It’s a company that supplies equipment to 45 of the world’s 50 largest telecoms operators and ships its products to 140 countries. It has 140,000 employees worldwide, and it has research and development centres in 20 countries including the United States, Russia, Germany, the United Kingdom, and India. It’s turnover in 2012 was 220 billion yuan (roughly £22bn) and it’s profits were 15 billion yuan (roughly £1.5bn). In 2008, it was the largest applicant for patents in the world, and by 2011, it had filed 49,000 patents globally and had been granted 17,765.
In the UK, it has 15 offices and 690 employees, with new headquarters in Green Park, Reading in Berkshire. Its customers include BT, Everything Everywhere, Sky, O2, Orange, TalkTalk, and Virgin Media. In September 2012, it announced that it was investing £1.3bn in expanding its UK operations in reply to which Prime Minister David Cameron said the investment demonstrated that the UK is ‘open for business’.
You may not see its logo plastered over handsets, but its products and services support the infrastructure of the world’s best-known mobile phone service providers through which phone calls and data flow around the world. It is the largest telecommunications equipment manufacturer in the world, having overtaken Ericsson in 2012.
It is the world’s biggest company that most people in the West have never heard of, and its headquarters is in Shenzhen, Guangdong in China. But Huawei (pronounced WAH-way) is at the centre of a debate about cyber security, and about how far western countries are willing to engage with the Chinese company.
The US Congress has done its best to keep Huawei out of the US infrastructure, the House Intelligence Committee describing it as a threat to ‘core national security interests’. In 2012, Huawei, along with ZTE (another telecommunications equipment supplier based in China, and the world’s 4th largest mobile phone manufacturer) faced allegations that some of their equipment had been installed with codes to relay sensitive information back to China. The US’s attitude though may mask the real reasons for their concern. They know from their own experience how imported electronics can be turned into a weapon of espionage and sabotage by the supplier, one notable example being their creation of the Stuxnet worm that was used to damage the Iranian nuclear research program. In any case this official hand-wringing neglects the fact that most electronic components, with the exception of certain high-grade chips, are manufactured in China.
However in the UK back in 2005, BT after consulting the government signed a deal worth £10 billion to purchase Huawei equipment as part of an infrastructure upgrade, a deal that saved the British company millions of pounds. Checks were put in place by BT and government to make sure there was no risk that the Chinese company would act on behalf of the Chinese state by installing back-doors. But in June this year, the House of Commons Intelligence and Security Committee in their report Foreign Involvement in the Critical National Infrastructure said it was ‘shocked that officials chose not to inform, let alone consult, ministers’ about BT’s use of Huawei equipment until a year after the contract had been signed, a deal in which security issues ‘risked being overlooked’. It also said that the self-policing arrangements by Huawei were ‘highly unlikely to provide the required levels of security assurance’.
As well as the USA, security concerns have also surfaced in Australia, Canada and India over Huawei’s perceived links with the Chinese state and the possibility that it could be using Huawei to carry out espionage and reconnaissance of computer networks in the West, or to steal intellectual property to support Chinese companies. As a result, Huawei is aware it has become a lightning rod for a wider suspicion about China.
What is the basis for these concerns? The company was formed in 1987 by Ren Zhengfei, a former member of the People’s Liberation Army, and it describes itself as a collective owned by its employees. However its ownership structure remains opaque, it is not known how its profits are distributed, and it does not seem possible for employees to trade or profit from their shares. Huawei disclosed the names on its board of directors for the first time in 2011 as part of an attempt to distance itself from allegations of close ties to the Chinese State. It also started appointing its CEOs on a rotating six month basis. In a press release issued on 30 September this year, it announced that Eric Xu was to become the third CEO under the new system, Ren Zhengfei having handed over the reins in late 2011, though he remains as President. Ren Zhengfei gave his first ever media interview on a visit to New Zealand in September 2013. The company’s Global Cyber-Security Officer is John Suffolk who used to be the UK government’s Chief Information Security Officer, though this seems of doubtful relevance.
Huawei has strenuously denied that it has direct links with the Chinese Government or military, claiming that it receives no financial support from the Chinese Government and that it is 98.6% owned by its employees. Huawei has said that it would not be in its interest to engage in any activity on behalf of the Chinese state since if discovered it would seriously damage the company’s reputation and its ability to win contracts around the world.
In February 2010 the Government highlighted its security concerns to Huawei and suggested the establishment of a Cyber Security Evaluation Centre to weed out security vulnerabilities in its technology, ultimately so that British businesses and politicians could trust its hardware was secure against espionage and cyber attacks. The centre was subsequently located in Banbury, Oxfordshire and it was dubbed the Cell. Although the Cell was overseen by Government Communications Headquarters (GCHQ), it was run by Huawei staff. In March 2012 the Cell was given access to the company’s source codes (Banbury is the only place outside of China where they are held) which it would be reluctant to pass to any external party.
But the House of Commons Committee in their June 2013 report as referred to above questioned whether the checking processes in the Cell were sufficiently independent since Huawei staff were responsible for providing assurances about the security of its own products, whereas they had assumed that the checking was done by GCHQ staff. The Committee recommended that the staff in the Cell should be GCHQ employees, and that the National Security Adviser, Sir Kim Darroch, conduct a review of the effectiveness of the Cell. The Government’s response was to agree to a review by Kim Darroch, to include the role of Huawei staff.
The Committee also warned that issues of national security could be overlooked because of potential financial consequences. But the Chancellor George Osborne did his best to play down the report’s security concerns with a statement issued through the British Embassy in Beijing ‘I cannot emphasise enough that the UK is open to Chinese investment’.
Huawei may have arrived in the UK under our radar but it is here to stay.