Over the last few months Huawei has been the subject of heavy scrutiny, with several countries
accusing them of spying on foreign companies and stealing trade secrets.
Huawei has even been banned from doing business with US companies.
Which means Google is no longer allowing Android to run on Huawei devices, which is an unprecedented
move in the smartphone industry.
So what exactly is Huawei doing wrong to receive so much backlash from the public and private
sector?
Well, that’s exactly what we’re going to find out.
This is Greg with Apple Explained, and I want to thank Squarespace for sponsoring this video.
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Now I want to give you some background on Huawei as a company to help put these recent
events in perspective.
They’re a Chinese company founded back in 1987 whose primary goal was to help modernize
China’s underdeveloped telecommunications infrastructure.
Because back then the US and other wealthy countries like Hong Kong had already developed
advanced telephone technology that was being utilized by governments and companies alike.
The infrastructure served as a sort’ve closed circuit telephone system, and Huawei wanted
to develop similar technology to sell in China.
And how did they manage to do that?
Well, they started off by buying private branch exchange, or PBX, telephone switching systems
from Hong Kong companies, and then reselling those switches to customers in China.
But serving as a salesperson of foreign technology wasn’t a very sustainable business model.
Huawei knew they had to develop their own PBX technology and they did so by reverse
engineering the switches imported from Hong Kong, and developing manufacturing techniques
to produce their own telephone switching systems.
By 1990 the company employed about six hundred research and development staffers and began
selling their technology to small business and hotels.
Their product sold well, and Huawei’s success snowballed from there.
They eventually began to sell their products internationally, winning contracts with the
British telecommunications conglomerate Vodaphone, British Telecom, Australian carrier Optus,
and Canadian carriers Bell Mobility and Telus Mobility.
Huawei also built one of the first LTE networks in world back in 2009 for TeliaSonera in Norway.
All this overseas success generated 21.8 billion dollars of revenue for Huawei, and earned
them a spot in the 2010 Global Fortune 500.
But despite their rapid international growth, very few people outside of China had ever
heard of Huawei.
That is, until their smartphones began selling like crazy.
In fact, Huawei’s growth in the global smartphone market over the past four years has been an
incredible achievement.
While companies like Apple and Samsung have struggled with market saturation and slowing
sales, Huawei achieved 50% year over year growth in smartphone sales this year, which
was enough to outsell Apple and become the worlds second largest smartphone manufacturer.
So how exactly did Huawei manage to achieve all of this success so quickly?
Well, that’s where the drama comes in.
The company’s rise to power was plagued with intellectual property infringement and
industrial espionage, here are some of the most blatant examples.
Back in 2004 a company called Lemko was founded by Motorola engineer Shaowei Pan.
And right after creating Lemko, Pan visited China and met with Huawei’s CEO and other
top executives.
It was later discovered that Lemko was created to build wireless technology for Huawei based
on stolen trade secrets and technology from Motorola.
Pan even sent an email to Huawei’s CEO that said, “If our plan can progress smoothly,
Lemko will be the company we are planning to establish, and it will be independent of
Motorola Inc.”
And keep in mind that Pan wasn’t just an entry level engineer at Motorola, he had been
with the company for over ten years, had been responsible for 60 patents, and become Director
of Architecture in Motorola’s wireless business department.
So he had access to some of the most advanced technology Motorola was working on.
Now Pan and Huawei were eventually sued in federal court, and the case was settled confidentially
in 2010.
But the effects of Huawei’s espionage were irreversible.
Their EasyGSM base station for 2G networks had played a huge role in the company’s
growth, but the technology in that product turned out to be stolen from Motorola.
Huawei has since become the world’s number one wireless infrastructure company and forced
others like Motorola out of the business.
And this is just one example of Huawei’s illegal behavior.
There are countless other examples that I could probably dedicate an entire video to.
They stole source code from Cisco, they willfully violated five patents held by PanOptis, they
tried using MPEG’s AVC video technology without licensing it, and the list goes on.
Also, keep in mind these are only the things Huawei was caught doing wrong, who knows how
much they were actually able to get away with.
I also want to mention that while Samsung was sued by Apple for copying the original
iPhone, Huawei seems to have done the same thing without any repercussions at all.
There were even allegations that stolen trade secrets and patents were utilized to create
Huawei’s recently released MateBook X Pro.
