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Huawei crackdown

Sources: Fearing spies, Huawei redeploys US-linked executives

China's biggest tech group moves on senior research scientists following US crackdown

Huawei is redeploying senior research scientists who have U.S. links due to growing concern inside China's biggest tech group that they could be co-opted by American intelligence agents and leak secret data. (Nikkei montage)

TAIPEI -- Huawei Technologies is redeploying senior executives and scientists who have U.S. links due to growing concern inside China's biggest tech company that they could be co-opted by American agents and leak confidential data, multiple sources have told the Nikkei Asian Review.

The world's biggest telecom equipment builder and second-largest smartphone maker, which Washington insists is involved in covert surveillance by Beijing, has also reinforced electronic security systems between its overseas offices and Chinese headquarters to minimize security leaks, the Nikkei Asian Review has learned.

Huawei lies at the center of several U.S.-China disputes and the Trump administration has placed it on a blacklist to curb its use of U.S. technologies. One result, among many, is that the company can no longer ship Google-licensed software in its latest smartphones. Huawei has said the blacklisting will cost its overall business around $10 billion in sales this year.

The Washington crackdown has now prompted Huawei to reduce personnel with U.S. citizenship or residency, as U.S. agencies could exploit that potential conflict of interest. Several such Huawei executives with senior research and development positions, including Asian-Americans, have left the company or been moved on.

"Part of the reason that some American executives have left is that Huawei is worried that some of its local U.S. employees have been contacted by U.S. intelligence," said one source familiar with the matter. "The company is worried that other senior executives [with U.S. citizenship or residency] could be approached, too."

Among the several executives that sources said were moved on are Sunhom Steve Paak, chief technology officer of Huawei subsidiary HiSilicon Technologies, China's biggest chip developer. Paak, who has now left the company, was a high-profile hire that Huawei poached from Samsung Electronics, where he formerly served as senior vice president of semiconductor development.

Another is Wang Hsin-shih, a Huawei tech development team leader based in Taiwan and a former vice president at Faraday Technology, a chip design subsidiary of United Microelectronics, the world's third-biggest contract chipmaker. Wang, who has previously worked in Silicon Valley, has also stopped working at Huawei.

Paak, who according to his LinkedIn profile has worked in the U.S. technology industry for more than a decade after graduating with a Ph.D. from Purdue University, declined to comment for this article. Wang did not respond. Huawei also declined to comment.

"His [Wang's] departure was abrupt and part of the reason, we understand, is his U.S. links," another source close to the situation said. A third source confirmed the staff departures, adding that Huawei was concerned U.S.-linked scientists working at the company could be construed by the U.S. as a breach of Washington's technology ban.

The personnel redeployments are the latest example of the decoupling taking place between the world's two biggest economies as they jostle for global economic, financial, military and technological supremacy.

Late last week, in a sign of a possible detente, U.S. President Donald Trump said he had reached an interim trade deal with China that would postpone a tariff increase on $250 billion of Chinese imports that had been scheduled for Oct 15.

But the preliminary agreement notably did not cover two contentious issues -- whether the U.S. will continue to label China a currency manipulator or whether it will continue to keep Huawei on its technology blacklist out of national security concerns.

With 194,000 staff spread across 170 countries, and over $105 billion of annual sales, Huawei's scale and domination of the 5G technology that is the backbone of next-generation mobile communications networks and artificial intelligence applications, have long been a U.S. concern.

Huawei, which means "China Can Make It," has had three bids for American tech companies blocked by U.S. authorities out of security worries. In 2012, a report by the U.S. House Intelligence Committee also alleged that it was spying on American enterprises to gain access to advanced technologies.

Huawei has consistently denied the allegations, but Washington effectively banned U.S. technology exports to Huawei in May. It has since expanded the ban to other Chinese groups.

Last week, it blacklisted 28 Chinese entities for their involvement in security surveillance in Xinjiang Province, where human rights groups say over a million Uighurs and members of other ethnic groups have been rounded up in vast detention camps.

Beijing forcefully condemned the U.S. move, saying it would "continue to take firm measures to resolutely safeguard national sovereignty, security and development interests."

Amid the heightened tensions, sources stressed that Huawei's personnel reshuffling was partly due to uncertainty within the company as to whether highly qualified, U.S.-linked staff working at the company might be seen as a form of technology transfer.

"You can't really blame Huawei. Who would dare trust the Americans after what Washington has done?" one source said.

Huawei has already laid off 70% of its employees at U.S. subsidiary Futurewei, citing "curtailment of business operations" caused by the technology ban. As a result, Huawei may not have fully revealed to some relocated employees the reasons for their move, and instead alluded to general corporate restructuring and the usual personnel turnover common to all large companies.

The U.S.-China confrontation has so far led to an over 80% drop in Chinese direct investment into the U.S. to $5 billion in 2018, from $29 billion in 2017, according to Rhodium Group, a research company. 

Sources added that it was also only logical for Huawei to bar access by potentially vulnerable staff to sensitive research information, given Huawei's own concerns about security and its normal practice of reconfiguring electronic security systems.

In March, Huawei sued the U.S. government, alleging that American authorities had "hacked into its company servers to steal emails and source codes," as rotating chairman Guo Ping described the suit.

"The company [Huawei] has built isolating firewalls between some overseas offices and its China headquarters to avoid the retrieval of internal information ... and staff access to Huawei intranets in China," one source said.

So far, marketing executives have not been included in the reshuffling, the sources added.

In its drive to reduce ties to U.S. technology, Huawei has begun an aggressive campaign to source alternative component suppliers in Asia and Europe. It is investing billions of dollars to develop its own software to replace Google's popular Android operating system. Its race to reduce U.S. technology has now expanded to human capital and scientists' know-how, too.

Ross Darrell Feingold, a lawyer and political risk consultant with long experience in Asia, said: "The decoupling of global talent will [soon] become a reality."

Senior executives at Huawei have already taken to broadcasting that they want to recruit "young geniuses" from around the world. They also publicize that new hires with doctorates can receive salary packages this year as high as 2 million yuan ($281,000), more than at Google or Apple.

"We can find mathematicians in Russia, scientists from Europe ... if we can't from the U.S.," Huawei's founder and chief executive Ren Zhengfei said in a September press conference at the company's headquarters in Shenzhen.

On Wednesday, in an impromptu results release, Huawei said sales grew 24 percent in the first nine months of 2019 to 611 billion yuan despite the U.S. crackdown. 

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