Huawei ban: Why it faces an uphill battle

By Justin Ware. Published at May 17, 2019, in Ctrl Alt Del

US President Donald Trump has issued a damning executive order this week in an effort to crack down on international tech companies.

The order has been in the works since June 2018, but with US-China trade talks at loggerheads, it was likely an opportune time to go public.

In what he declared as a ‘national economic emergency’, the order will provide the groundwork for the government to ban telco gear and suppliers as it sees fit.

The Department of Commerce now has 150 days to create regulations on future policy.

While the executive order does not name any countries or companies directly, Huawei is likely to feel the full force of Trump’s wrath.

The likely imminent ban comes off the back of long standing concerns over Huawei’s relationship with China, which intelligence leaders have accused of widespread economic and data espionage.

Huawei is the world’s largest supplier of network components but its once lustrous reputation has fallen by the wayside over recent years.

Meng Wanzhou, the daughter of Huawei founder Ren Zhengfei, is likely to go to jail.

Wanzhou, who was the director of Huawei’s Australian subsidiary from 2005-2011, was sensationally accused by the US Department of Justice of feeding sensitive data back to China and defrauding major banks.

She is also believed to have engaged in a criminal conspiracy that defeated trade sanctions in Iran, allowing Huawei to operate a covert business in the frontier country.

Wanzhou has since been arrested and awaits extradition to the US.

In January this year, Polish intelligence charged a Huawei manager with spying on behalf of Beijing as a string of companies and partners cut ties with the Chinese company.

5G a no go for Huawei

Huawei equipment features heavily in 4G networks around the world, and as such provided a low cost fuss-free rollover to 5G technology.

Unfortunately, ongoing controversies have seen it lose out on several lucrative 5G contracts and put others in jeopardy.

Perhaps the most dramatic of these was TPG’s (ASX:TPM) cancellation of its 5G network, which would have utilised Huawei’s 5G offering.

Despite committing A$100 million into the new network and having some 900 of 1,500 network sites completed, TPG pulled the pin.

It’s a strong move that looks likely to be replicated overseas, where the UK’s Henry Jackson Society recommended the immediate ban of Huawei equipment in Britain’s upcoming 5G networks.

Huawei responded to the recommendation, urging the UK to reconsider acting on the report.

“This report is long on politically motivated insinuation but short on fact. It fundamentally misunderstands the nature of modern China, global technology markets and of 5G.

“The isolationist approach they recommend may support an America first trade agenda but it’s hard to see how it’s in the UK’s national interest. We are an independent, employee-owned company which does not take instructions from the Chinese government.

“We hope and expect that any decision on Huawei’s participation in Britain’s build out of 5G networks.”

The company is so desperate to remain on side with the British government, it has gone to the extraordinary measure of offering to sign a ‘no-spy agreement’ to prove it will not use its technology to spy on the behalf of China.

While it’s hard to know what’s in store for the company’s future, it may be fighting a battle it cannot win.

tags

china tech

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Thanks for subscribing!

X