“The more assertive Beijing has become in pressing its diplomatic and economic goals — from its state-led ambitions to conquer world manufacturing to the sizable expansion of its military capabilities — the more threatening a rising China has appeared.”
5G Networks, the Trump Administration and Beijing’s Delicious Fear, by Tom Rogan in The Washington Examiner
“We should unequivocally endorse Trump administration and congressional action to restrain China’s 5G activity. The simple point is that when it comes to international order, China is a master at saying the right thing and doing the opposite.”
WHAT TO WATCH
China’s Huawei Indicted: Breaking Down the Charges
“Huawei entities directed employees to take photographs, to take measurements and to take other protected information without permission.”
Watch on The Wall Street Journal on YouTube:
Exclusive Interview [With] Huawei Founder Ren Zhengfei: Technological Competition Is [a] Peaceful Game
“This is a competition — and you do well, or you don’t.”
Watch on CGTN on YouTube:
WHAT TO SAY AT THE WATERCOOLER
Call it a comeback. Huawei’s 74-year-old founder was once prohibited from joining China’s Communist Party because his father was labeled a “capitalist roader” — essentially a fake socialist who clung to capitalist ways — during Mao Zedong’s Cultural Revolution. But Ren was eventually admitted after inventing a tool to test equipment at a French-supplied synthetic fiber factory, where he says he “learned from the world’s most advanced technology.”