In fact, when the company tried hiring Apple suppliers to manufacture the MateBook, they
refused, since one of the components was considered to be an infringement on Apple’s patent.
Now as we cover Huawei’s recent controversies you’ll notice that things start to get more
political, and I’m going to do my best to simply report the facts.
So in 2018 the five eyes intelligence alliance, which in made up of Australia, Canada, New
Zealand, the United Kingdom and the United States, alleged that Chinese cellular network
equipment may contain backdoors that allow surveillance by the Chinese government.
Keep in mind that Huawei, a Chinese company, was the world’s number one supplier of telecommunications
equipment.
So naturally governments all over the world began to grow suspicious of them.
Especially since they have a track record of illegal and immoral behavior.
But Huawei hasn’t taken these allegations lying down.
They’ve criticized the claims as being politically motivated without any evidence to back them
up.
Huawei said they’ve never placed backdoors in their products and wouldn’t give the
Chinese government access to user data.
But I should mention that according to Chinese law, companies are required to assist the
government intelligence agency on the collection of user data as needed.
Although this also happens in other countries like the US.
But despite the claim’s uncertainty, the controversy led to countries debating whether
or not to use Chinese telecommunication equipment in the development of their new 5G infrastructure.
And this is when everything started to go south for Huawei.
Australia was the first country to ban Huawei and their Chinese competitor ZTE from their
5G rollout, and it wasn’t long before New Zealand and the US followed suit.
But perhaps the most damaging backlash Huawei has experienced was from President Trumps
executive order.
Which said US companies are restricted from doing any business with them.
And that has led to a domino effect of companies cutting ties with Huawei in many different
ways.
Google is no longer allowing Android to run on new Huawei devices, Intel, Qualcomm, and
ARM aren’t letting Huawei use their chips, and the SD Association isn’t letting Huawei
put microSD slots in any of their future products.
And this isn’t even considering all of the miscellaneous components Huawei sources from
US companies that they’ll no longer have access to.
And if you’re wondering how in the world Huawei’s going to respond to all of these
restrictions, we have some clues as to what they might be planning.
When it comes to the software, Huawei has actually been working on their own mobile
operating system, complete with an app store, for quite some time in order to reduce their
dependence on Google.
But they’re likely facing unexpected pressure to finish the OS much earlier than originally
planned.
And if we’ve learned anything from Windows phones, it’s that establishing an alternative
to iOS and Android is a huge challenge.
Especially when considering Huawei won’t be able to include apps from US developers
on their platform.
It’s also worth mentioning that this ban will effect more than just Huawei’s smartphones.
Because their notebook computers also use an operating system from a US company, Microsoft.
And it’s unknown if Huawei is developing their own desktop OS as well.
Now when it comes to hardware, things don’t get any easier.
Like I said before, Huawei sources a large portion of their components from US companies.
And without those parts, the threat of manufacturing slowdowns appears imminent unless Huawei can
quickly find new suppliers outside the US.
But in the meantime Huawei has stockpiled about three months worth of US components
while they figure out how to make a successful transition.
The problem is certain components simply cannot be replaced.
For example, if you’ve been banned by the SD Association, that means you can’t include
SD cards in your products at all.
So this is definitely an uphill battle for Huawei that doesn’t appear to be getting
any easier anytime soon.
Now what does all of this mean for people who own a Huawei product?
Well, you’ll continue to received Android software updates for the next ninety days.
But after that time your phone will stay they way it is forever, unless the ban is reversed
at some point in the future.
Now if Huawei does in fact release their own operating system you may be able to upgrade
to it, or you may not, depending on the older hardwares compatibility.
And when it comes to Huawei’s notebooks, Microsoft has yet to come to a decision regarding
their Windows license.
Many people are assuming Microsoft will do the same thing as Google and stop providing
their OS to Huawei, but that’s just speculation at this point.
So Huawei’s explosive rise in the smartphone market appears to have been stunted for the
time being, but there’s no saying where the story will go from here.
Huawei is worth billions of dollars and they’ll do anything to maintain their success in spite
of this setback.
And although government intelligence agencies do have valid concerns about the company,
I’m hoping Huawei will remain a serious player in the tech industry since heightened
competition benefits all of us consumers by forcing other tech companies to create the
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