While much of the West has rushed to lock Huawei out any public or private procurement of telecommunications equipment and closed its ears to Beijing’s calls for fair market access, the fact is that the beleaguered Shenzhen-based information-technology behemoth has one vital outpost to fall back upon.
The adjoining city of Hong Kong is now Huawei’s beachhead for sales outside mainland China and efforts to work around US sanctions in order to strike deals with Iran and the like, amid the ongoing legal proceedings of Washington’s pressure on Canada to extradite Huawei chief financial officer Meng Wanzhou, who is under house detention in Vancouver.
As the list of countries that have unplugged Huawei devices keeps growing, questions are being raised about the Chinese company’s status in Hong Kong’s telecom-infrastructure market, as well as the ramifications for the city’s residents, expatriates, diplomats and business community.
Huawei has been accused of implanting clandestine back-door access in its hardware and systems as well as maintaining close dealings with the Chinese military, something it has vehemently denied.
But while being purged elsewhere, the Chinese IT juggernaut is everywhere in Hong Kong.
It has been revealed that almost all mobile-phone network and broadband Internet providers in the city, including Three and HKT under the umbrella of business magnate Li Ka-shing, have adopted Huawei’s network switches and base stations.
It is the same with the Hong Kong arms of the state-owned “big three” – China Mobile, China Telecom and China Unicom – known for patronizing products from their home-grown companies.
Huawei has amassed a 70% share of Hong Kong’s business-to-business telecom-equipment market, according to Apple Daily.
SmarTone, controlled by Hong Kong real-estate giant Sun Hung Kai Properties, is the only operator that has chosen equipment other than Huawei’s. It reportedly sticks to base stations supplied by Ericsson.
Transportation and 5G
That said, with its stranglehold in the supply of IT equipment, Huawei is poised to determine when and how people can surf the fifth-generation (5G) network in the city and elsewhere.
Huawei is also behind the networks that support Hong Kong’s busy urban-rail system.
The city’s railway operator MTR Corp, whose largest shareholder is the Hong Kong government, awarded orders worth HK$140 million (US$17.8 million) to Huawei in 2016 to install a one-for-all backbone wireless telecommunications system along subway lines to serve all passengers regardless of their choices of telecom carriers.
HKT and Huawei also announced in November the construction of an ultra-high-speed, fiber-based 5G network architecture for trial rollout by the end of this year. The system is designed to allow multiple operators to share a common network and co-deploy radio headends, and to enable onward evolution into 5G without the need for additional cabling.
This means subscribers to non-Huawei mobile-phone networks will still have to use Huawei’s systems when they take trains in the city. And those who shun Huawei’s triumphant crossover to the consumer-electronics segment and cling to Apple or Samsung gadgets may be unaware that they still rely on the Chinese company’s softswitches, servers and network protocol systems to stay connected.
Huawei is also been accredited by Hong Kong’s Customs Department to enjoy perks such as reduced or prioritized customs inspection under the Authorized Economic Operator scheme.
Meanwhile, the Hong Kong government has revealed in a reply to lawmakers that between February 2016 and November 2018, various governmental departments procured around 190 sets of Huawei products, including network switches, routers and fiber transceivers and cables for connecting fiber optics, at a total cost of HK$1.76 million.
The government insists that requirements are in place to safeguard systems and data assets and that confidential and restricted data are encrypted both in storage and during transmission.
Huawei “is still widely used by other international cities and therefore the prevailing procurement procedures do not include additional checking in this respect,” Secretary for Innovation and Technology Nicholas Yang Wei-hsiung said in a written reply to Hong Kong’s Legislative Council.
On January 11, Huawei announced a US$27 million donation to the Hong Kong University of Science and Technology to fund its IT research projects and aid in the recruitment of top-tier scholars.