A smartphone sensation or a clear and present danger? Huawei probably fits into both categories.
The Chinese telecom group raked in US$52.5 billion from its consumer business last year, which was a 45% increase in revenue compared to the same period in 2017.
At the same time, the family-run firm has strengthened its 5G grip after signing 46 commercial contracts with plans to ship more than 100,000 base stations to run the super-fast networks.
To cap a controversial 12 months, it has also been blacklisted in the United States and branded a national security threat. Yet Huawei is still at the vanguard of China’s high-tech ambitions and the global leader in next-generation wireless technology.
“The leader of 5G stands to gain hundreds of billions of dollars in revenue over the next decade, with widespread job creation across the wireless technology sector,” the Defense Innovation Board, a group of American business leaders and academics, stated in a report for the US Department of Defense.
“The country that owns 5G will own many of these innovations and set the standards for the rest of the world,” it added. “That country is currently not likely to be the United States.”
Since the Defense Board is made up of a tech royalty, such as former Alphabet chairman Eric Schmidt, LinkedIn founder Reid Hoffman and former Aspen Institute CEO Walter Isaacson, that final sentence resonates.
So does other key aspects of the recently-released study, which is a wakeup call for Washington as it sleepwalks into a technology race with Beijing.
“China has taken the lead in 5G development through a series of aggressive investment[s] … investing US$180 billion in capital expenditure for 5G deployment over five years,” the report, co-authored by Milo Medin, the vice-president of wireless services at Google, highlighted.
“Domestically, China’s 5G deployment is being implemented through its major telecommunications companies (China Mobile, China Unicom, and China Telecom). All three are primarily focused on developing a standalone 5G network, with plans to deploy pre-commercial application in 2019 and formal commercial application in 2020,” the study entitled, The 5G Ecosystem: Risks & Opportunities For DoD, continued.
“Globally, China’s large manufacturers (Huawei and ZTE) are pushing 5G deployment through commercial sales of 5G-enabling equipment and devices primarily for non-standalone networks, and Huawei has already shipped upwards of 10,000 base stations overseas,” it added.
Commercially, the rewards are immense and will dwarf the riches amassed from the 4G revolution nearly a decade earlier.
These high-speed strands developed by American telecom groups AT&T and Verizon opened the way for the smartphone era in the US and the rapid rise into global giants of Apple, Google, Facebook, Amazon and Netflix along with an array of online wannabes.
As 4G networks were rolled out across the rest of the world, this “helped drive global US dominance” in wireless and internet services. It also “created a US-led ecosystem on which the US Department of Defense (DoD) and the rest of the world operated” on “for nearly a decade.”
But that is starting to change, according to ‘The 5G Ecosystem’ white paper, with Beijing, and not Washington, in pole position. In a stark statement, the report added:
“China plans to deploy the first widespread 5G network in 2020. First-mover advantage will likely drive significant increases in their handset and telecom equipment vendors market along with their domestic semiconductor and system suppliers.
“As a result, Chinese internet companies will be well-positioned to develop services and applications for their home market that take advantage of 5G speed and low latency. As 5G is deployed across the globe, China’s handset and internet applications and services are likely to become dominant, even if they are excluded from the US.
“China is on a track to repeat in 5G what happened with the United States in 4G.”
Leading the way in this brave new world with Chinese characteristics will be Huawei, which is part of the Intelligent Plus policy. Up to six months ago, it was known as the “Made in China 2025” initiative, a 10-year program launched in 2015.
Rebranded because of the Sino-US trade war, the multibillion-dollar project will create the “smart cities” and “smart factories” of tomorrow.
The blueprint encompasses an array of industries such as renewables, railways and robotics, as well as the Internet of Things. All of them will be built on the massive digital foundations of big data and linked through artificial intelligence or AI.
Moreover, 5G will be the engine room, fuelling superfast networks and processing oceans of data in less than a blink of an eye. Inside that engine room will be Huawei technology.
“We have been actively taking part in 5G rollouts and we won’t see big changes in terms of our geographic involvement at the global scale,” David Wang, a senior executive at the company, said back in April.
Since then, the company founded by former People’s Liberation Army engineer Ren Zhengfei has been accused of having deep ties with the PLA and China’s central government in a series of research papers. The group has categorically denied the allegations.
Still, Huawei’s starring role in 5G continues to raise concerns in Washington. As the Defense Innovation Board pointed out in its white paper:
“China will shape the entire 5G product market going forward. If companies want to sell their 5G products into China or into any network, they will have to build to Chinese preferred specifications and partner with Chinese companies.
“This increases the risk of product backdoors and vulnerabilities throughout the supply chain. Evidence of backdoors or security vulnerabilities has been discovered in a variety of devices globally. Many of these seem to be related to requirements from the Chinese intelligence community, pressuring companies to [extract] information about domestic users.
“However, if Chinese policy does require backdoor access embedded in devices sold in China for internal security purposes, this compromised code applied to such a large market increases the risk that these vulnerabilities will spill over into the rest of the world.”
For Huawei, to quote their homepage slogan, Building a Fully Connected, Intelligent World appears to be fraught with risks for the rest of the world.