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Trade war

5 things to know about Huawei's fraught relationship with US

For 15 years, Washington has been casting a suspicious eye

In the 31 years since its founding, Huawei has grown to become the world's largest telecommunications equipment provider. (Photo courtesy of Huawei)
In the 31 years since its founding, Huawei has grown to become the world's largest telecommunications equipment provider.   © AP

WASHINGTON -- The U.S. has magnified the pressure on Huawei Technologies in recent months, leading to the Chinese telecommunications company's exclusion from 5G projects and government procurement in several countries and even the arrest of a top executive.

But while U.S.-China tensions and concerns about Huawei's head start in fifth-generation wireless technology have escalated the feud, Washington's suspicions of the company -- over both intellectual property and security -- go back much further.

How did the feud begin?

Huawei has faced criticism from U.S. companies since at least 2003, when it was sued by American router rival Cisco Systems on allegations of patent infringement. Cisco accused Huawei of copying software source code and even documentation, and of selling equipment that used the technology at much lower prices. The Federal Bureau of Investigation looked into the matter.

The two companies settled the lawsuit after Huawei agreed to change the products in question, but the affair put the Chinese business on Washington's radar.

When did the U.S. government start getting involved?

Washington began regarding Huawei as a security threat in 2011, when the company's annual sales came to 203.9 billion yuan ($29.6 billion at current rates) -- just one-third of their current levels.

The U.S. Defense Department issued a report that year citing Huawei and compatriot ZTE as examples of information technology companies that maintain "close ties" to the People's Liberation Army. A congressional advisory committee argued that the rapid growth of China's telecom sector represented a security threat and that Huawei was receiving government support on corporate acquisitions and other matters.

In 2012, the House of Representatives held a hearing with representatives from Huawei and ZTE before releasing a report recommending that the government and the private sector avoid their products. The two companies "cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems," the report argued.

That laid the groundwork for legislation passed this summer that will bar purchases by U.S. government agencies from Huawei and ZTE, among other Chinese telecom companies.

Huawei insisted these reports were based on speculation. But in 2015, the FBI warned that as American telecom companies use more Huawei equipment and services, "the Chinese government's potential access to U.S. business communications is dramatically increasing."

Later that year, then-President Barack Obama told Chinese President Xi Jinping that Washington would pursue sanctions against Chinese perpetrators of cyberattacks.

How has the situation changed under the Trump administration?

The dispute shifted into high gear under President Donald Trump, heartening those frustrated by previous administrations' perceived failure to challenge China. National security adviser John Bolton and trade adviser Peter Navarro, both prominent China hard-liners, have called Trump the first president to stand up to Beijing's policies.

"We've had enormous concern for years" about the alleged use of stolen intellectual property by Chinese companies, Bolton told National Public Radio in early December. "Huawei is one company we've been concerned about."

In a television appearance on Dec. 10, Secretary of State Mike Pompeo accused China of having "committed cyberattacks across the world." But he defended a recent comment by Trump expressing willingness to intervene in the case of Huawei Chief Financial Officer Meng Wanzhou -- who was arrested this month in Canada at Washington's behest on allegations of Iran sanctions violations -- if doing so would help the two countries strike a trade deal.

"Any time there's a law enforcement engagement, we need to make sure we take foreign policy considerations into effect," Pompeo said. "It's totally appropriate to do so."

How does the Huawei situation tie into the transition to 5G?

U.S. players' late start on 5G accelerated the move to push Huawei out of the market, a Washington lobbyist said.

Though existing 4G infrastructure can be upgraded to work with 5G, the new technology requires more base stations. China built 350,000 5G cell sites over the three years starting in 2015, while the U.S. constructed fewer than 30,000, according to Deloitte.

"Looking forward, China's five-year economic plan specifies $400 billion in 5G-related investment," the consulting firm said. "Consequently, China and other countries may be creating a 5G tsunami, making it near impossible to catch up."

Though American players seized the initiative in services enabled by 4G, such as video and music streaming, lagging on 5G could force the U.S. to play catch-up in emerging areas that will rely on the technology's higher speed and capacity, such as artificial intelligence and autonomous driving. Washington fears that Huawei serves as an advance guard for China's 5G strategy.

What is Congress' position on the issue?

U.S. lawmakers seem no less alarmed than the White House.

"China is believed to be responsible for 50% to 80% of cross-border intellectual property theft worldwide, and over 90% of cyber-enabled economic espionage in the United States," Chuck Grassley, chairman of the Senate Judiciary Committee, said on Dec. 12.

In its annual report to Congress last month, the bipartisan U.S.-China Economic and Security Review Commission warned that if China takes a leading role in setting international 5G standards, Beijing will be able to collect American data much more easily. The commission also linked the issue to the race for military superiority, arguing that Huawei's continued rise would strengthen China's defense strategy.

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